After a year of bitter battles with its dealers in the wake of a bankruptcy-era dealer cull, Chrysler is about to do the unthinkable: start a whole new dealer network to sell Fiats built in Italy by its new owner. The Detroit News reports that
existing Chrysler, Dodge, Jeep and Ram dealers will get a chance to apply to sell the Italian Fiats, but they must be able to operate separate facilities with different sales and service teams in order to win a franchise.
Fiat will return to the US by the end of this year, starting with the Mexican-built Fiat 500.
The new Fiat dealers will be located in 125 major metropolitan areas in the US, and the network should be in place by September, some three months before the 500 debuts. A Chrysler statement gives a few guidelines for dealers seeking a Fiat franchise:
Chrysler had said that it would exclusively draw on its dealers to sell Fiat 500s, and the big question now is the extent to which that remains true. Chrysler won’t say if it will charge dealers for a franchise, or what percentage of Fiat dealers will come from the ranks of existing Chrysler dealers, but considering that Alfa Romeo is scheduled to head stateside, and will likely share dealerships with Fiat, expect competition over these franchises to be tight. Even though the last thing Chrysler needs is more dealers.
It seems silly to ask already-taxed Chrysler dealers that they can only sell what at the end of the day is the best car in their showroom only if they totally remodel part of their showroom or build a new one especially for just one model. We’ve heard nothing about when other Fiats will get here. Then again, it’s far sillier to try to sell a 500 that’s parked between a giant RAM and a Charger Daytona.
Fiat made the smart move with this seemingly counter-intuitive decision. Initially they are going up against the Mini and they need to have high design value showrooms with exceptional sales and service staff to get the customer wow factor they need.
Look at it the other way around. How many times has throwing a captive import or two on the showroom floor of an American brand dealer network worked? Mercedes tried it years ago with Studebaker. Other notable efforts included Hillman, Opel, Cortina, Pantera and the Geo lineup. Had Fiat decided to go that same route with the Chrysler dealer network we would be here in a few years throwing stones at them for not learning from the history of other similar attempts.
Besides, it doesn’t cost a car company money to build out a dealer network, it makes them money! Franchise fees, initial parts stock, signage and such all mean profit dollars for the manufacturer.
Oh, and one more thing. If Fiat’s American mistress doesn’t work out (Chrysler), she can be dumped without endangering #1 wife.
You make some good points, but I’m not convinced. Mini dealers are tied to swank BMW dealerships, while Fiat will be anchored to Chrysler, which is about as low as you can go these days.
Still, Fiasler has to try something, this may be their best shot. But given the times we live in, it’s still a long shot. Now if gas prices spike as the new dealerships come online, they’ll look like geniuses.
is it just me, or did others assume Chrysler would automatically get Fiats to sell?
It wasn’t just you.
I thought so too.
Looks like a money grab. In view of Fiat’s track record, if I had that kind of money to gamble I’d head for Las Vegas. The odds of winning are better!
Good luck to them. I’m just struggling in my mind picturing a mega-dealer complex with two separate buildings, one carrying Dodge/Chrysler and one carrying Fiat/Alfa.
It doesn’t seem to stretch the imagination much. There are two C/D/J franchisees in the Richmond, VA area that have two buildings on a common lot. Coincidentally they’re both also Mazda franchisees, with one franchise operating Mazda in its own building behind the C/D/J one and the other built a brand-new Mazda store a couple miles down the road from their CDJ spot, while the old Mazda building still stands adjacent to what is now the CDJ store. The one seems ready-made to open a Fiat store, but not sure if Fiat or Mazda will allow sharing showroom space that would be required in the other location.
There’s a big mental leap between Japanese cars (well established in the US) and Italian cars that ran away from the American Market with their tail between their legs. I’m also guessing that Customers for a Fiat 500 are different from Caliber customers, or Mazda 3 or 2 customers, or heck even Toyota Yaris customers.
@cdotson: We’ve got (Pearson)Kia in that little showroom now, but the space is really ideal for a Fiat/Alfa boutique.
