Fiat rises, yet profits elude many dealers
Those who spent heavily on stores bank on new products
DETROIT -- A year after Chrysler Group hit the reset button on the botched launch of its Fiat 500, more than half of the brand's 183 dealerships in the United States have turned a profit.
But the big difference between Fiat dealers in the black and those still losing money is how much they spent setting up their stores, say dealers and the brand's North American head.
Tim Kuniskis, the 45-year-old motorcycle enthusiast who took over Fiat in North America last November after the departure of Laura Soave, argues that the brand and its dealers are in a much better place today than they were a year ago.
And the dealers still losing money, Kuniskis said, will have a better chance to turn a profit as the brand rolls out more product for Fiat showrooms in coming months and years.
"The profitability has improved dramatically over the last year, but talking about dealer profitability is like talking about fingerprints: Every one is different, depending on how they have their operations structured," Kuniskis said.
Not surprisingly, dealers who invested heavily in the brand -- some spent $3 million or more building stores with attached service areas -- are less likely to have turned a profit than those who limited their exposure with retail-only operations, Fiat dealers say.
The first Fiat stores began delivering vehicles in March 2011, but sales languished as Chrysler slowly built out its dealer network, a process that continues today.
A year ago this month, Soave, Fiat's first U.S. brand chief, left Chrysler amid concerns that the launch of the Fiat 500 had been botched. An internal Chrysler memo last November indicated that 29 of what were then 130 Fiat dealerships hadn't sold a single car in October 2011, while sales per dealership that month averaged 15.
Soave was replaced by Kuniskis, a seasoned Chrysler marketing and retail executive, who immediately launched a nationwide tour of Fiat stores to listen to anxious dealers. He also changed the marketing to focus more on the brand and worked to expand the dealer network, though holes remain.
Fiat’s Kuniskis: More products will help.
'Volume is profitability'
The strategy seems to have worked. Through October, Fiat sales in the United States have more than doubled to 36,462 units, from 15,826 units sold from March through October 2011.
Last month, the 183 Fiat dealerships in the United States each sold an average of 20 cars.
"The key to profitability for this network is the same key to profitability for every brand everywhere: volume," Kuniskis told Automotive News. "Volume is profitability."
Some Fiat dealers have patiently waited to have models other than Fiat 500 derivatives in their showrooms. Others have been more outspoken in their desire to broaden their product portfolio, especially with the promised return of Alfa Romeo.
"Alfa represents profitability in the long term," said Carl Galeana, whose Fiat dealership in suburban Detroit opened in May 2011 with a personal visit from Chrysler-Fiat CEO Sergio Marchionne. "You have to have more than one vehicle to sell. The Fiat 500 is a great vehicle, but a Chevy store can't live just on a Malibu."
Fiat will reveal three new models at the Los Angeles Auto Show this month, and the first Alfa Romeo vehicles intended for the United States have been spotted during testing.
Alfa -- owned by Chrysler Group's parent company, Fiat S.p.A. -- will come to market first with the 4C sports coupe, followed by a sporty luxury sedan named the Giulia, say dealers briefed in September on Chrysler's plan.
Fiat also plans to broaden its slate of Fiat 500 derivatives, adding a previously discussed electric version and a four-door wagon from Europe called the 500L, among other offerings.
But in terms of profits, Kuniskis said, each Fiat dealer in the United States knew that it would take time to achieve profitability, and each baked that consideration into his or her decision on whether to open a Fiat store.
But Fiat dealers and Chrysler may not have known who the customer was going to be.
Mike Brillanti was among the initial wave of Chrysler dealers who signed on to open a Fiat store. As president of Landmark Fiat of Atlanta, which opened in June 2011, Brillanti said the store's launch "has been a painful experience to date," though the situation is improving as brand awareness increases.
"Part of the challenge of a bigger facility is that it costs more money to run," Brillanti explained. He said he thought used-car sales were going to help, "but the problem with a stand-alone Fiat store is that you don't take a lot of trade-ins."
'Alfa is a game-changer'
"Alfa is a game-changer," said Lisa Copeland, general manager of Fiat of Austin, which has consistently been among the top-selling Fiat dealerships in the United States, averaging about 85 vehicles a month.
Armed with Alfa's expected return to the United States, Fiat of Austin is building a 25,000-square-foot dealership in North Austin near a large Kia store. The dealership also will keep its current 6,000-square-foot store in a high-end Austin mall.
Copeland said she believes Marchionne when he says that Alfa will compete directly in the United States with BMW, and she predicted that Alfa's return will likely repeat Fiat's experience in 2011.
She said: "We'll have early adopters, but it will catch on."
You can reach Larry P. Vellequette at firstname.lastname@example.org.