Chrysler has high hopes of reviving and accelerating sales in Europe as its alliance with Fiat gains strength, Chrysler executive Mike Manley said in an interview
Chrysler’s sales in Western and Central Europe dived by about 20 per cent in 2010 to 37,000.
Despite independent predictions that overall market sales in Europe will do no better than stagnate in 2011, Manley, president and CEO of Chrysler’s Jeep brand, and head of Chrysler’s international operations, expects a much better performance in 2011.
“Despite a likely flat (overall market) 2011, we have to significantly grow our share and I want to get back in 2011 with sales growth in excess of 25 per cent,” said Manley, in an interview on the Chrysler-Fiat stand at the Detroit Car Show.
Chrysler is likely to have much more leverage in Europe these days as its vehicles will be sold through Fiat as well as Chrysler outlets. Fiat now owns 25 per cent of Chrysler, after Fiat CEO Sergio Marchionne announced on Monday that the company had fulfilled its first commitment to provide technology.
Fiat could raise its 25 per cent stake in Chrysler to over 50 per cent this year, if the formerly bankrupt U.S. company is able to float its stock on markets in 2011. Fiat had agreed to increase its stake in Chrysler to 35 per cent from 20 per cent by providing technology and meeting sales targets.
Analysts like Bernstein Research of London’s Max Warburton, see Chrysler sales as a way of offsetting losses from Fiat’s loss making European operation.
“While Fiat’s U.S. affiliate Chrysler should make profit progress in 2011, can Fiat Auto deliver any improvement? We doubt it – in fact we think the risks are on the downside. We believe Fiat Auto lost almost 800 million euros in Europe in 2010, with Brazil making a profit of 1.4 billion euros,” said Warburton.
“With Fiat’s small car focus and minimal gross margins, the problems are more complex and intractable than just excess capacity and inflexible labor (in Italy). Clearly Fiat management want to increase the Chrysler stake and move towards consolidation so that U.S. margins can subsidise European losses, but this may take some time to complete,” Warburton said.
Chrysler’s Manley had no comment on Warburton’s remarks, but said Chrysler’s international sales should grow by between two and 3-/2 times by 2014 from 147,000 in 2010 to around 500,000.
“That shows the rate of growth we are looking at. We expect significant growth in Europe, even more than the overall international rate. We need to do much better,” Manley said.
Manley reckoned Chrysler’s biggest seller in Europe would be the Dodge Journey minivan.
The Journey will be rebadged as the Fiat Freemont, although this hasn’t yet been confirmed. The new Chrysler 300 is also earmarked for Europe.
Manley said the Jeep Grand Cherokee (large SUV) and Jeep Compass (compact SUV) will do well.
“I think we will be pleasantly surprised by Compass sales. We are looking at sending the Chrysler 200 to Europe too. It’s much different now. This is a very competitive portfolio,” Manley said.
It is good news for Chrysler that the new 200 is a big improvement on its predecessor, the Sebring, which generated derision in Europe when it went on sale in the middle of the decade. Its handling wasn’t up to scratch and the interior was tacky. Press reports on the new 200 suggest that this has been put right by some margin.
The initial success demonstrated by the Fiat-Chrysler alliance hasn’t convinced everyone that the grouping has long-term viability.
“While Chrysler is in a better position that we would have ever envisaged 18 months ago, and may be able to make a decent margin by 2012, we remain unconvinced that there are large synergies with Fiat’s small car operations. We continue to see Fiat Auto and Chrysler as two separate businesses, as is still the case with (the) Renault and Nissan (alliance),” Warburton said.
Neil Winton – January 15, 2011
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