Fiat’s Sergio Marchionne hopes to sell or merge Fiat-Chrysler

The turnaround at Fiat over the past decade has been little short of startling. Back in 2005, Fiat was burning through cash like there was a bush fire in the accounting department and came close to outright financial collapse. It had to legally enforce an unloved deal with then-partner General Motors to shore up its finances just to survive.

Then, Sergio Marchionne, a man who favours comfy jumpers over sharp suits, took the helm of the vast Italian conglomerate and things began to turn around.

A recreated 500 shored up the sales numbers, while Ferrari became a massive cash-cow for the group as a whole. If other models failed to fire especially, Fiat at least began to make money again, so much so that in 2009, when American giant Chrysler went bankrupt, Fiat was able to step in and buy it wholesale from the US government.

Cashflow pumping

It was an audacious deal at the time and seemed to cement Marchionne’s canny reputation. As Fiat sales stalled in the face of a crippling European downturn, so Chrysler’s resurgent US sales kept the cashflow pumping. Could there be here an automotive giant to rival the mighty VW?

Perhaps not – according to Reuters, Marchionne is currently seeking a new suitor for Fiat-Chrysler Automobiles, either to merge with it or to buy it out entirely.

For while Chrysler and Jeep are doing well in the burgeoning US market, the news is not so good elsewhere. The group as a whole, says Reuters, runs on a margin of about 3.5 per cent – that's 2 per cent below the industry average and not sustainable if you're serious about survival, let alone taking on Volkswagen and Toyota.

Then there is the area of unfinished business. Fiat, starved of investment and new models through the recession, is only now starting to launch key models such as a Qashqai rival in the shape of the 500X, while key cars such as the ageing 500 itself, the Panda and the somewhat unloved 500L MPV are selling only slowly.

A new Punto seems as far away as it ever was and the moribund Bravo hatchback crawled out of the hugely important Focus-Golf-Astra segment with barely a sale to its name. All will need replacements, convincing ones, and soon.

Then there is Alfa Romeo – one of the most storied names in motoring but a consistent misfire on the sales front. Marchionne has big, big plans for Alfa, with a new range of rear-drive saloons and four-wheel-drive SUVs starting this year with a Giulia-badged 3 Series rival. It will cost billions to put Alfa up to where it needs to be though, an investment cost that any potential partner will baulk at.

Likewise Jeep – currently seen as the doyen of the Fiat-Chrysler empire. It's selling strongly and has plans for global expansion to two million sales a year. But again, it's US-centric in its sales, and lacks both image and dealers on the ground in key markets such as Europe and China. Once again, billions need to be spent to make it all work right.

Public ownership

And Ferrari? Marchionne dug his fingers deep into Enzo’s pie last year when he sacked long-serving president Luca Di Montezemolo and announced plans to float Ferrari into public ownership, to help raise investment funds for the group. A canny move? Or selling off the family jewels? Well, at least Ferrari is now back to winning ways on the race track . . .

Who would buy, or partner with, Fiat? Marchionne has mentioned former partner General Motors, saying such a tie-up “would be feasible” but the response from Detroit has thus far been icy. Likewise Volkswagen and PSA Peugeot Citroen, whom Marchionne has also mentioned as potential partners.

It has often been mooted that VW wants to buy Alfa Romeo, but the project was often cited as a personal quest by VW's Ferdinand Piech and he has a massive boardroom rebellion to deal with right now, so won't be making many trips to Italy to buy troubled sports car makers.

Cutting edge

Marchionne's best hope would seem to be Mazda. Mazda is now independent of Ford ownership and is turning significant profits. It already has a platform-sharing agreement with Fiat in place, which will see the new MX-5 eventually twinned with a new Fiat 124 Spider sports car.

Mazda’s cutting edge SkyActiv platforms would be ideal underpinnings for a new line-up of Fiats, Jeeps and Alfas, and the synergies between Mazda’s vast US operations and Chrysler-Jeep are obvious. Sadly for Marchionne, the Japanese as yet haven’t shown any interest in a full-blown merger.

Ireland is actually a pretty good example of the mountain Fiat has to climb. In 2000, Fiat and Alfa were selling strongly in Ireland, with significant market shares for both brands. Alfa alone sold 2,000 cars in 2000. Then both fell off the perch in a major way, and now, with Jeep included, the group can muster just 328 new vehicle registrations in the first three months of this year.

2018 is the deadline – that’s the year Marchionne is set to step down from Fiat’s top job, and a date when the combined group is supposed to be well on the way to seven million global sales a year.

Will it have a partner, or even a new owner by then? Sergio will need every ounce of that famed business nous if he’s to secure that deal.