Chrysler dealers hear company’s plans for Fiat’s return to the US market with the 500 minicar

Chrysler dealers hear plans to sell Fiat minicars

DETROIT — Fiat is coming back to the U.S. after a 30-year absence, and now Chrysler Group dealers have to decide whether they want to sell the Italian brand that initially will offer just one model, the tiny Fiat 500.

At a meeting in Detroit Monday, about 400 Chrysler, Dodge and Jeep dealers who want to sell Fiats were told that the exotic minicar at first will be the only 2011 model in their Fiat showrooms.

Chrysler, which is now controlled by Italy’s Fiat, was short on specifics such as price and future models. A larger model was promised, although covered by a tarp.

Chrysler hopes to sell 50,000 of the stylish, bulb-shaped 500s the first year they arrive. Eventually four versions will be offered, a standard 500, a cloth-top convertible, a high performance version with up to 185 horsepower, and in 2012, an electric version, the dealers said.

Fiat-run Chrysler Group LLC wants the 500 to become a strong contender in the U.S. small-car market, where the Detroit automaker has struggled for years. The car will be sold by about 165 Chrysler Group dealers in 125 mainly big-city markets starting in December. Chrysler hopes the tiny Italian car will help its lackluster sales.

Dealers will be asked to build separate showrooms and have separate sales and service staffs for the cars, in order to help create a distinctive European aura for the 500.

Many dealers were impressed, but some were left with questions about whether it would be worth the investment because future models were not unveiled. Chrysler CEO Sergio Marchionne, who also runs Fiat, has said that Fiat dealers will get first shot at selling the Alfa Romeo brand when it returns to the U.S. in 2012.

But the dealers were happy for a chance to sell a competitive small car, because they have had little to offer in the segment.

“There’s no doubt about it. It’s a home run,” said Alan Helfman vice president of River Oaks Chrysler Jeep in Houston. “It’s not going to make it from day one, but it will be a good seller, and it’s a market I don’t play in right now.”

Helfman, whose dealership is near Rice University, said the car will appeal to younger people who care about the environment and fuel economy.

Carl Galeana, who owns a Dodge dealership north of Detroit, was excited about the possibility of refurbishing a former Saturn dealership to sell Fiats. General Motors Co. is almost finished phasing out and scrapping the Saturn brand.

“I’m going to put a pencil to it. I’m going to do everything I can to see if I’m going to qualify,” Galeana said.

Pricing for the 500 wasn’t announced, but it’s expected to be around $15,000. That’s close to its main competitors, the Honda Fit, Toyota Yaris and Ford Fiesta. Dealers were told to expect profit margins of $1,200 to $1,500.

Dealers have until Sept. 22 to apply for Fiat franchises. Chrysler said it will pick its dealers in the fourth quarter.

Fiat last sold cars in the U.S. in 1983, but pulled out of the country after a string of quality problems that led to the joke that its name was an acronym for “Fix It Again Tony.” On one model, warranty repair costs wiped out any profits in the U.S.

Until recently, Fiat had a similar reputation in Europe, but industry analysts say the company’s new models are vastly improved. The brand got low customer satisfaction scores in J.D. Power surveys in the U.K., Germany and France this year, but the 500 scored well individually.

Marchionne, took control of Chrysler after it emerged from bankruptcy last year, turned around Fiat and is trying to work the same magic with Chrysler.

But he won’t be able to save the company with the 500 alone. Sales of minicars make up only about 5 percent of U.S. car sales, but the 500 can draw in customers and lend its European sophistication to Chrysler’s entire lineup.

“Our dealers will be able to interact with a group of individuals that are not part of their current customer base,” said Laura Soave, a former Ford Motor Co. and Volkswagen AG executive who is now head of the Fiat brand in North America.

Although Marchionne has narrowed Chrysler’s losses, it is still suffering from a lack of new models.

Chrysler’s sales to individuals, known as retail sales, fell 21 percent from January through June, compared with a rise of 11 percent for the industry overall. The six-month decline is worrisome because it’s measured against 2009, a year in which Chrysler shut down its factories and went through bankruptcy.

Including lower-profit sales to fleet customers, such as rental-car companies, Chrysler’s U.S. sales are up 11 percent through July.

The Fiat 500 will be built in Toluca, Mexico.

(This version CORRECTS spelling of Dodge dealer’s name in first reference to Galeana)