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FCA has a new plan to save Fiat. Can it work?

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2016 Fiat 500

2016 Fiat 500

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It seems like just yesterday that Fiat Chrysler Automobiles--then known as Chrysler--was preparing for the return of Fiat and its pint-sized 500 model to the U.S. The company had big, big hopes for its well-known European brand, but things haven't played out exactly as FCA expected.

In fact, Fiat has had trouble gaining a foothold in America. And so, FCA has now announced plans to keep its struggling brand afloat by allowing dealers to merge their Fiat operations with those of other FCA nameplates.

That's a 180-degree reversal of the course that FCA initially charted for Fiat. Back in 2010, CEO Sergio Marchionne's grand vision required that dealers create new, Fiat-specific showrooms, separate from those that housed Chrysler, Dodge, Jeep, and Ram vehicles.

That made several dealers nervous. First, it seemed like a significant investment to make in what some observers considered a failed U.S. brand. (Fiat withdrew from the U.S. market in the early 1980s after garnering a reputation for iffy quality.)

Dealers also worried about the Fiat lineup, which wouldn't have much variety. If shoppers didn't like the 500 or its sporty Abarth sibling, Fiat dealers wouldn't have anything else to offer for a while.

And of course, there was a larger concern about whether Americans could get excited about small cars, when all they really seemed to want was large SUVs and pickups.

20/20 HINDSIGHT

In the end, it appears the dealers concerns were justified. Fiat sales for 2015 were eight percent lower than 2014, suggesting that the brand really hasn't caught on with U.S. consumers.

Though it might be tempting to blame the brand's troubles on Marchionne, he's only partly at fault.

True, he probably underestimated the brand's dodgy reputation among U.S. consumers, and he likely overestimated the numbers of people who'd be lining up to buy such small cars. However, he couldn't have truly predicted today's rock-bottom gas prices, which have encouraged more consumers to purchase big, less-fuel-efficient rides. (To his credit, he now sees the error of his ways.)

Nor could he have predicted how poorly Fiat might perform in terms of quality, dependability, and satisfaction among U.S. consumers. Fiat dealers have had trouble winning fans, too. 

The results of those failures are clear: less than half of Fiat's 206 U.S. dealerships turn a profit, and two-thirds sell fewer than ten new vehicles per month.

Clearly, it's time for an intervention.

NEW DAY, NEW PLAN

Yesterday, FCA unveiled a new plan to make Fiat dealers' lives a bit easier. Speaking in Detroit, FCA told dealers about a couple of new options aimed to improve their bottom lines and brighten Fiat's future prospects. The most notable changes include:

  • Dealers can now consolidate Fiat operations with those of Chrysler, Dodge, Jeep, and Ram. That will help streamline administrative costs and allow dealers to share Fiat ad expenses with those associated with their other FCA brands.
  • Dealers can now bundle Fiat sales with those of Chrysler, Dodge, Jeep, and Ram to meet sales targets.

FCA said that Fiat dealers won't be forced to take advantage of such offerings, though. Dealers who choose to continue operating stand-alone Fiat outlets can receive monthly rent assistance from FCA.

And all Fiat dealers, no matter how they operate, will benefit from a new, pared-down product line-up. The vast array of trim levels available on the Fiat 500, 500L, and 500X has proven confusing and frustrating to some consumers. Even sales staff can have a tough time wrapping their heads around all the options. By slashing the number of trims available, FCA hopes to make products more attractive to shoppers and more sellable for staff.

Will actions like these save Fiat from the scrap heap? We'd love to hear your thoughts in the comments below.

 
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