FCA CEO Sergio Marchionne has a problem of image and politics that grips his stewardship of the Ferrari and Jeep brands.
Both brands are incredibly valuable, and each faces growth challenges that must be balanced against arguments of brand purity, as well as this week's geo-political concerns.
Let’s take Ferrari first. Marchionne this week seemed to tease the idea that he has changed his tune about green-lighting a Ferrari SUV after previously stating he would not consider it. Ferrari today is its own company with its own stock, and has Wall Street analysts and shareholders kibitzing about the future of the vaunted Italian sports car brand.
For Marchionne to have denied the brand an SUV after other luxury brands have done it with great success — notably Porsche, Bentley and Jaguar – will soon be seen as malpractice. Let’s not forget that Porsche purists decried the idea of an SUV back in 1990. Then came the Cayenne, which made Porsche’s vehicle business profitable beyond all expectations. Jaguar, too, is not in the SUV/CUV business, and the F-Pace became the best selling model in Jaguar’s barn before it actually went on sale based on pre-orders.
Marchionne said Monday that the notion of a Ferrari “FUV” will be seriously considered and have a 30-month incubation period before a decision is made. One of the obstacles is where to build it. No one thinks the company could build a legitimate Ferrari SUV on the same line as a Jeep, for example, as a shared platform project. But going it alone will challenge the profitability of the project. Still, one would think that even Ferrari could solve the issue when the end price tag of a Ferrari SUV would be something like $250,000. Right?
“There is no more classic marketing problem than deciding what segments are right and wrong for your brand,” says Los Angeles-based marketing consultant Dennis Keene.
“But Porsche in particular has blazed a path for how this can be done rationally and successfully, and there is no doubt that there is a market for a Ferrari-brand SUV worldwide,” Keene said, adding, "It's awfully tough to see how he justifies not doing one."
Marchionne’s other SUV issue is Jeep. The American icon, along with the Ram pickup, continues to prop up what is left of the old Chrysler Corp. The Chrysler and Dodge brands in the U.S. are mere baggage. And FCA’s U.S. adventure with selling Fiat cars has not gone well. China’s Great Wall Motor Co. Ltd. has made an overture to FCA to acquire the company, and the company especially wants its hands on the Jeep brand.
Marchionne has not been coy about his desire to sell the company or substantially align it with another automaker in the way that Renault and Nissan have aligned. The CEO has said on many occasions that the cost of electric and emissions technology going forward requires that the company have a partner and greater scale across which to spread the costs.
But Marchionne said that he was dubious that a marriage with Great Wall would achieve his strategic goals. He also noted that there are “sensitive issues” with trans-national mergers. From that we can glean that he and the company would be excoriated in public by the current president and legions of Jeep fans, owners and loyalists for selling a celebrated American icon to China, viewed widely as a villain in the trade war with the U.S.
“FCA would suffer great damage to lose Jeep to China – perhaps fatal," says Professor Gerald C. Meyers of the Stephen M. Ross School of Business at the University of Michigan. “Meyers is the former chairman and CEO of American Motors Corp., which sold Jeep to the Chrysler Corp. in the mid 1980s when Lee Iacocca was CEO of the company. However, Marchionne's best move now is to break up Chrysler [and maximize the value of the pieces], and he seems to know this."
Marchionne is due to retire in April 2019 and would like to set the company on a course that resolves the future ownership of the company before he goes. Only he knows if a Ferrari SUV and Asian ownership of Jeep are part of that future. One thing is certain, though. Few people care who comes to own the Chrysler and Dodge brands. Jeep is another story, and there is a long list of buyers who’d line up for Jeep – some of them might even be based in Detroit.