In my younger days I had a number of FIAT’s. Other than the rust, for which they deserved their horrible reputation (the most 1970’s vehicle weren’t all that corrosion resistant either), they were better than their reputation (again, whose quality didn’t suck in the 1970’s, and whose vehicles weren’t compromised by the rudimentary emission control equipment of the day)?
With the exception of the Strada, so bad it could / should have come from GM, if you’d performed the scheduled maintenance (especially timing belts) the underlying drivetrain was pretty robust.
In return they were a blast to drive. I can’t wait for them to return to the U.S.!
What are their “identified markets?”
So you have to double down to play. It will be interesting to see if they can pull this off. It will be very difficult for a Chrysler dealer to go to a bank to finance a new dealership, and even tougher for him to allocate a major portion of his personal capital to that mission.
Sounds just like the Mini/BMW strategy…
Makes sense to me
How are they going to get these up and running by December, when the 500 goes into production? Doesn’t seem like enough time.
So, if Chrysler dealers don’t get Fiats to sell, what exactly did Chrysler get out of this deal again. For that matter, what did the US and Canadian taxpayers get in exchange for the equity handed to Fiat? A new management team – but what else?
Not sure what the big deal is here. Fiat wants to be selective in which dealers get the 500. I would think that those Chrysler dealers who get on board will, in the long run, have a more comprehensive line of products than those who don’t. It’s even possible that Fiat may ultimately follow (at least partially) in the footsteps of Renault, which gradually phased out the AMC nameplate in favor of its own. If Fiat’s and Alfa’s reputations can be rehabilitated then how much of a rationale is there for Dodge (and perhaps Chrysler) passenger cars?
Some of you may remember Chrysler had a joint venture with Alfa Romeo NA to sell Alfas through Chrysler dealers from 1989-91. It didn’t work. Now there’s greater commitment and urgency from all parties so it might work this time. Though, it’s hard to see how a potential Fiat dealer is going to make a decent return on investment on dedicated facilities in a terrible market likely to go sideways or modestly upwards for years to come with only one Fiat model.
I thought this was a truly outrageous announcement by Chrysler.
Lets see, to qualify to be a dealer for this one horse pony of a car, a dealer has to have service guys standing around in a separate building, sales people too, and after having gone through Chrysler bankruptcy 101 just a short time ago, spend a whole bunch of money which they may not have.
What if nobody applies?
Maybe they should dual the Fiat 500 with Vespa scooters in high end urban markets. While they are at it, add a high end Tuscan style Italian restaurant to the place. Make it a destination for lovers of all things Italian.
That’s a very good idea. It seems hard to imagine that one car, alone, could support all that new infrastructure.
John,
+ 1
I was pondering the investment needed to make Fiat viable in customer’s eyes and the ‘Italian thing’ may be the only way to get people on board. The primary problem is that Vespa dealers are typically found in very close quarters in urban areas, not in a sprawling lot.
The other option is Ferrari/Maserati, but I’m not so sure those dealers would be too keen on the 500. Alfa’s perhaps, but not Fiat.
Good espresso bars.
Would guarantee traffic as very few places have good ones, Starbucks sucks.
Something like the Cafe Roma or a Pasquini.
It’s an interesting thought. But who would do the cooking/serving? Would they take some Italian looking guys from the Chrysler dealership, throw an apron on them, and let them go to it? Maybe they’d whip up some braciole in between oil changes?
I think some sort of co-op with established purveyors of that which is Italian (coffee, food, fashion, not Olive Garden), whereby a 500 would be parked, along with brochures, and a smattering of available accesories, might work. Part of the deal might be someone there would have to be able and willing (and correspondingly compensated), to address the questions. Maybe have a demo out back.
In this economy, such an arrangement could be a win-win. But it would have to be managed right, and that would be tough. You don’t want a sour relationship or less than dedicated “employees” ruining the experience or the presentation of the car. You can’t have folks unfamiliar with the intricacies of screwing…selling people cars actually selling cars.
