News Analysis: Fiat-Chrysler faced with uncertain future without innovative new products

Source: Xinhua| 2019-07-27 05:37:58|Editor: Yamei
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by Eric J. Lyman

ROME, July 26 (Xinhua) -- The year 2018 has been a challenging one for Italian-American carmaker Fiat-Chrysler, starting with the death of the architect of the company's turnaround and ending with a failed merger that would have created a market giant. The company's share price reflects the problems.

In June 2018, when Fiat-Chrysler announced its new business plan, the company's market capitalization was around 29 billion euros (32.3 billion U.S. dollars).

Today, the company is worth around 19 billion euros (21.1 billion U.S. dollars) -- meaning it has shed a third of its value in a year, its market capitalization shrinking at the rate of around 770 million euros a month.

"The company was hit by a combination of factors," Marco Leonardi, an economist with the State University of Milan and a long-time observer of Fiat, told Xinhua.

"There has been a general slowdown for automakers around the world, plus European markets are very competitive in the market segments the company focuses on. Add to that the shock from the unexpected death of Sergio Marchionne."

Marchionne, who died a year ago, guided the merger of Italy's Fiat with Chrysler from the United States starting in 2009 and he helped strengthen the fortunes of the combined company. The deal gave small Fiat cars access to the giant United States' market, while creating production synergies on both sides of the Atlantic.

"The presence in the [United States] market is important for the company since there is less competition there in the small- and medium-sized car markets where Fiat-Chrysler is strong," Leonardi said. "The company's profit margins in the U.S. are still much healthier than they are in Europe."

Fiat-Chrysler's boldest move since Marchionne's death was a merger proposal with French rival Renault. The deal ultimately failed, but if it had succeeded it would have created the world's third largest carmaker while giving Fiat-Chrysler a presence in the electric and hybrid car markets where it is absent.

After the failure of the Renault merger, Fiat-Chrysler announced ambitious plans to develop an electric version of its iconic Fiat 500. The first units are expected to go on sale next year.

"The plans for the electric Fiat 500 are important, but they won't save the company on their own," Michele De Palma, national secretary for the FIOM CGIL trade union that represents many Fiat-Chrysler workers, said in an interview. "The company is lagging behind its rivals when it comes to innovative new products."

De Palma agreed with Leonardi that the United States branch of the company is doing better than the European side, where, De Palma said, Fiat-Chrysler's sales are falling faster than the market slowdown in general.

"Fiat-Chrysler owns a shrinking piece of a shrinking market in Europe," De Palma said. "The company has to start developing more new products. The electric Fiat 500 is a start, but more needs to happen. The company's leadership needs to show it can innovate and adapt better than it has been."