Maserati reinvention to rival Porsche

MILAN - As Fiat Chrysler moves to reinvent its small Maserati brand as a serious rival to the world's luxury car makers, the pressure to succeed is all the greater for the startling success of Germany's Porsche.

The German sportscar maker has set the standard for multiplying sales of an expensive brand without damaging the exclusive image that reaps big profits.

Fiat Chrysler Automobiles chief executive Sergio Marchionne wants Maserati to be for the Italian automaker what Porsche is for its parent company Volkswagen - a formidable source of profits that is less vulnerable to swings in the economy than the group's mass-market brands.

Maserati has Italian allure and a recognised sporting heritage. But Fiat Chrysler, the world's seventh-largest auto group, sold just 15,400 of the growling, muscular sportscars last year - not yet enough to change the group's fortunes - compared to Porsche's sales of over 160,000.

Porsche's 18 per cent automotive operating margin - the rate of underlying profit on its sales - has made it a more valuable company than rivals selling millions of cars each year. Even in the premium sector, the average margin is only 10 per cent.

Porsche contributed less than 2 per cent of VW group sales last year, but about 22 per cent of its operating profit. Maserati's trading profit tripled last year, but still contributed just 5 per cent of Fiat profits and less than 2 per cent of sales.

By next year, Mr Marchionne wants to be selling 50,000 Maseratis. The goal hinges on a rapid take-up of new models designed to appeal to a broader variety of driver tastes and budgets.

Maseratis are priced at around a 20 per cent premium over similar-sized rival German cars, so the product offensive must not cheapen the brand.

Porsche managers faced the same dilemma two decades ago when they were mulling a cheaper sportscar to complement the 911.

The Boxster took wing in the face of deep scepticism among Porsche fans disappointed by previous failures to develop a worthy stable-mate for the 911.

An earlier 928, which broke with Porsche's tradition of rear-engine layout, had a quirky, rounded form and pop-up headlights and shared few parts with the 911. It never matched the 911's popularity and production was halted in 1995.

The Boxster blew away expectations because its styling, engineering and performance were not dramatically different to the 911, but the price made it accessible to far more customers, thanks partly to more common components shared with the 911.

It gave Porsche the confidence, and the expertise in cross-platform manufacturing, that later informed the Cayenne and the new Macan sport-utility vehicles that broke with the brand's pure racing, two-seater sportscar heritage.

"Porsche subjected itself to the most radical changes in production and management without shunning the risk of expanding into new segments," said Stefan Bratzel, head of the Center of Automotive Management think tank near Cologne. "They managed to preserve the brand DNA which gives them special pricing power."

Fiat Chrysler has its own past failings to learn from. The Italian group has spent many years trying to craft a successful industrial entity out of a host of brands, from Fiat and Alfa Romeo to Lancia and Ferrari.

Mr Marchionne hopes to bring Fiat Chrysler back to profit in Europe by 2016. Some analysts are sceptical of his targets for Maserati, given his record for ambitious goals that sometimes fail to materialise.

Soaring demand for ostentatious wealth symbols among the new rich of China and other emerging markets is likely to ensure some of Maserati's hoped-for sales growth.

In developed markets, success depends more on stealing customers from rivals such as BMW, Mercedes, Audi and Porsche - a tougher challenge.

Like Porsche, Maserati will use its parent company's economies of scale in purchasing, production and distribution, enhanced by Fiat's marriage to Detroit icon Chrysler this year.

Fiat has invested around 1.5 billion euros (S$2.59 billion) to revamp a plant outside Turin, where recent models are built.

It plans to invest one billion euro more at Mirafiori in Turin where its first SUV will be built from 2015. Maseratis could share assembly platforms there with higher-end models of a relaunched Alfa Romeo brand.

Such common platforms make it easier for low-volume car brands to turn a profit. Porsche has shown with the Cayenne that an expensive car can share some parts and processes with a sub-premium model - VW's Touareg - without damaging the brand.

Maserati's product offensive is the most ambitious yet for the brand founded a century ago in Bologna by five brothers and which Fiat bought in 1993.

Its line-up includes a four-door GranTurismo sedan, the two-door Quattroporte coupe and the compact, lower-priced Ghibli. They will be joined next year by its first SUV, the Levante.

The GranTurismo offers a cabriolet version, the GranCabrio, while the Ghibli is the first Maserati that also comes with a diesel engine.

The Ghibli's price tag of around 70,000 euros - well below the Quattroporte's 100,000 euros - seeks to attract well-heeled younger buyers. Maserati CEO Harald Wester says that any further push downmarket to boost sales is not on the cards.

At the Geneva car show last month, Maserati presented a prototype of the Alfieri, a sporty two-seater which Mr Marchionne said "could complete the Maserati line-up". He said that the Alfieri was only "an indication of things to come".

Maserati will give more details on its industrial plan in early May.