MILAN/DETROIT (Bloomberg) -- Sergio Marchionne had what he called a "once in a lifetime" moment in 2009 when President Barack Obama selected
Fiat S.p.A. to save Chrysler Group.
As CEO of both automakers, Marchionne may now be having flashbacks as the Italian automaker now comes to depend on Chrysler.
The previously bankrupt U.S. company, which became majority owned by Fiat this year, is now helping to support its parent, as the European debt crisis depresses sales.
Chrysler is due to outpace Fiat's operating profit by 87 percent in the second half and the gap will likely continue in 2012, according to a Bloomberg News survey of analysts.
"Fiat would be very vulnerable now without Chrysler, with few industrial and financial options on its hands," said Emanuele Vizzini, chief investment officer at Investitori Sgr in Milan.
While the revitalization of Chrysler offers Fiat a cushion for Italy's downturn, Marchionne's turnaround of the U.S. company has deepened Fiat's troubles in Europe.
With the U.S. unit taking the majority of available development and management resources, Fiat has been left with aging models and eroding market share, putting Italy's largest manufacturer at the mercy of historically volatile Chrysler earnings.
"Long-term, neither Fiat nor Chrysler would have made it on their own," Marchionne said on Oct. 7 in Montreal. "Fiat was too small and too handicapped by an inadequate business model in Europe to have any hope of a future."
Profit predictions
Chrysler may post earnings before interest, taxes and one- time items, of 864 million euros ($1.18 billion) in the second half of 2011, compared with 462 million euros from Fiat's traditional operations, including profit from the Ferrari and Maserati brands, according to the average estimates of six analysts.
Trading profit for Chrysler, which was consolidated into Fiat results from June, may reach 1.91 billion euros next year, 77 percent more than Fiat's 1.08 billion euros. The turnaround at Chrysler hasn't helped Marchionne win over investors to his plan to create a global auto group to rival
Volkswagen AG. The shares have fallen 40 percent in the last three months, the second-worst performer in the Bloomberg European autos index after France's PSA/Peugeot-Citroen.
"If Fiat is depending upon Chrysler, that's a bad bet because Chrysler is still a question mark," said Gerald Meyers, a business professor at the University of Michigan in Ann Arbor, Mich. "It will be two to three years before we know whether Chrysler is going to even be successful, much less sustainable."
