Report: Struggles In Europe Causing Fiat-Chrysler To Revamp Two-Year Plans

As sales continue to fall in Europe, Fiat-Chrysler CEO Sergio Marchionne says he will revamp both companies’ two-year business plans. According to Automotive News, Marchionne doesn’t expect reality to live up to Fiat’s expectations for the European market.

Marchionne had previously released a five-year growth program for Fiat in 2010 and for Chrysler in 2009, but he now plans to issue a new Fiat strategy for 2013-2014 on October 30. That’s because Fiat — like many other European auto companies — reportedly expect the European new-car market won’t fully recover for two more years. The automaker’s original business plan was far more optimistic about a rebound in car sales.

“The market won’t be there,” Marchionne told Automotive News. “We will be updating our forecasts for 2013 and 2014 as a consequence.”

The economic situation in Europe is so bad that Fiat has recently backed off on a plan to invest about $26 billion on factories in Italy, and instead the company might consider exporting more models from Italy to the U.S. market. It’s unclear what other changes will be included in Marchionne’s new plan. The company already has said it might allow Mazda to take advantage of excess capacity by building cars at Fiat-Chrysler factories, for instance.

Chrysler’s position in the U.S., however, remains strong. In a speech at Ohio State University yesterday, Marchionne told students that Chrysler is on track to be the nation’s fastest-growing automaker for the second year running. In the first half of 2012, Chrysler posted net income of $909 million — triple its income over the first half of 2011, and on track to exceed the company’s public goal of $1.5 billion in full-year income.

Fiat also is still working to increase its stake in Chrysler from 58.5 percent to 61.5 percent. The additional three percent is slated to result from Fiat purchasing a batch of shares owned by the United Auto Workers’ VEBA health-care fund, but the two groups have yet to agree on what the shares are worth. Fiat reportedly wants to spend less than €200 million ($258 million) for the shares, but the UAW likely wants at least $300 million. Marchionne says that Fiat will revisit purchasing the VEBA shares in January 2013.

Sources: Automotive News, Chrysler

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