Sales would have to be handled by a dealer of sorts…back to the Chrysler shop? Next to the Ram and the Challenger? Yuck.
That’s the biggest issue. You really can’t have the stench of Chrysler anywhere near the new baby. Fiat needs to come in clean and create its own stench.
A Vespa instead of a spare tire and jack!
(In the pic) They were selling a “Jolly” in Vermont? Why?
I think the 500 is the start. Then they will sell Alfa Romeo in the same dealership. They’re targeting urban areas, and I bet the same type of clients of MINI.
The thing is cute and good looking and I’m almost sure you gringos are not going to get any of the puny engines the Europeans do. I think the volume will be there.
Interesting take on this story, Mr. Niedermeyer. I can understand that Chrysler dealers are scratching at anything to remain viable.
But some of your logic appears wrong. Where do you see that we can “expect competition over these franchises to be tight?”
Yes, it does sound like the MINI/BMW strategy, but it isn’t. MINI works because its demographic are aspiring BMW owners. I don’t see what the Fiat 500’s connection to a minivan, RAM truck, Jeep or Chrysler 300 aspirant is, or even if such a buyer exists. This morning on NPR I heard a Chrysler exec say that a Fiat 500 buyer is unlikely to go into a showroom full of RAM trucks. YIKES, that’s their own people!
Given the conditions, I’d think the smartest of Chrysler’s dealers would flip Fiat the bird. The others who take the bait will be toast. It’ll be interesting to see what the response will be.
there is a good chance that dodge and chrysler (brand)
will be killed in some years to come
(hint: why else the separation of RAM from dodge)
so your chrysler dealer thats “flipping the bird @fiat” is
actually starring at a mirror flipping himself..
european — I agree that the Dodge and Chrysler brands are probably gone within 3-4 years. My main point is that I don’t agree with Niedermeyer — the death of those brands doesn’t automatically mean that competition for Fiat franchises will be tight.
These are independent business people who have to act in their own best interests. Say that if you’re still a C/J/D dealer who wasn’t culled. What would you do?
– Double-down (invest in the uncertain Fiat/possible Alfa franchise)
– Hold (hoped-for C/J/D/Ram sales, used cars, repairs, hold on to see what happens)
– Fold (get outta Dodge and gut dealership for the real estate)
The answer is different for every dealer. I’d be most interested in their comments, anonymous or otherwise.
european wrote: “there is a good chance that dodge and chrysler (brand)will be killed in some years to come”
I wouldn’t bet on it unless the economy picks up and Fiat is able to capture a controlling interest in Chrysler far more than its current 20%. Dodge and Chrysler may have bad images, but they’re far better than Fiat’s (at least in the USA and Canada). I see Dodge and Chrysler plodding along for quite a while with modified Fiat platforms that don’t quite match Ford, Toyota, Honda and GM in the eyes of American buyers but just good enough for value and fleet buyers.
@bomberpete
fair enough. ;-)
@getacargetacheck
to be frank i don’t want chrysler do die off. i really don’t.
i don’t wish that for any car maker. but i’m realistic. everyone
can agree that the US is going into a double-dip recession with no job recoveries during the intermediate period. fleet sales happened in that period, and there might be no substantial fleet sales in the coming quarters that would “save the day”.
so somethings gotta give. GM shed few brands, Ford ditched Mercury.
question is who will Fiat let go. Lancia? Lancia got weak sales, almost no product. Dodge/Chrysler? – all 2005 made products. yea, new product is expected, but i’m not so sure interior changes and few facelifts will help that much.
tell me what’s your take on all of this?
btw, i think the lower-tier japanese mfgs are also in big doo-doo.
mitsubishi, mazda…
I was really hoping that I wouldn’t have to drag my ass all the way over to Palm Beach to shop (or even service) a Fiat.
It would appear to be a money losing venture for a dealer until additional Fiat and Alfa Romeo models are available. And banking on the additional product being a success a risky venture at best from a dealer’s perspective. Fiat may be able to quickly open stand alone facilities from closed Hummer, Saturn, Pontiac, Dodge, Chrysler/Jeep and soon LM points as opposed to building brand new ones. I would think there are a lot of stores that lost their franchises available to become stand alone Fiat stores.
