DETROIT -- Fiat Chrysler today rolled out a plan to bolster its struggling Fiat dealers in the U.S., in part by allowing them to combine operations with adjacent Chrysler-Jeep-Dodge-Ram stores.
The strategy -- revealed to dealers this afternoon at a suburban Detroit hotel -- could save a retailer selling 15 new Fiats a month an average of $180,000 per year in duplicate third-party vendor expenses, FCA estimates.
Dealers who decide to stick with the existing stand-alone Fiat showroom -- who essentially stand pat -- will receive about two-thirds of the savings as well as other benefits to their monthly operations.
In addition, FCA will simplify its underperforming Fiat product lineup -- cutting the number of trim levels to limit price overlap among nameplates. Pricing will be affected, but details of those changes aren’t yet available.
The measures are aimed at halting Fiat’s sales decline and restoring dealers’ faith in the beleaguered brand, said Tim Kuniskis, head of FCA’s passenger car brands.
Two-thirds of Fiat’s 206 dealerships average less than 10 new sales a month, and less than half are profitable, an FCA source said.
But the vast majority are located near a sister Chrysler-Jeep-Dodge-Ram dealership, often on the same site. All but 42 Fiat dealerships are owned by Chrysler-Jeep-Dodge-Ram dealers.
With the brand’s return to the U.S. in 2011, Fiat dealers were required to apply for separate franchises, not just open Fiat showrooms in their existing dealerships. Those dealerships were given separate and distinct dealer codes from the Chrysler-Jeep-Dodge-Ram stores.
But under the new plan, previewed exclusively to Automotive News, Fiat dealers can:
- Consolidate operations under a single dealer code, allowing them to avoid duplicate vendor contracts and share advertising costs.
- Apply Fiat sales toward monthly sales goals and incentives, including meeting the minimum sales responsibility for their Chrysler- Jeep-Dodge-Ram outlets.
- Receive direct payments each month in the form of rent assistance if they continue to operate Fiat franchises as stand-alone dealerships.
- Receive additional incentives to sell Fiat vehicles, such as lucrative stair-step incentives.
Dealers are not obligated to combine their Fiat and Chrysler-Jeep-Dodge-Ram operations, but they could see greater financial advantages if they do. But even if dealers choose to do nothing, they should see a positive impact on their monthly profits, Kuniskis said.
“I’m not telling them that they have to do it, but I’m opening the door,” he said. “You can walk through it or not. I’m not going to make you.”
Consolidating codes
Kuniskis says shifting to one dealer code for both a stand-alone Fiat dealership and a nearby Chrysler-Jeep-Dodge-Ram store is more than an administrative change. He says the move could save dealers $10,000 to $24,000 each month on duplicate services from third-party vendors.
“It’s a huge deal,” he said.
For example, Kuniskis said a dealer with a Chrysler-Jeep-Dodge-Ram dealership and an adjacent Fiat store might pay $7,500 monthly for a dealer management system at the larger store and an equal amount each month for the DMS system at the Fiat store -- simply because of the different dealer codes.
“The same would be true for other service providers, like online inventory listing services,” Kuniskis said. “I think they’re going to see that as a huge, huge advantage.”
He said the average Fiat dealer could save $180,000 a year.
Consolidating dealer codes also will add Fiat sales to a dealer’s monthly sales goals and incentive programs.
“We’re going to allow you to become one dealer entity,” Kuniskis said. “One legal entity with two locations means that I now have the multiplier effect immediately. All of a sudden, [Fiat] now makes it onto the dealer’s playbook -- his playbook of, how do I get to my number for the month? I get shelf space in the dealer’s mind from just flipping the switch.”
Rent help
For the 42 Fiat dealerships not owned by Chrysler-Jeep-Dodge-Ram dealers, Fiat will work out “one-off” programs that will mimic most of the advantages that a consolidated dealer could achieve, Kuniskis said.
The rent assistance for stand-alone dealers will be redirected from payments made currently to offset local advertising costs. But the monthly payments will be larger than the co-op advertising payments were, Kuniskis said, though he did not provide specific amounts.
While the advertising cash was a reimbursement, the rent assistance is a direct subsidy. That should mean a net gain for most dealers, Kuniskis said.
“You have to be a guy that invested in a stand-alone facility to get it,” Kuniskis said. “But it will be paid every single month, based on that month, so it won’t be paid a year in advance.”
Dealers who combine their operations also will be able to combine advertising, allowing them to advertise Fiats with their Chrysler- Jeep-Dodge-Ram products.
Another fix
The new plan is Kuniskis’ second attempt to improve the lot of Fiat dealers. He took on the same task in late 2011 and early 2012 after the brand’s botched 2011 relaunch in the United States. In 2013, Kuniskis moved to Dodge, and after a two-year stint as head of the brand, he picked up responsibility for Fiat again last fall, along with Dodge and Chrysler.
Fiat’s U.S. sales peaked at 46,121 in 2014 but slipped to 42,410 last year and are down another 15 percent so far this year. That’s despite the addition nearly a year ago of the 500X crossover to a lineup that also includes the 500 minicar and 500L four-door hatchback.
The lineup will expand to four vehicles this spring when the 124 Spider, based on the Mazda MX-5 Miata, debuts.
Kuniskis said the 500L and 500X are “tripping over each other” in terms of pricing and content.
“The cannibalization between [500L and 500X] is very evident,” he said. “We’re not getting any new people in, and all we’re doing is flip-flopping them between these cars.”
To address the overlap problem, Kuniskis said FCA will cut the number of trim levels for each nameplate. For example, there are currently nine versions of the 500 minicar, with different option packages for each one. Kuniskis plans to cut the number of trim levels to three.
All of the options and packages now available will remain on the order sheet, but instead of special models, they will be packaged under option groups. The same is planned for the other Fiat nameplates.
“It will just be a lot easier for a guy to stock it, sell it and understand it, frankly,” Kuniskis said.
Pricing also will be adjusted, though details were not available. He said there will be more money available for dealers to tinker with their own pricing.
“We’ve added a ton of product, and we’ve seen no increase in sales -- none,” Kuniskis said. “Every single car has been substitutional to the other ones.”
Dealer reaction
Dealers interviewed outside the meeting a Detroit area hotel were mostly upbeat.
Mike Bettenhausen, dealer principal at Fiat of Tinley Park, Ill., and Bettenhausen Chrysler Dodge Jeep Ram in Tinley Park, praised Kuniskis' moves.
"It is really what I consider a relaunch of the Fiat brand. Gives us the opportunity to finally get the brand going in the right direction," he said.
Bettenhausen said the moves allow dealers to "eliminate the costs of a separate corporation," separate marketing and DMS systems. "That in itself is huge," he said.
However, Bettenhausen said he is not yet sure whether he will combine his Fiat Alfa Romeo stores with his Chrysler Dodge Jeep Ram store.
"There are probably very few individuals who can walk out (of this meeting) and say I know exactly what I'm going to do. There’s so many variables.Every state has different franchise laws. I've got to go back and consult with my attorney my CPA. But I know one thing. Tim Kuniskas will get this right."
Brad Wernle contributed to this report.
