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Fiat's Five-Year Plan Fails To Impress Investors, Stock Plummets

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Godzilla about to swallow a Fiat 500L

Godzilla about to swallow a Fiat 500L

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On Tuesday, Fiat Chrysler CEO Sergio Marchionne unveiled his five-year plan for the company. Some called it too ambitious, others didn't think it went far enough, but according to Bloomberg, investors were in agreement: they said it was time to sell.

Accordingly, Fiat stock tumbled 12 percent yesterday, the biggest hit it's taken in two years. In Italy, shares closed at 7.48 on Wednesday, creeping up just a bit on Thursday to €7.61.

THE BAD, THE GOOD

On the one hand, Marchionne's plan for the Fiat family of brands seems very, very aggressive. Among his goals are doubling revenue and boosting deliveries by 61 percent.

The most troubling part of Marchionne's scheme involves Alfa Romeo. As we reported last week, he plans to invest up to 5 billion in the brand over the next five years, adding eight new models to its lineup. He also aims to increase global deliveries to 400,000 by 2018 -- a huge jump from 2013's figure of 74,000.

Of course, Alfa's success will depend in large part on how well it fares in the U.S., where its cars haven't been sold for nearly 20 years. Adding more uncertainty, the brand's debut model, the 4C, has been delayed numerous times -- and even when it arrives, it won't do so in large numbers. (Currently, just 1,000 are slated for U.S. showrooms.)

Marchionne is also stretching on Maserati, hoping to quadruple deliveries to 75,000 by 2018. To accomplish that feat, he expects to spend some €2 billion to develop and launch six new models.

By comparison, Marchionne's plan for Chrysler, Jeep, and Dodge seems fairly tame. Chrysler will rebrand itself as a mainstream line, and Dodge will focus on performance. They're likely to play second and third fiddle to Jeep, though, which is adding production capacity at facilities around the globe and broadening its lineup of SUVs. By 2018, Marchionne hopes to boost Jeep deliveries by about 160 percent, to 1.9 million units.

ANALYSTS APPREHENSIVE (AND SO ARE WE)

Analysts and investors are dubious of Marchionne's projections, particularly for Alfa and Maserati. Admittedly, those brands are popular in Europe, but most of Europe is just crawling out of a vast economic crisis. In five years, the Continent will almost certainly be in better shape than it is now, but will demand for Marchionne's high-end brands be as strong as he predicts? The safe money is on "maybe not".

Obviously, China is a major market, too -- the biggest auto market on the planet right now -- and it's key to Fiat's success. However, there are signs that China's economy may be headed for upheaval. Mainstream marques like Jeep have less to worry about than, say, Maserati, but even a small hiccup in China could wreak havoc on Marchionne's projections.

Then there's the U.S. to consider. Our economy is chugging along, and though it's not growing as fast as analysts would like, it's moving in positive territory.

Chrysler, Dodge, Jeep, and Ram shouldn't have much trouble meeting their stateside goals. Alfa Romeo, however, is a significant gamble. The brand was never hugely successful in the U.S.: the cars were pricey, quirky, and, if we're honest, they didn't have a reputation for being especially reliable. The brand retreated from America in 1995 because it became "economically unfeasible". That's not to say that Alfa can't be successful here, only that it's going to take time, energy, and a lot of marketing.

Has Marchionne's Italian upbringing blinded him to Alfa's weaknesses? Is he expecting too much too soon? Or are we too pessimistic about the brand's chances? Sound off in the comments below.

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