STLA Stellantis NV

By Eric Sylvers 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 11, 2020).

MODENA, Italy -- Fiat Chrysler Automobile NV's years of struggles in Europe faded for an evening as its Maserati brand lavishly unveiled a new luxury sports car it hopes will reinvigorate the unprofitable marque.

Booming music, strobe lights and video clips recalling Maserati's illustrious racing past met hundreds of socially distanced, mask-wearing observers gathered Wednesday to get a first peek at the MC20. The brand's first new car for four years can accelerate to 60 miles per hour in less than 3 seconds and has a top speed of 200 miles an hour.

As the consummation of Fiat Chrysler's merger with Peugeot owner PSA Group approaches, the Italian-American car maker is again trying to revive the fortunes of Maserati. The brand sold just 19,300 cars in 2019 -- down by almost two-thirds in two years -- and coronavirus lockdowns contributed to a further 50% drop in first-half sales this year.

A new five-year target calls for Maserati to achieve an operating profit margin of 15% on sales of 75,000 vehicles.

Fiat Chrysler's European business, which also includes the struggling Alfa Romeo and Fiat brands, has long strained to make a profit, with the group's finances depending in recent years on strong sales of Jeep sport-utility vehicles and Ram trucks. Once the PSA merger is finalized by the end of March, the combined company is expected to cut costs, putting more pressure on the Italian brands.

While Fiat Chrysler has barely broken even in Europe in good years, PSA has been on an upward trajectory since Chief Executive Carlos Tavares took the wheel in 2014. The French company sells almost 90% of its vehicles in Europe -- typically a tough market for mass-market car makers -- and is a rarity among the region's auto makers in having turned a profit in the first half of this year despite the pandemic.

Mr. Tavares, who will be CEO of the combined group, has consolidated his credentials as a turnaround specialist, stoking optimism that he can help revive the likes of Maserati, Alfa Romeo and Fiat. He engineered PSA's 2017 acquisition of Opel, General Motors Co.'s European arm that had been losing money for two decades, and rapidly made it profitable. PSA's sustained period of profitability in Europe under the Portuguese executive, is something that longtime Fiat Chrysler CEO Sergio Marchionne never pulled off.

Fiat has grappled with overcapacity in Italy for decades, with some factories making use of government-funded furlough programs even before the coronavirus hit. The company had its European factories working at about 50% capacity last year, well below the average in Europe, according to LMC Automotive, a research firm.

Following failed attempts to close factories in Italy amid political and union resistance, Mr. Marchionne tried to solve the overcapacity issue by turning Italy into a production hub for Fiat Chrysler's premium brands. But that plan never took off, partly because Alfa Romeo and Maserati sputtered. Alfa Romeo vehicle sales have been in the doldrums for years and fell almost 40% in the two years thru 2019. The brand took another hit this year because of the pandemic.

Mr. Marchionne skimped on research and development spending for the European brands for years, analysts say, prioritizing aggressive debt and profitability targets. As a result, Maserati, Alfa Romeo and Fiat had fewer new models to offer customers, notably missing out on the rise of sport-utility vehicles. Maserati and Alfa Romeo are now promising several new SUVs.

"Fiat's biggest problem in Europe is a very elderly product range," said Bernstein analyst Arndt Ellinghorst. "Marchionne starved the business of money as he couldn't see a way to justify investment." While that made sense at the time, the strategy is now catching up with the company and its new leadership, Mr. Ellinghorst said.

Mr. Marchionne died in 2018, and his successor as CEO, Mike Manley, said Thursday he would unveil his new role at the merged company later this year.

While volumes of Maserati's new MC20 are expected to be low -- the super-car segment sells only about 20,000 vehicles a year globally -- executives hope the car will increase the brand's credentials in the luxury-car market, thanks to its newly designed 630-horsepower engine and extensive use of carbon fiber.

Initially available only with a traditional engine -- an electric option is planned -- the car has a starting price of about $200,000, putting it within range of an entry-level Ferrari or Lamborghini.

"The MC20 is a message showing what Maserati is capable of," said Fiat Chrysler Chairman John Elkann following the presentation. "I like the car very much. I ordered two."

Write to Eric Sylvers at eric.sylvers@wsj.com

(END) Dow Jones Newswires

September 11, 2020 02:47 ET (06:47 GMT)

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