Analyst Says Chrysler Unlikely to Survive Without More Downsizing

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While Fiat boss Sergio Marchionne is pushing to right Chrysler, an analyst from Bernstein Research in London is convinced Chrysler won't survive without axing its Chrysler and Dodge brands.

The report was made by Max Warburton of Bernstein and was drafted for Fiat investors and shareholders in advance of the unveiling of Fiat’s five-year restructuring plan. Although Marchionne has dutifully leveraged cost-cutting measures at Chrysler, Warburton remains unswayed in his opinion of the Pentastar’s outlook. Fiat’s plan is scheduled to be revealed April 21 in Turin, Italy.

“We remain unconvinced Chrysler will survive in its current form despite Marchionne’s blood, sweat and tears,” said Warbuton’s report. “A slimming down of Chrysler to be just Ram, Jeep and a U.S. production base for Fiat looks a realistic exit strategy to us.”

During its research, Bernstein Research said it interviewed four “very senior industry sources in Detroit,” although the sources’ tie-ins with Chrysler were not disclosed. Warburton identified three major issues with the Chrysler-Fiat link up that are hampering Chrysler’s business case and goals to retake United States market share:

* Limited new-product development despite efforts to bring Fiat-based vehicles to North America. * A skimpy product portfolio. * “Very limited” synergies between Fiat and Chrysler.

With these barriers in place, Warburton remains bearish on Chrysler’s progress and warns Fiat stakeholders to be wary should Marchionne’s plan fall flat. Warburton asserts that though Chrysler is close to breaking even for the first quarter of 2010 from an accounting standpoint, its three big bullet points are still glaring issues.

<;p class="MsoNoSpacing" target="_blank">The report wasn’t all somber news. Warburton says Chrysler’s outlook would pick up considerably if the housing and construction market regains steam, helping sales of the highly profitable Ram trucks.

<;p class="MsoNoSpacing" target="_blank">Chrysler currently holds a 9.2 percent market share in the U.S. and Marchionne is targeting 14 percent in 2014. The last year Chrysler held 14 percent or higher was in 2000.

<;p class="MsoNoSpacing" target="_blank">Source: Automotive News (Subscription required)

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