This is exactly how Honda launched the Acura nameplate in the US. Even existing Honda dealerships had to have separate stand-alone facilities and staff. And IIRC, there was a separation requirement too – you could not just have a separate building on the same lot.
I think that if they want to launch FIAT and ESPECIALLY Alfa Romeo as upmarket brands, they would have to be absolutely suicidal to do so in existing Chrysler showrooms filled with typical American car dealer staff. I went to our local C/D/J store with a buddy to pick up his Grand Cherokee from servicing – that joint makes Walmart seem classy! Every car dealer cliche right out there in the open, from old sales guys in bad suits glad-handing you as soon as you walk in to screaming SALE banners and balloons tied to every surface. Blech.
The biggest problem a stand alone Fiat store would have initially in staffing it is with just the 500 to sell I don’t know how a salesperson could survive. We have a large Ford store that several years ago built a Mazda stand alone facility on the same premises and it does so little business that they have only a receptionist. If you want a salesperson they call the Ford store to have one come to the Mazda store. Same with a Fiat service dept. there wouldn’t be enough volume for techs to survive either.
Khodes, that’s exactly why I don’t this will work.
Lord knows that Honda dealers in the mid-Eighties were no paragons of virtue (smugly marking up in-demand Accords). But with Acura, at least they had a desirable core product line to build on plus the knowledge they were working with the same exact company (not a new mgmt. team) with a proven track record in the US. That made those early franchise investments to be a worthwhile gamble.
How is this comparable for downtrodden Mopar dealers? To me, it seems too faddish, like a re-run of the Hummer debacle. Or Sterling. Or Merkur. I will at least grant that it’s a better strategy than the one Daewoo tried.
Very true. I remember walking past a Fiat dealer in London, and while car dealerships in the UK in general are quite different from American ones, the Fiat store was really snazzy and the 500 was definitely the image leader to get people in the store, where they would realize they were better served by a Panda and just buy one of those. The difference was night and day to your average Chrysler dealer.
So if Chrysler divorces Fiat like they did Diamler, there is less community property?
I remember reading that Fiat wants to sell 20,000 500’s per year. Divide that number by 125 dealers, and you get 160 sales per dealer per year. That’s roughly one every other day. Since these are fairly low end cars, you can expect that the margins will be low. Let’s say the dealer keeps $1000 per car for all costs. That’s $160,000 to pay all non-inventory costs. Even if you double that, I don’t see how you can run a dealership on that kind of money.
I remember when Saturn started, it was looked upon as being questionable to have a one model dealership, but at least Saturn was selling a model that could sell 100,000 units per year.
There is no question that until more Fiat/Alfa models are available a stand alone Fiat store is a money losing proposition from a dealer’s standpoint. And as I said previously, a risky proposition at best after additional models become available. However, a temporary money loser with a chance to make profits in a couple of years could be very appealing to a dealer that lost their franchise and is trying to survive on used car sales, body shop and service depts. provided they have adequate working capital to get through a couple of money losing years. There is certainly no guarantee that either Fiat or Alfa will be successful this time around.
To sell just 20 000 Fiat 500 in the us seems like a very conservative number.
The 500 sells like hotcakes elsewhere.
http://www.caradvice.com.au/62993/fiat-500-celebrates-half-a-million-sales-in-21-months/
Buckshot — MINI sold 54,000 units in 2008, its best US sales year. They’ve had great marketing, a dealer body that understands the product, and good timing (remember $4 gas?). Will Fiat 500 be so blessed? I’d say 20K U.S. units a year is a very reasonable estimate.
Yes, we wouldn’t want Fiat’s stellar reputation for quality sullied by Chrysler*.
* Note: Comment not just sarcastic but absolutely dripping with sarcasm.
Underneath the sarcasm is a legit argument – this strategy just doesn’t fit the way it did with MINI & BMW.
