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Chrysler to Set Up 200 Fiat Dealerships

Chrysler said Tuesday that it planned to set up about 200 outlets by the end of the year to sell the Fiat 500, an Italian designed subcompact. The dealerships will be run by existing Chrysler dealers and in many cases located on the same property, but they will have separate showrooms and employees.

The strategy runs counter to a general trend of consolidating multiple brands into one showroom. It also requires dealers to commit significant resources to a lineup that initially has a single model. A convertible, the 500 Cabrio, is scheduled to arrive in 2011, followed by a battery-powered 500 in 2012, but Chrysler has not revealed plans to expand Fiat beyond that.

BMW used a similar approach to successfully reintroduce its Mini brand to the United States nearly a decade ago, requiring dealers to build auxiliary showrooms to sell the Mini Cooper. But investing in an expansion for what analysts consider to be a niche model, at a time when auto sales are depressed and many dealers are struggling, is a gamble.

“If I were a dealer, I would be somewhat reluctant to make that investment,” said Erich Merkle, an automotive analyst and president of Autoconomy.com in Grand Rapids, Mich. “You have to go and build a new facility to sell a brand that really is going to take a considerable amount of time to get any kind of volume.”

A Chrysler spokesman, Ralph Kisiel, said the company intended to have Fiat dealerships in 125 markets in about 41 states. He said most would be concentrated in metropolitan areas where small cars were already popular and where demand was expected to increase.

Executives sent letters this week to all 2,320 Chrysler, Dodge, Jeep and Ram dealers inviting them to apply for a Fiat franchise. Fewer than 10 percent will be selected, and the locations will be announced in September, Chrysler said.

“We want our best performing dealers to get these franchises,” Mr. Kisiel said, adding that Chrysler has focused on “markets that have a high number of small-car registrations.”

Interest in the 500 among Chrysler dealers has been high, and given the small number of outlets being selected, Mr. Merkle said he expected the company would receive more than enough bids, despite the requirements.

Among those planning to apply is Alfredo Gulla, a Chrysler dealer in suburban Westchester County, N.Y. Mr. Gulla opened a Fiat dealership at age 19 and sold that brand for more than two decades until Fiat abandoned the United States in 1984 amid widespread quality problems.

“All these years I’ve been waiting and waiting and waiting” for Fiat to return, said Mr. Gulla, the owner of Larchmont Chrysler Jeep Dodge. “It’s an emotional situation as well as an economic one.”

Mr. Kisiel said Chrysler was confident that dealers would get a good return on their investment and thought that separating Fiat from Chrysler’s four other brands would help the 500 attract customers who have not bought Chrysler products before.

“You can’t expect a Ram salesman to be trying to sell a Fiat 500,” Mr. Kisiel said, referring to Chrysler’s Ram brand of pickup trucks.

The Fiat 500 is a major piece of Chrysler’s efforts to diversify a lineup that has relied heavily on trucks and sport utility vehicles, hurting sales as American consumers began seeking more fuel-efficient alternatives. The company plans to build more than 100,000 of the vehicles a year at a plant in Mexico, sending half to the United States and half to South America.

Access to a dealership network in the United States was a major reason that the Italian carmaker’s chief executive, Sergio Marchionne, pursued a takeover of Chrysler. The 500 fills a hole in Chrysler’s lineup, but also gives Fiat a quick way to re-establish itself in the United States.

“Everybody wants something new, so it will create a lot of excitement, and we’ll probably sell a lot of them at the beginning,” said Frank Mancari, the owner of Mancari Chrysler Jeep Dodge in Oak Lawn, Ill., who hopes to get a Fiat franchise. “It’s Mr. Marchionne’s baby; he’ll make it work whatever it takes. If they price it right and the quality’s there, they’ll have a winner.”

http://www.nytimes.com/

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