Fiat-Chrysler Automobiles CEO Sergio Marchionne is famous for speaking his mind and making controversial statements about the automotive industry. He did so again earlier this week when he stated that he didn’t understand how the upcoming Tesla Model 3 could be sold for € 35.000 euros ($39,600) at a profit. He also claimed that he could build a rival to Tesla’s mass market sedan but doesn’t want to because he doesn’t see the business case: “If he (referring to Tesla CEO Elon Musk) can show me that it can be done, I will do it as well, copy him, add Italian style to it and put it on the market within 12 months”. Guess what? Sergio is right: it would be impossible for FCA to make money from EVs under his command, but that’s because he’s stuck in the traditional way of doing business as a car executive and an accountant.
Marchionne is betting big on gas-guzzling trucks and SUVs which are more profitable at the moment and probably will remain so in the near future. That’s a sound business decision from a purely financial point of view. But he lacks the vision to prepare FCA for the future beyond that, and he’s making the same mistakes as those American auto executives from the 1970s who didn’t believe they could make money from economy cars, until Honda and Toyota quickly rose to dominate the compact and midsized car segments and have continued to do so while making money off them. In the meantime, FCA is abandoning those segments because they’ve been trying to catch up with the Japanese, but simply haven’t been able to build competitive and profitable compact and midsized cars for decades. [Read more…]