In an earlier post, I stated that Honda dealers who invested in Acura franchises were getting a known commodity. In this situation, it’s more like Chrysler dealers who bought into Bricklin’s Yugo pitch back in ’85. They did OK for a year or two, then….WTF? And remember that car was a Fiat 127 underneath.
The sarcastic part was Fiats don’t exactly have a stellar reputation for reliability. I guess you’re saying that they’ve been away from the US market long enough that the pool of inexperienced (in Fiat) schmucks is now large enough. There’s no doubt in my mind that nobody in the US would take the time to look at what Fiat’s reliability reputation is like in Europe, though the poster’s on this site are probably well aware that Fiat’s reliability numbers make Chrysler look good.
Fiat isn’t trying to predict what the end outcome will be, they’re just creating some flexibility.
Having the boutique-style store will appeal to buyers who are curious about something new. People who freq this site are aware of Fiat’s reliability reputation but I can guarantee you that awareness doesn’t exist in the general public. It’s like when a new restaurant opens up. People don’t wait for a culinary review to come out or investigate the owners to see what previous reputation they may have, they’ll just try it out for the sake of something new. A car costs a whole lot more than a meal out but I believe the mentality is still similar. Besides, the very word “Italian” oozes of all sorts of positive connotations that will be a huge help in selling these chihuahua 500s. Throw Alfa in the mix later on and the car bonership will continue.
The difference here is that Fiat isn’t signing up any Tom, Dick or Harry with a wad of cash – they’re getting people who are familiar with the industry and have knowhow to create these stores. The sentiment here seems to be “How can a Chrysler dealer afford to create a whole new store?” but they’re specifically targeting successful dealerships and you have to know that many of those dealers also have other brands (GM, Toyota et al) jingling in their pockets so they’re not strapped for cash.
Back to the flexibility thing. Let’s say that Fiat/Alfa flies this time around. There’s nothing to say the stores couldn’t be swapped at a future date. Kill off the Chrysler brand and put Jeep/Dodge in the original Fiat stores and vice versa. That wouldn’t happen much, with the exception of dealers who decide to ditch C/D/J/R and sell only Fiat/Alfa out of that larger location. They can just shutter the boutique store or recycle it for something else (e.g. Italian bikes).
This is all theoretical until Marchionne can successfully win over the hearts of North Americans, but I think this is a completely different situation from last time when they tried to come in as a standalone brand with no dealer presence. This time around, those dealers are going to pop up overnight and Fiat will soon be a household brand.
+1
Very nicely put Mr. Source, nice to see that not every car fan in the US is still welded to the 1970s cliché image of Fiat, and that some people can see the genuine potential here.
The Fiat/Alfa stores MUST be stand alone!
Thats the only way they could possibly interest new buyers.
And personally I think that Alfa will figure BIG in these new stores quickly if not at the same time as the 500.
It will be wonderful to have an affordable european presence in this
country again!
And maybe the French next!!!!!
Maybe now some variety.Its been missing in this country for WAY to long.
Just my 2 cents..
oldyak – It’s a romantic notion. I wish I weren’t so skeptical, because all I can think of is Hemingway – “pretty to think so.”
Sergio THINKS he’ll get separate Fiat showrooms. Here’s what’s really going to happen. The same dealers who called their congresspersons and complained about being railroaded out of their franchises (and who ended up getting arbitrations even after the bankruptcy) will call their congresspersons and complain that the whole reason for the government handing a share of bailed out Chrysler to Fiat was to get new products in the Chrysler showrooms. (How’s that for a long sentence.) Congress will call Sergio up to the hill, and the next thing you know, Fiats will appear in the Chrysler Dodge Jeep showrooms.
Come on down for great deals during our Summer Event, on now at your local Chrysler/Dodge/Jeep/Ram/Fiat/Alfa Romeo dealer. Kind of just rolls off the tongue doesn’t it?
I would think closed BP gas stations would be the perfect low cost venue for FIAT retail ops. Probably available cheap although the underground tank liability may be a long term negative.
