This Fiat Thing…

Well, what about this Fiat thing?

The Italian automaker now owns – well, controls – the remnant of Chrysler Corp., formerly the third of America’s Big Three.

Is it a bad thing? A good thing?

Or just an ill-advised thing … for Fiat?

The U.S. car market is still green around the gills three years after the Great Implosion. Yes, sales have increased. But they are still nowhere near what they were.

Chrysler is hoping it will reach the milestone of 2 million vehicles sold by the end of 2011, a solid-sounding uptick of 25 percent over last year, when global sales were 1.6 million.

Except that back in ’07, Chrysler sold 2.08 million vehicles – so even assuming the company reaches its target, it will still not have caught up to where it was.

If you read the company’s news releases, they all tout what sound like solid gains – relative to 2010. Or 2009.

Par has yet to be achieved. Will it ever be achieved?

Two of the reconstituted Chrysler’s best-sellers, the just-updated Jeep Grand Cherokee and the Dodge Durango, are the vehicular equivalents of the WW II-era Yamato Class battleships: The culmination of SUV development and brilliantly executed. The problem is that like the Yamato Class dreadnoughts, whose massive guns could do little against fleets of carrier-based dive bombers, these gas-hungry 4WD SUVs are not built for the times in which they’ve been christened. Gas prices are still high – and worse, unpredictable. They may fall back to $2.50 per gallon. But what if they shoot up to $5 per gallon? If they do shoot up to $5 per gallon, big SUVs like the Durango and Grand Cherokee are toast.

That would make me nervous if I were sitting in the captain’s chair at Fiat.

So also the fact that Fiat hasn’t sold cars in the United States in nearly 30 years. Rebuilding a franchise is probably harder than starting from scratch because at least when you’re starting from scratch, people’s attitudes are neutral and their minds open. But rebuilding a franchise – a brand – that had to leave the market because it couldn’t sell cars successfully – in part because of quality control problems the memory of which still lingers – that’s a tougher nut.

The subcompact Fiat 500 has just been launched, so there’s no data yet, either way.

But I suspect the road ahead will not be smooth for this car given the weak economy and thus a weak market plus the additional difficulty of penetrating that market given the glut of makes/models already on the market.

Is there room for another brand?

One major advantage Toyota and Honda had when they entered the market back in the ’60s (and then seriously in the ’70s) was the market was still not fully exploited (it is now) and also the economy was not a disaster (ditto).

One possibility is for Fiat to significantly undercut other compacts on price while equaling them on quality/desirability. But the Fiat 500 coupe, at $15,500 is priced about $2k above excellent competitors like the  2011 Ford Fiesta $13,200 and about $1,300 higher than a Mazda2 ($14,180). It is also nearly $6,000 more (!) than a Nissan Versa 1.6. Granted, the Versa 1.6 is a stripper… but still. $6k is a lotta coin.

Meanwhile, Uncle Sam will take a $1.3 billion hit on rescuing Chrysler in order to let Fiat take over Chrysler. That is the net loss, post bankruptcy, the government will eat on the deal. Or rather, that taxpayers will eat on the deal. For fun do some math and calculate how much that $1.3 billion works out to divided by the appx. 140 million actual taxpayers ( 305 million total population less the various not-working).

Fiat isn’t getting the bill – though arguably, it ought to have. Why, after all, should American taxpayers help to bankroll the fortunes of a foreign-owned car company?

But don’t sweat that too much. Fiat may have gotten something worse than a bill from Uncle Sam – in the form of an albatross around its neck.

We shall see.