Five years ago, Chrysler Group unveiled plans to significantly increase sales. The plan had a lot of doubters, who thought Chrysler “were on some serious hallucinogenic drugs," remarked Reid Bigland, the carmaker’s chief of sales operations in the United States. But Chrysler proved those doubters wrong by achieving most of its targets.
Fiat Chrysler Automobiles -- a merger between the group and the Italian carmaker – recently unveiled a new five-year business plan. Again, a lot of people don’t believe that Fiat Chrysler would not be able to hits targets and accomplish its plan.
That resulted to Fiat shares dropping so sharply in Italy after the plan was announced, even prompting trading to be halted briefly the next day. The skepticism in the new business plan has also prompted chairman John Elkann and chief executive Sergio Marchionne to each purchase over 130,000 shares as a show of confidence.
While analysts were amenable to the direction of the plan, they think that its financial and sales projections were too optimistic. Jeff Schuster, senior vice president of forecasting for LMC Automotive, remarked to Automotive News that the things that Fiat Chrysler want to do and the risks it wants to take “all make sense” to him.
He, however, said that he has trouble with the numbers that Fiat Chrysler placed on its plans, saying that they were “too ambitious." Even Marchionne admitted that parts of the business plan depend on "near-perfect execution."
Analysts from IHS Automotive, however, wrote in a report last week that Fiat Chrysler’s recent product launches "have been anything but 'near perfect.' Fiat Chrysler’s CEO remarked that the carmaker can decrease some investments if vehicles are not received as well as expected.
The IHS analysts said that while that strategy could the carmaker from getting into trouble financially, it also means that its aggressive business plan “could see delays in execution and may not meet aggressive sales targets as quickly as outlined."
The plan calls for Fiat Chrysler to hike its annual global sales by 59 percent to 7 million by 2018.