Chrysler Group LLC wants dealers to avoid haggling with shoppers over the price of the Fiat 500 when reintroducing its parent company’s brand to America, betting that will make young customers more comfortable in showrooms.
“The pricing is the pricing,” said Laura Soave, head of the Fiat brand in North America. “The younger generation doesn’t haggle. They don’t feel comfortable with it. They hate the experience.”
Dealers have been given advertising standards that include prohibitions on promoting vehicles for less than the manufacturer’s suggested retail price, Soave said during an interview this week in San Diego. While automakers typically can’t prohibit discounts, the company limited the number of U.S. Fiat franchises to minimize competition among dealers.
Chrysler, operated by Fiat SpA (F), is bringing the 500 and the Italian automaker’s namesake brand to the U.S. market at the same time as it prepares to sell a redesigned Chrysler 300 flagship sedan. The Auburn Hills, Michigan-based automaker may report a fourth-quarter loss of $99 million on Jan. 31, the average of three analysts’ estimates.
The vehicles are among 16 models Chrysler has refreshed or redesigned in the past year, most of which are just going on sale.
The 500 and redesigned 300 “really represent that this company is coming together,” said Rebecca Lindland, an industry analyst with IHS Automotive.
The automaker is more than one year into a five-year turnaround that’s supposed to return the company to profitability this year.
Fiat has already sold 500,000 of the 500 cars since 2007 in other parts of the world. The small car and its clam-shaped hood evoke the 500’s iconic design of more than 50 years ago.
Unlike the original, the small engine is in the front of the car. Engineers also worked to update the new 500 to U.S. tastes, including the addition of an automatic transmission, glove box and cup holders.
Early buyers of the 500 will have a greater interest in the manual transmission, which will get 33 mpg in combined city and highway driving, while eventually the majority of buyers will prefer the automatic transmission, Soave said.
Younger drivers “never learned how to drive a manual and they have no interest in driving a manual,” she said.
The Fiat 500, already being made in Mexico, will start at $15,500, not including the destination charge. Chrysler has said it expects to sell 50,000 of the cars in North America. Company executives expect to make additional money on the sale of accessories.
Demonstration units have begun arriving in showrooms, she said, and a marketing push is planned for March.
Early next month, Chrysler is bringing together about 300 people from the 130 U.S. Fiat dealerships for special training in handling customers and selling the car which can be configured in 500,000 ways, Soave said.
Dealers “need to be able to take the customers and show them how to accessorize the vehicle,” she said.
The sales “consultants” will take on non-traditional roles, including being the customer’s contact point for vehicle service, she said.
“The passion for a Fiat is much bigger than I thought,” he said in a telephone interview.
Chrysler’s efforts to set up Fiat reminded him of how the predecessor of General Motors Co. (GM) went about setting up Saturn, Galeana said. He was a Saturn dealer until the Saturn brand was ended as part of GM’s bankruptcy in 2009. The Saturn experience included no-haggle buying.
“Customers, quite frankly, liked that process,” he said.
No-haggle policies can be effective if consumers feel like they’re getting a good deal already, Lindland, the industry analyst, said.
“Taking that haggling aspect out of it is a really smart move,” she said.
Chrysler expects the market for small cars in North America to more than double to 896,000 vehicles in 2014 from 442,000 last year, Soave said.
Consumer interest in small cars may not keep up with the number of new entries.
“The 500, right now I think, is more symbolic” for the return of the Fiat brand, Jeremy Anwyl, chief executive officer of automotive website Edmunds.com, said in a telephone interview. “I don’t see it as a massive volume car.”
While Soave is busy preparing dealers for a small car, Chrysler is also preparing them for the 300 large sedan.
Chrysler executives call the 300 and the 200 convertible “Chapter 2” of rebuilding the namesake brand. The first chapter was unveiled in November with the redesigned and renamed 200 mid-sized sedan -- previously called Sebring -- and the refreshed Town & Country minivan.
This is “our opportunity to tell the world that you don’t have to cross an ocean to get a great car,” Olivier Francois, head of the Chrysler brand, said this week in San Diego.
The new 300 starts at $27,170, excluding destination charges. The previous model’s starting price was $27,260, according to Chrysler’s website.
Chrysler’s average incentive spending on the 300 last year rose to $5,042 from $4,765 in 2009, according to researcher Autodata Corp. The industry average for passenger cars last year was $2,563.
Chrysler plans to pull back on incentive spending with the new vehicle, Francois said in an interview earlier this month.
“We choose to be very transparent,” he said. “We are going to aim for both loyal customer targets and to conquest.”
To contact the reporters on this story: Tim Higgins in Southfield, Michigan at Thiggins21@bloomberg.net.
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