Fiat took control of Chrysler to get a major presence and sales in the U.S. market. It also hoped the deal would give it a beachhead for its primary brand. That has not worked out, and new J.D. Power data puts Fiat near the very bottom of the Initial Quality Study, which ensures that its poor progress in America will continue.
Source: Courtesy Chrysler Group LLC
The Fiat takeover of Chrysler gained it the position as the American company’s primary shareholder and also gave it management control. In reality it has almost ended up as a Chrysler buyout of Fiat. Chrysler’s sales in the United States have soared for the past three years. It currently has an 11.5% share of the American market, which puts it ahead of Honda Motor Co. Ltd. (NYSE: HMC), which has been a major success in the country for decades.
In the meantime, Fiat’s fortunes in Europe have been very badly damaged. Sales of all cars in the region hit a 20-year low in May. The news was even worse for Fiat. The European Automobile Manufacturer’s Association reported that Fiat Group sales fell 10.8% in May to 72,227. Its market share dropped to 6.9% in the month, down from 7.3% last year. It has fallen to sixth place in sales among all the major manufacturers in Europe. To make matters worse, total vehicle sales in its home market of Italy have plunged due to the deepening recession there.
On the other hand, Chrysler Group sales in the United States continued their advance in May, up 11% to 166,596. But, at 4,051, Fiat model U.S. sales were pathetic.
Fiat has pinned its U.S. fortunes on the Fiat 500, a tiny car that sells for as little as $16,000. Part of the car’s appeal is supposed to be that it gets 40 mpg in highway driving. Unfortunately, it competes with a slew of cars from larger companies like Ford Motor Co.’s (NYSE: F) Fiesta and Focus, the Toyota Motor Corp. (NYSE: TM) Corolla and Chevy’s Cruze. Each parent company of these has huge marketing budgets and large dealer networks.
Given its less than modest sales and presence in the United States, Fiat could not afford a setback. The J.D. Power rating was more than a setback. It was crushing.
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