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Bloomberg: Analysts say Chrysler now propping up Fiat

by Bill Cawthon on

Two years ago, Fiat was Chrysler’s lifeline. This year, it’s the other way ’round.

According to industry analysts surveyed by Bloomberg News, Chrysler’s growth is now balancing Fiat’s slump in the weak European market. The expectation is that Chrysler’s operating profits will outpace those of Fiat by 87% in the second half of 2011 and the trend will likely continue in 2012.

“Fiat would be very vulnerable now without Chrysler, with few industrial and financial options on its hands,” said Emanuele Vizzini, chief investment officer at Investitori Sgr in Milan. Vizzini sold his Fiat shares in August.

While part of the cause is the current financial situation in Europe, Sergio Marchionne, CEO of both Chrysler and Fiat, is coming under increasing criticism for focusing on Chrysler to the detriment of Fiat. The Fiat range is getting a bit long in the tooth: aside from the rebadged Dodge Journey, the new Panda unveiled at the Frankfurt Auto Show last month is the first all-new Fiat model since the revitalized 500 debuted in 2007. By comparison, 75% of Chrysler’s lineup has been updated in the past two years.

Fiat recently pushed back production of some new models again. It will now be 2013 before promised new Fiats, Alfas and other European market vehicles appear.

All this has not escaped investors: Fiat stock has plunged 40% in the past three months. Only PSA-Peugeot stock has fallen farther on Bloomberg’s European autos index.

Marchionne, while acknowledging Fiat needs more attention, says progress is hampered by the conditions in Europe and uncompetitive factories in Italy. He wants every factory in every country to compete for new product. His hard line in Italy has led to conflicts with the government and powerful Italian unions. It also led to Fiat’s decision to leave Confindustria, the Italian manufacturers’ trade group, fueling speculation that Italy’s largest private employer might leave the country.

Not everyone is pessimistic: Massicmo Vecchio, an analyst with Mediobanca in Milan, said Chrysler can generate cash in the U.S. to fund Fiat’s reclamation of the European business. Vecchio has an “outperform” rating on Fiat stock.

“Thanks, America,” said Vecchio.

To read the entire Bloomberg article, click here.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.


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