John Horner makes some interesting points, but I must respectfully disagree.
Fiat isn’t BMW, and can’t trade on a rep for quality. Americans either remember Fiat from the past, or they don’t, in which case, they’ll ask their Dad/Uncle/older cousin, etc. Most of these older men will say “All I can tell you is they were crap when they were here before and I’d advise you not to buy one for about 5 years until we see what their reliability is going to be”. IOW, Fiat has to compete against 3 year old Civics. And Fiat can’t really compete against 3 year old Civics.
And, 3 year old Civics are larger, roomier, more comfortable, and almost undoubtedly more reliable. They’ll be a safer bet than a 500 – and most buyers will give up on the cute factor if they start considering reliability.
Those who say Fiat is more reliable than Chrysler may be correct. They are also missing the point. Toyota (not so much these days) Honda, Ford, and Hyundai are the quality level that’s needed today. If you aren’t competing at that level, you aren’t really in it for the long haul. I don’t really know how Fiat will do on quality, but as I said, they don’t have a good rep to trade on. Just the opposite.
On the idea of Fiat/Vespa dealers- it should be the other way around. Instead of Chrysler dealers adding the Vespa line, offer existing Vespa dealers the chance to sell 500s. It will appeal the the trendy types and the “mini” types (not necessarily MINI types) and the “It’s small and underpowered so it must be green” types.
My prediction (and you can call me on it if I’m wrong – but you’ll have to remember I said it) Chrysler won’t get 125 dealers to sign up for this. They’ll have to make do with fewer dealers, which might be good.
In the end, it will all come down to long term reliability. It’s quite a gamble for a Chrysler dealer – none of them know what the long term reliability will be either. Finally, Americans have a different (reality based) idea of what reliability is.
125 major metro areas.
Here’s a list of the 125 (and more) largest cities in the US. Ask yourself whether of not a stand alone Fiat dealer (even with the promise of adding Alfa Romeo) could survive in some of these cities.
http://en.wikipedia.org/wiki/List_of_United_States_cities_by_population
I’ve already written that I think Fiat will be forced to sell in all the Chrysler dealerships. I also think that the wider distribution is a good idea. As Dynamic88 points out, some of the top 125 markets are pretty small. Not only could they not support a stand-alone Fiat dealer, they probably don’t have a Mini dealership either. By selling in all Chrysler dealerships, Fiat will have dealerships that are convenient to a much larger segment of the population. Hit ’em where they ain’t.
Talk about linear thinking. So that means that New York would only get one dealership? “125 major metropolitan areas” could be as broad as one set of burbs in Philadelphia.
Even still, there’s no border patrols to prevent rural folk from shopping in a smaller city. If they want it, they’ll make the drive to get it.
Dynamic 88 and Conslaw both make excellent points. Either the Vespa strategy or the all-in for Chrysler dealers selling Fiat makes a whole lot more sense than a stand-alone strategy that dealers will have to borrow hundreds of thousands for against already-leveraged franchises.
If I’m posting a lot on this subject, it’s because I hate to see otherwise astute business people making dumb mistakes. And to me, Sergio seems to be attempting three-card monte with Chrysler dealers.
Rusted Source
You make a good point. The top 125 Metro areas isn’t necessarily synonymous with the top 125 cities. NYC could get two dozen dealers, so could LA.
But, I can’t know what Fiatsler means, precisely, by 125 major metro areas. So, my point in listing the top 125 cities was to get a rough feel for where these things would sell, and where they won’t.
I’m certainly not familiar with all 125 cities, but I know some of them. Were I a top Chrylser/Dodge/Jeep dealer in LA, I’d jump on this. Were I a top C/D/J dealer in Grand Rapids, MI. I don’t think I’d be at all interested in plowing capital into a stand alone franchise.
But again, your point is a good one. I may be wrong in thinking that Chrysler won’t get 125 dealers to sign up. There may be 125 dealers in CA who sign up. We’ll have to wait and see. I’m going to stick with my prediction.