LUCA CIFERRI

Chrysler saving Fiat? Odd, but true

Luca Ciferri is Automotive News Europe's chief correspondentLuca Ciferri is Automotive News Europe's chief correspondent
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TURIN -- If someone had told me that Chrysler would rescue Fiat within two years of their tie-up, I would have said, "Smettila di bere prima di pranzo" -- stop drinking before lunchtime.

What has happened since 2009, when Fiat took control of Chrysler? Actually, Chrysler is marginally ahead of what CEO Sergio Marchionne expected in his original restructuring plan.

The main problems are here in Europe: aging Fiat vehicles, Europe's faltering economy, and the sovereign debt and euro crises.

Sales in Italy this year are spiraling down to a 15-year low. Fiat's Alfa Romeo, Fiat and Lancia brands compound the market's weakness with aging products. Fiat sales and market share will continue to erode.

A Nov. 3 headline in the Italian daily Libero Quotidiano summed up the view here of Fiat's and Chrysler's sales: "Fiat on the hand-brake in Italy, but Chrysler applies the turbo."

A decade ago, an Italian market sinking 11 percent to just 1.75 million units, as forecast for this year, would have been the kiss of death for Fiat. But now that Fiat owns Chrysler, car sales (excluding light trucks) in Italy account for just 10 percent of Fiat's global revenues.

Chrysler accounted for 53 percent of parent Fiat's third-quarter revenues. Brazil is also a strong market and a huge profit generator for Fiat.

In the third quarter, Fiat tripled its operating profit to 851 million euros, or about $1.15 billion, and Chrysler provided two-thirds of the total.

Oddly, the United States suddenly looks like an island of stability in the global auto market. First, European automakers never addressed their overcapacity problems -- as the United States accomplished during the bankruptcy year of 2009.

And now the sovereign debt crisis is expected to cause a third consecutive year of sliding sales in Europe. The anticipated new-car volume for 2012 will be 2.3 million units below the 14.8 million peak seen in 2007, says market analyst LMC Automotive.

In Europe, nerves are stretched thin by dysfunctional Greek politics and huge Italian sovereign debts. Events are moving so swiftly that any prediction is good for no more than, oh, 24 hours.

But one thing is safe to say: Chrysler is now Fiat's life insurance.

Thanks to Chrysler's profits, along with technical and purchasing synergies from the combined companies, Fiat is in a much better position to withstand the crisis.

"Fiat, with Chrysler, grew its operating margin to 4.8 percent, not a great number by itself, but better than 2.5 percent averaged by PSA/Peugeot-Citroen and Renault," wrote Alessandro Penati in Il Corriere della Sera, Italy's No.1 daily.

Without Chrysler, I fear the automaker, after numerous brushes with bankruptcy in its 112-year history, would finally be looking at la fine -- the end.

You can reach Luca Ciferri at lciferri@crain.com.

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