By Peter M. De Lorenzo
Detroit. Thinking of the perilous state that the automobile business finds itself in at this very moment brings to mind that classic Jagger/Richards song lyric, modified with a few ominous words.
Wait, what? Did I say perilous state? How can that be? Hasn’t this been The Summer That Rocked for the biz, with cars and trucks flying off of dealer lots in a near frenzy, to the point that it started to remind everyone of the good old days when car sales were jacked, momentum was real and problems were just a few sad little specks in the rearview mirror?
Yes, it has. The summer sales numbers pegged the exuberant meter and started to veer into smokin’ hot territory. You could even feel a trace of borderline overconfidence – of all things - in the hum and thrum of the Motor City.
But then again it was only a trace, because the people who have been to the circus before in this business and have had the spotlight shined on them under the Big Top a few times knew that the sizzling sales pace wouldn’t last. Not only that, there were clear indications that the steam was about to be let out of the momentum train in a big way, and sure enough, that giant whoosh you’re hearing isn’t just from the dumb and dumber government shutdown impasse in Washington, it’s from the September sales numbers bringing everyone back to reality, soon to be punctuated by a resounding thud.
For those out there who are experiencing this for the first time, it can be a particularly bitter pill to swallow. They were the ones who got sucked in and started to think that the summer sales pace would continue indefinitely (but then again they’re probably also guilty of thinking that the Tigers are ready to win it all this year after stumbling their way into the playoffs). No wonder they can’t understand why things just can’t stay hot for the auto business indefinitely.
But all is not lost, is it? Even if the business can’t run at a 17 million unit annual pace everyone can at least get what they need, right? Well, like everything else in this business, that depends. Good products plus an executive team smart enough to know what to do in terms of marketing them and supporting them helps a great deal.
And knowing what kind of car company you want to be when you grow up is helpful too. That seems simple enough, right? After all, with these car companies flaunting their various brand mission statements around with mind-numbing regularity - to the point of being obnoxious - you’d think that having everyone on the same page would be standard operating procedure by now.
But no, it never quite works out that way, does it? Why? Because it’s not unusual for upper echelon management to have a completely warped – and wrong - view of what the actual reality of their companies is. And you don’t have to look far in this town to see it either.
Car companies are kaleidoscopes of contradictions, with the clash between the True Believers who actually keep moving the ball forward – i.e., the ones doing the work – and the obstructionist coasters and pompous windbags who like to go along for the ride, or worse, take credit for successes gained, both real and imagined, is an ongoing battle. And it often plays out in ugly and extremely counterproductive ways.
And it doesn’t help matters that car companies and car company executives tend to create unreasonable expectations too. And who usually suffers immeasurably for that? The dealers.
Let’s take what’s happening at Fiat-Chrysler, for instance. More specifically, let’s take a look at Fiat dealers and their promised flirtation with Alfa Romeo.
Now that the ugly reality of Alfa Romeo has set in, that other whooshing sound you’re hearing is myriad Fiat dealers “reevaluating” their relationship with Fiat-Chrysler. And it’s quite simply because they were sold a bill of goods by Sergio Marchionne when it comes to Alfa, and now they’re royally pissed-off.
As you recall, in order to get their financial commitment and buy-in to Marchionne’s “vision” for Fiat in the U.S., these dealers were first promised that they would be swimming in cool Alfa Romeo products by 2012. Then, due to circumstances beyond Saint Sergio’s control, that promise – which was based on the equivalent of selling air to begin with - slipped to 2014. But it was all going to be good because Alfa’s presence in this market would be led by the 4C sports car, and if the dealers would just sign up for the program they would be rewarded with eye-popping profits on their way to glory, while Sergio’s espresso-fueled minions would go on to sell as many as 75,000 mainstream Alfa Romeos in the U.S. per year.
So these dealers, armed with the unerring wisdom of The Great Sergio, invested in brick and mortar (to the tune of $1-$2 million) and jumped all-in for Marchionne’s “vision,” because if they didn’t, they would be left behind. And since they were promised that Sergio’s masterful manipulation of the existing Alfa Romeo architectures would result in vast riches beyond their wildest imaginations, they didn’t dare miss out.
So just how ugly has that reality become now? The vaunted Alfa Romeo 4C is going to show up sometime in the second quarter of 2014, although I wouldn’t place much stock in that time frame. The kicker? Not only will it be the equivalent of an extremely low volume rounding error in the scheme of things in this market, they will be sold through Maserati dealers, according to an email from Harald Wester, Alfa’s CEO, to Automotive News. In other words, those Fiat dealers have been rewarded all right – with a giant bowl of WTF?
Oh, and about the timing of those future Alfa Romeo products that the dealers were to be swimming in shortly? Fiat-Chrysler isn’t saying, but if I were a Fiat dealer betting on the come, I’d be beyond livid right about now and looking for a new franchise to acquire.
Is there anything surprising in any of this? Not really, especially if you’ve been paying close attention to the way Marchionne has conducted himself since he arrived. Lots of promises mixed in with arrogant bombast, while the essence of yet another Chrysler turnaround has come to fruition solely because of the Herculean efforts of the True Believers in Auburn Hills who actually did and are doing the work, not the Italians who are quick to stand on the profits of Ram pickups in a hot pickup market and proclaim themselves geniuses.
The reality of the situation is that the profits from those pickups are keeping that broke-ass car company back in Italy afloat. And it’s no secret either that, as I said last week, despite his public posturing Sergio must make a deal with the UAW Retiree Medical Benefits Trust because without Chrysler's pile of cash Fiat will be dead, a smoldering wreckage of a pitifully mediocre industrial legacy left by the side of the road.
Fiat dealers with visions of Alfa Romeo profits dancing in their dreams have just come face-to-face with the realization that they’ve been hosed, big-time, and that news has been delivered like a blow from a 2x4 to the forehead. Because when it comes right down to it there aren’t enough Fiat 500 and 500L sales to make up for the promise of Alfa Romeo.
And Sergio Marchionne, formerly known as their Esteemed Leader, has now been revealed for who he truly is: just another guy peddling another deal who is a genius at using other people’s money to line his pockets, and someone who will adjust his so-called “vision” to suit his whims and carefully manicured public persona whenever he sees fit. And if the Fiat dealers who bought his act hook, line and sinker get caught out by it, so be it.
Are these Fiat dealers ever going to get anything close to what they want?
No.
They’re not even going to get anything remotely close to what they need, either.
And that’s the High-Octane Truth for this week.