Fiat Chrysler Automobiles’ 5-year business plan outlined last week was certainly ambitious, if not somewhat overreaching.
The strategy calls for growing volume of all brands to 6.3 million units by 2018, up from 4.4 million in 2013. Key to this growth is the Jeep marque, which in the plan is projected to increase volume from 700,000 units last year to 1.9 million globally in 2018.
The Jeep target may be achievable, given its rather limited exposure in the global market today and the rising demand for rugged SUVs and CUVs in developing countries. However, other aspects of the strategy, most notably growing niche brand Alfa Romeo’s volume to nearly 400,000 units in 2018, four times the number of units sold in 2013, is overreaching.
One of the biggest questions is how FCA is going to finance the growth plan, which includes launching numerous new models in a scant five years. Some analysts put the price tag for the strategy at a staggering $66 billion.
And then there’s the all-too-real possibility that a launch doesn’t go smoothly, which could create a ripple effect that disrupts the plan going forward. This outcome is a definite possibility given the past botched launch of key models, including the Jeep Cherokee which was delayed because of transmission issues.
FCA CEO Sergio Marchionne even admits that the plan requires “near-perfect execution.” That’s not exactly reassuring in an industry where even the best-laid plans can go awry.
Another wild card is Fiat’s performance in a down European market that is just now exhibiting signs of life. The strategy for the Italian brand is to embrace a 2-prong approach in which some models feed the lower end while some marques, including the 500 lineup, will be geared toward the upper end of the market.
Fiat sold 1.5 million units last year, and by 2018 FCA says it will hit 1.9 million. Not overly ambitious, but a bit of a stretch in the ultra-competitive global marketplace.
Before the FCA plan was outlined, some industry pundits said selling the Ferrari brand could in part finance the 5-year strategy. But Marchionne was quick to quash that speculation, saying in no uncertain terms that Ferrari was not for sale.
There’s no doubting Marchionne’s ability as a CEO. Although he exudes confidence that the plan can succeed, it’s likely he has some inner doubt as to whether it’s actually doable.
But perhaps Marchionne feels FCA has no choice but to meet the aggressive targets. During the presentation the executive said, as he has on several previous occasions, that an automaker needs to reach at least 6 million units a year to be a credible long-term global competitor.
Like any plan, the only way to tell if it will work is to watch it play out. That said, the FCA strategy seems like a classic case of biting off more than you can chew.
