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Ties With U.S. Dealerships Have Never Been Better

Fiat's Marchionne Says Ties With U.S. Dealerships Have Never Been Better
Aug 26, 2010

Fiat SpA Chief Executive Officer Sergio Marchionne said the Italian carmaker’s relations with U.S. dealerships “have never been better” and more of them than the company expected have applied to sell its cars.

Chrysler Group LLC, the U.S. automaker controlled by Fiat, invited about 600 dealers to an Aug. 30 meeting in Detroit to describe plans for Fiat’s retail network. Fiat plans to open as many as 200 franchises and has identified 119 U.S. markets with potential small-car sales growth. Dealers may submit proposals until Sept. 22, and the winners will be picked by early October.

“We have received a number of applications, well in excess of the targeted number of dealers in the U.S.,” Marchionne said in a Bloomberg Television interview today in Rimini, Italy.

Chrysler will begin selling the Fiat 500 subcompact car late this year and the Fiat 500 Cabrio in 2011. The Fiat 500 will be built in Toluca, Mexico, and about half will be sold in South America, Marchionne has said.

Fiat and its Alfa Romeo brand vehicles will “more than likely” be sold in the same showrooms, with Alfa Romeos sales beginning in the U.S. in 2012, Marchionne has said.

Marchionne said today he isn’t willing to sell Alfa Romeo to Volkswagen AG. Automobilwoche reported Aug. 23 that Volkswagen would be interested in purchasing Alfa Romeo should it become available.

“Someone asked me the question of whether I’m willing to sell it and the answer is ‘no,’” he said in the interview.

Judging Applications

Fiat franchise proposals will be judged on the dealer’s sales performance, plans for a separate facility, marketing strategy, capitalization levels and compliance with standards, according to Chrysler.

“There are a number of serious people who have been more than thorough in presenting their business plans and their applications,” Marchionne said. “The relationship has never been better,” he said.

Fiat’s desire for separate facilities and teams selling and servicing its vehicles require an investment that may be difficult to make, said Tom Barenboim, owner of Clark Chrysler Jeep Dodge in Methuen, Massachusetts.

“I really need to take a better peek under the tent and see what the long-term plan is,” Barenboim said in a telephone interview today. “It would be a very tough business decision to make if they tell me that for the first 12 to 18 months I’m going to have the Fiat 500 and I’m going to get two to six units per month.”

Gas Prices

Fiat’s small cars can do well in the U.S. as gasoline prices increase, he said. Regular unleaded gasoline in the country averaged $2.70 per gallon yesterday, according to AAA.

Every Chrysler dealer should get a chance to sell Fiat vehicles, said John Schenden, owner of Pro Chrysler Jeep Dodge in the Denver suburb of Thornton, Colorado.

“Without a service and parts operation, it’s pretty hard to substantiate putting in a facility unless you’re somebody that has empty facilities from Saturn and Hummer and Chrysler and GM laying around,” he said in a telephone interview.

The Fiat franchises most likely will be concentrated on the East and West Coasts, said Paul Melville, a Grant Thornton analyst in Southfield, Michigan.

“The demographics of the people are going to be in the larger cities,” he said. “I can’t see anyone in Texas driving around in a Fiat 500.”

Fiat Popularity

Fiat’s negative history in the U.S. and the unproven popularity of small cars will be issues for Chrysler dealers still suffering from a lack of new products, said Sheldon Sandler, chief executive officer of dealer consultant Bel Air Partners in Princeton, New Jersey. New facilities may cost $1 million to $5 million, he said.

“The only dealers, I think, who would want the Fiat 500 are the ones that have empty showrooms, so their investment is going to be very limited,” he said.

Marchionne also said today that Fiat expected European car sales would fall after governments in the region removed purchase incentives.

“We knew that as soon as the incentives system was removed from most of the European countries, that you would see a natural attrition of demand and that you would see a rebuilding of demand in January of 2011, or at least the first half of 2011,” Marchionne said in the interview.

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Fiat's Marchionne Says Ties With U.S. Dealerships Have Never Been Better - Bloomberg

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