What Will Marchionne Do, Now That Fiat\'s Sales Target Is Down By 15 Billion Euro
|   Saturday, November 03, 2012
Two and half years ago, back when he was elected CEO of Fiat, Sergio Marchionne set his sights on selling 6 million cars per year by 2014. Auto industry analysts as well as observers said then in a united voice that this is impossible. Now, he too knows that. Sergio Marchionne, which leads both Fiat and Chrysler, said forecasts will be reviewed after the announcement of the third quarter results was made.

"Marchionne was too optimistic in 2010," said Giuseppe Berta, professor at Bocconi University in Milan.
He has also written several books on Fiat besides having worked as a company historian. "Fiat and Chrysler can't grow by self-propulsion to the famous 6-million-car target."

This means that Sergio Marchionne, who said earlier this year that the European crisis will stop in two years, will have to make due with less than the predicted sales. Thus, in 2014, projected revenues for the entire group, including Chrysler, Ferrari and Maserati, will go down to 89 billion euro from the 104 billion euro projected in 2010.

In unit sales, Fiat has every chance of falling short of the intended target by 27 percent, or 1.6 million cars. Researchers at IHS Automotive are predicting sales of 4.4 million in 2014 for the whole group, up by 300,000 cars from 4.1 million this year. In Europe, IHS expects sales to drop 1.4 percent to about 917,000, while in North America sales could see a 6.2 percent jump to 2 million units.

The problems in Europe are balanced out by significant achievements from Chrysler, Fiat's Brazilian division and supercar maker Ferrari. For the third quarter, Fiat's trading profit will increase 10 percent to about 938 million euro.

"Chrysler and Brazil, the group's strengths, could compensate for the half-disaster in Europe in the short term," stated Massimo Cassia, head of equity at Sella Gestioni Sgr in Milan. "Fiat is massively burning cash in Europe, has few new models in the pipeline, and faces a huge issue of overcapacity."
Marchionne has also stated that on the long run, Fiat and Chrysler may require a third partner to survive and that he has held partnership talks with Mazda and Suzuki.

Because Marchionne doesn't expect a recovery in the region before 2014, Fiat has shut down investments in Italy, reducing European spending by 500 million euro just this year. Also, Fiat will delay the arrival of new models, including the Punto hatchback. The strategy of delaying the launch of new models and freezing investments was targeted by everyone, including politicians, unions, and the rival from Volkswagen.

To offset the the fall in sales in Europe, Sergio Marchionne plans to make Chrysler models in Italy, and then export them to North America.
European partners have asked Sergio Marchionne to draw a plan to cut overcapacity all across the region. Fiat itself has closed a plant in Sicily last year and is reducing output. The company will bring to a stop its Pomigliano plant, where the Panda subcompact is build, the only new model in Italy, from November 26 to December 9; about 2,000 workers will be on hold during that time.
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