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Dealers » Fiat
Dealers fume as Fiat's U.S. comeback stalls
Less than half of stores are profitable
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The 500L, Fiat's second U.S. nameplate, has helped the brand's transaction prices rise nearly 6 percent.
Automotive News
October 7, 2013 - 12:01 am ET
DETROIT -- This summer, Fiat dealers finally got a second nameplate, the 500L, to sell. Despite high hopes, the new car has failed to boost the brand's U.S. sales.
After a 24 percent decline in September, Fiat brand sales are the same -- 32,743 -- as they were through nine months of 2012. Demand has stagnated despite the addition of the 500L compact hatchback and more Fiat dealerships than last year.
The flat sales add to the frustration of Fiat dealers, who agreed to help bring the brand back to the United States following Fiat CEO Sergio Marchionne's 2009 rescue of Chrysler from bankruptcy.
"I think most dealers have been disappointed in the performance of their Fiat dealerships," said Alan Haig, president of automotive services for Presidio Group, a San Francisco financial services company that brokers dealership sales.
One dealer in the northern half of the country echoed that view.
"It's sad to say, but it's become a stepchild. Chrysler doesn't want to hear that, but that's the reality," said the dealer, who spoke on condition that he not be named.
The dealer said he runs his Fiat store as a used-car lot, supplemented by whatever Fiats he can sell. "That's the only way I can make it work," he said.
All but one Fiat dealer contacted for this report declined to be named to avoid being identified by the factory.
Jason Stoicevich, who took over as head of the Fiat brand in the United States in April, said sales of the 500L will grow. "Our online traffic has improved," he said, "but it takes a few months" for those investigating a 500L to get into showrooms.
Factory figures shown to dealers indicate that only about 45 percent of Fiat dealerships are profitable. But many of these share some expenses with Chrysler Group dealerships, meaning even fewer would be profitable if treated as stand-alone businesses.
Fiat originally asked for stand-alone stores with separate service departments. But the factory later scaled back the investment requirements.
Volume is light. Some dealers say many Fiat dealers prefer to concentrate on their profitable Chrysler Group stores while others say the brand just needs more time.
The average Fiat dealership sold about 17 units per month this year, compared with the average Chrysler Group dealership's 64 units.
Last week the dealers received another blow when Automotive News reported that the Alfa Romeo 4C sports coupe likely will be marketed through the nation's 67 Maserati stores.
Earlier this year, Chrysler executives said the low-volume two-seater would be sold by the "top performers" among Fiat's 210 U.S. dealerships. It's not clear whether Fiat dealers will also get the car because Fiat executives decline to answer questions about the issue.
For perspective, Fiat's annual sales are roughly tracking what Chrysler Group promised from the beginning. Marchionne, who also heads Chrysler, predicted in 2010 that Fiat would sell about 50,000 units annually in North America. Through September, the annual rate in the United States alone was about 44,000.
But for dealers, the optimism of the early years has been replaced by realism -- and in some cases, disappointment.
"You never know. You can get one product that turns really hot, and it could turn everything around," said one Fiat dealer. "At some point, I truly believe Chrysler's going to figure out how to make this thing hunt."
Stoicevich: Faith in the 500L
Early stumble
The Fiat brand's planned relaunch in North America stumbled in 2010 and has struggled to gain nationwide traction since.
Chrysler first had difficulty getting some early U.S. Fiat dealerships open because of construction and zoning delays.
When the brand did begin selling cars in March 2011, sales were hampered by a slim product portfolio, a thin dealership network and ineffective marketing, Marchionne said.
"It was a poorly executed plan," he told Automotive News in January 2012.
Two months earlier, Chrysler had parted ways with Laura Soave, who had overseen Fiat's return to the United States. But Marchionne said the fault for Fiat's poor launch was his alone.
"I take full blame. I'm not blaming anybody else. The car got launched a year too early," Marchionne said at the time.
