2012 Fiat 500 Sales Hit The Skids: Will It Survive?

November 15, 2011

Many folks in the auto industry have praised Sergio Marchionne for revitalizing Chrysler. But according to a report in Automotive News, Marchionne may have made a major miscalculation about Fiat's prospects on this side of the pond. Will Fiat and its poster child, the Fiat 500, survive -- and perhaps more importantly, will Marchionne?

Once upon a time, Marchionne had predicted that sales of the Fiat 500 would ring in around 50,000 per year. Since the U.S. version of the 500 launched back in March, however, it's sold fewer than 16,000 units.

What's more, Chrysler has laid off workers at the plant that manufactures the 1.4-liter engine powering the 500 because there's not enough demand to keep those folks employed. The plant's union chairman, Tom Zimmerman, claims that 100 workers have been laid off, though Chrysler's Jodi Tinson has said that the number is closer to 30, with another 35 workers being reassigned to other areas of the facility. 

What's the real story?

In Chrysler's defense, the Fiat 500's rollout has been plagued with delays. Many of those stem from the fact that Chrysler dealers interested in selling Fiats couldn't simply add the 500 to their existing shops: Chrysler insisted that dealers create new showrooms specifically for Fiat. Even though Chrysler reported that the number of dealerships applying to sell the city car was very high, the time and cost of building out those showrooms put the process behind schedule.

Then, too, there was the marketing campaign for the Fiat 500. From the time the first 500s arrived on the lots, Chrysler worked to build awareness on social networks like Facebook and Twitter, and the company even placed a handful of ads on TV and in print. But the 500 campaign didn't hit full-throttle until just two months ago, when the now-ubiquitous commercials with Jennifer Lopez began littering the airwaves.

Those two factors alone could account for the 500's slow sales -- and why Chrysler has a 184-day supply of Fiats (both coupes and cabriolets) when the industry standard is closer to a 60-days.

Our take

The real question is: once Fiat's dealerships and marketing are up to speed, will shoppers be enticed to buy the 500?

Chrysler is doing a great job of branding the 500 with special Gucci editions, a pink-ribbon edition, and the upcoming Abarth performance edition. If that hip, stylish image takes hold with consumers, the 500 could be a huge hit -- especially with young college types on the lookout for their first rides and with downtown-dwellers in need of something easy to parallel park.

On the other hand, Americans haven't always taken small cars to their collective bosom -- and the 500 is one of the smaller rides available today. If gas prices were heading up, the public might feel differently, but for now, those prices are holding steady.

But worst of all is the fact that the young people who form a key target market for the Fiat 500 aren't so interested in cars anymore. There are a range of reasons for that -- not least of which is the crippled economy and dismal employment stats for Generation Y -- but the bottom line is that Millennials find smartphones and web-ready TVs more important than cars.

Then again, maybe this is a larger problem having to do with Fiat. After all, the company is even having troubles on its home turf, relying on Chrysler for a leg-up.

This much we know for certain: for those hoping that the return of Fiat will lead to the zippy return of Alfa Romeo, you might want to lower your expectations.

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