A 'fighting chance' for Fiat dealers
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March 14, 2016 01:00 AM

A 'fighting chance' for Fiat dealers

Kuniskis' plan to fix the brand has retailer backing

Larry P. Vellequette
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    Fiat's U.S. sales peaked at 46,121 in 2014 but fell to 42,410 last year.

    DETROIT -- Steven Wolf belongs to a fairly exclusive club -- a Fiat dealer in the U.S. who has consistently made money on the struggling Italian brand.

    But even Wolf's faith has been badly shaken as Fiat sales have plunged. Late last year he postponed a plan to build a $500,000 Fiat showroom on his 15-acre multifranchise campus in Houston -- at least until he knew Fiat Chrysler's strategy for the brand.

    Wolf was one of 200 or so Fiat dealers who flew to Detroit last week to be briefed on that strategy, and he was apprehensive about what he might hear.

    Other dealers were, too. Some feared that the franchise -- in which they had invested millions -- would be opened up to the rest of the FCA US network. A revolt appeared to be brewing.

    But by the time Wolf boarded a plane back to Houston after the meeting at an airport hotel, his doubts were swept away.

    "I'm going ahead [with the showroom] now," he said the next day. "I called the general contractor on the way home and said "Let's do it.'"

    Kuniskis: "I'm opening the door."

    Lisa CopelandFiat-Alfa Romeo of Austin

    "It's really a thoughtful plan because he's giving dealers a choice. It isn't FCA coming in and telling us how we're going to run our business. They're giving us four scenarios and they said do what you need to do, what's best for your business."

    During the two-hour session with dealers on Wednesday, March 9, Tim Kuniskis, head of passenger car brands for FCA North America, said the automaker would dramatically alter the way it supports its 206 U.S. Fiat dealerships.

    Beginning in April, dealers will be free to close their separate Fiat showrooms and combine operations with their Chrysler-Jeep-Dodge-Ram stores and thus dramatically reduce third-party vendor costs.

    For those who maintain separate showrooms, new direct cash payments -- in the form of rent assistance -- would boost dealers' income. Product and pricing actions would improve the lineup and reduce model overlap. Kuniskis said the 500L four-door hatchback and 500X crossover were "tripping over each other."

    Fiat's U.S. sales peaked at 46,121 in 2014 but slipped to 42,410 last year and were down 15 percent for the first two months of this year. But Kuniskis laid out the tools he said dealers need to keep the brand viable and then promised that FCA would stay out of the dealers' way while they fix their businesses.

    "I think everybody has a fighting chance now to at least make it viable," said Gary Brown, former chairman of FCA's national dealer council and a Fiat dealer on New York's Long Island. "Everybody has to analyze their own individual plan, but it's nice that we were given tools to make it viable for every individual dealer."

    The plan

    Kuniskis' plan to revive Fiat would allow dealers to:

    • Consolidate operations under a single dealer code, allowing them to avoid duplicate vendor contracts and share advertising costs.
    • Apply Fiat sales toward monthly volume goals and incentives for their Chrysler-Jeep-Dodge-Ram outlets.
    • Receive direct payments each month in the form of rent assistance if they continue to operate stand-alone Fiat dealerships.
    • Receive additional incentives to sell Fiat vehicles.

    Kuniskis told Automotive News that, depending on dealers' circumstances and the actions they take, the retailers would see a revenue increase and could potentially save hundreds of thousands of dollars each year in third-party vendor costs.

    Two-thirds of U.S. Fiat dealerships average fewer than 10 new-vehicle sales a month, and fewer than half of the stores are profitable, an FCA source said. The vast majority are near a sibling Chrysler-Jeep-Dodge-Ram dealership, often on the same site. All but 42 Fiat dealerships are owned by Chrysler-Jeep-Dodge-Ram dealers.

    Dealers are not obligated to combine Fiat with the other brands.

    "I'm not telling them that they have to do it, but I'm opening the door," Kuniskis said.

    But he said shifting to one dealer code for both Fiat and a nearby Chrysler-Jeep-Dodge-Ram store could save dealers $10,000 to $24,000 each month on duplicate services from third-party vendors.

    For example, Kuniskis said a dealer might pay $7,500 monthly for the dealership management system at his Chrysler-Jeep-Dodge-Ram store and an equal amount for his adjacent Fiat store -- simply because of the different dealer codes.

    Dealers who keep their stand-alone stores will receive each month a $1,000 rent assistance subsidy per vehicle sold, according to one dealer. Thus, a retailer who sells 10 Fiats in a month will receive $10,000 from FCA.

    Trusted messenger

    For dealers, the messenger was nearly as important as the message.

    In 2012, Kuniskis was charged with rescuing the Fiat brand from its botched 2011 launch. He largely succeeded and remains popular among dealers. Since 2012, he has gained added credibility heading the Dodge brand, helping retailers earn more profits on popular products such as the Dodge Charger and Challenger SRT Hellcat.

    After the meeting, Mike Bettenhausen, dealer principal at Bettenhausen Fiat-Alfa Romeo of Tinley Park and Bettenhausen Chrysler-Jeep-Dodge-Ram of Tinley Park, in Tinley Park, Ill., praised Kuniskis and his plan.

    "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 are so many variables. Every state has different franchise laws. I've got to go back and consult with my attorney and my CPA. But I know one thing -- Tim Kuniskis will get this right."

    Ralph Mahalak Jr., partner/dealer principal of Alfa Romeo-Fiat of Winter Haven in Winter Haven, Fla., was buoyant after the meeting. Mahalak said the pricing actions -- which were detailed to dealers but not released to the media -- along with efforts to simplify the product lineup, would help sales.

    "These pricing actions they're taking will put more pop and enthusiasm in the showroom floor," he said.

    Mahalak also has Chrysler-Jeep-Dodge-Ram stores in Florida, Ohio and Michigan, along with his Fiat store in Florida.

    "It's not been a lot of fun the last 30 months with our Fiat franchise. We have some great cars, exciting cars, really cool cars," he said. "It's nice we've got some tools now to work with so we can help satisfy more customers."

    Open questions

    There are unanswered questions. Many dealers invested in Fiat in hopes of winning an Alfa Romeo franchise. Kuniskis' plan was silent on Alfa. He told dealers who asked about Alfa that it was a "Fiat meeting" and that he wouldn't talk about Alfa Romeo.

    "If you're an Alfa guy, that means you already have a stand-alone business," Brown said. "Maybe you can tread water now until the Giulia and the SUV come. I think the rent assistance really helps for a guy that has Alfa."

    Another question is whether third-party vendors will allow Fiat dealers to combine their contracts if dealers consolidate Fiat with their Chrysler-Jeep-Dodge-Ram franchises. A dealership management system provider contacted by Automotive News said the answer would depend on the dealer's location and circumstances.

    For dealers, the best thing about Kuniskis' plan is that they can take all of it, part of it or none of it -- the choice is up to them.

    "It's really a thoughtful plan because he's giving dealers a choice," said Lisa Copeland, managing partner of Fiat-Alfa Romeo of Austin in Austin, Texas. "It isn't FCA coming in and telling us how we're going to run our business. They're giving us four scenarios and they said do what you need to do, what's best for your business."

    Bradford Wernle contributed to this report.

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