About a quarter of Fiat's monthly sales come from one state: California. But Fiat's relative success in the state hasn't spread eastward as fast as some dealers would like.
"We're seeing diminishing sales from when we started out," said one Fiat dealer in the western United States who said his Fiat store was in the black. "We're making money because we've got it structured right," with fixed costs and service operations -- and the expenses tied to them -- run through the dealer's nearby Chrysler store.
Numbers game
The factory originally asked dealers to establish full-service dealerships but later relaxed those requirements. They allowed dealers to open showrooms in malls, for instance, and consolidate service departments temporarily with Chrysler-Dodge-Jeep-Ram dealerships.
Fiat is successful in some markets. Fiat of Austin (Texas), for example, sold 112 new Fiats in August -- 81 hatchbacks and 31 Fiat 500Ls -- though sales dropped precipitously in September, General Manager Lisa Copeland said.
"What [the 500L] is doing is creating interest in the market and bringing people back in," said Copeland, who has six 500Ls displayed in malls around metropolitan Austin. "In my mind, the L is incremental business. I think it's a huge traffic driver."
For most Fiat dealers, 2012 and early 2013 were better as the Fiat 500 began appearing in traffic, spurring natural interest. The car was on pace to meet or exceed the pace that Marchionne had originally projected.
But when the 500L arrived in June, sales of the 500 mini car fell.
Through May of this year, sales of the Fiat 500 had grown by 5 percent over the same period of 2012. Over the next four months, sales of the Fiat 500 plunged 29 percent, including a 49 percent drop last month to just 2,126 units.
There are also more dealership mouths to feed. In October 2012, Fiat had about 180 dealers in the United States; now it has 210.
Fiat's Stoicevich said the sales trends that have taken place since the 500L was launched in June are temporary.
"We are just living through the launch of a car that is moving into what was a one-car showroom," he said.
Stoicevich said the automaker regularly works with Fiat dealers to improve profitability and that new product planned for 2015 will help dealers "take the next step."
Fiat had the second lowest average transaction price of any brand on sale in the United States last month at $20,517, ahead only of Daimler's Smart brand, according to KBB.com. Its average transaction price had climbed almost 6 percent over the previous year thanks to the more expensive 500L, Kelley Blue Book senior analyst Alec Gutierrez said.
"High prices are not a replacement for volume," Gutierrez said. "It's going to be tough as a salesperson in a Fiat store because the volume or pricing isn't as good as if they were working across the street at a Chrysler store."
One Fiat dealer in a large metro area agreed, saying it would be "crazy" for Chrysler dealers to put their best salespeople in a Fiat store.
"Whatever energy is expended there is too much," the exasperated dealer said.
Store demand
So far, dealership brokers and Chrysler say that only a handful of Fiat dealers have sold their stores or listed them.
The brand has added 10 stores since the first of the year to expand its U.S. network to 210 dealerships. Chrysler said the Fiat network is now largely filled out.
Fiat isn't a brand on most "gotta have" lists for prospective dealership buyers, said Presidio Group's Haig.
"They've essentially had one product to sell," he said. "I think that people would be willing to sell their Fiat store, but they may have to take a loss on their real estate, which they're probably unwilling to do. It's hard to sell a business that's losing money."
La storia della 500 negli usa non e' una passeggiata.
L' inizio fu catastrofico, non c' erano abbastanza concessionari ( molti dealers Chrysler non volevano investire nel marchio Fiat ma furono convinti con la promessa di poter vendere le Alfa Romeo), le vendite erano iniziate ma le auto non c' erano ancora, il cambio non piaceva e le campagne di marketing furono un flop.
Marchionne uso' la mano dura e dopo alcuni cambi di management riuscì a raddrizzare la rotta.
Adesso il lancio della 500L ha fatto riaffiorare le tensioni: gli investimenti con soli 2 modelli non verranno mai ripagati, le alfa Romeo non stanno arrivando e i margini sono inesistenti a causa dei prezzi bassi delle 500.
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