Fiat Chrysler: Global appetite, small stomach

September 12, 2014, 4:33 PM UTC
contract armin harris
Kyle Bean for Fortune

Fiat Chrysler’s blistering 20% sales gain in the U.S. for August was as eye-catching as it was unsustainable. The pace is sure to cool for the entire market and for Fiat Chrysler, as pent-up demand lingering from the recession inevitably ebbs, perhaps by year’s end.

Still, Fiat Chrysler’s numbers were impressive. They add to the bullish case for the automaker’s public share offering later this year. The listing of common shares will test whether the automaker can attract sufficient capital to raise it to the next level, following its strong recovery in the wake of Chrysler’s 2009 bankruptcy and purchase by Fiat.

Sergio Marchionne, CEO, has provided magical leadership for an enterprise whose prospects looked quite dim just five years ago. He showed another facet of his hardnosed governance style this week with the sacking of Luca Cordero di Montezemolo, chairman of the company’s prestigious Ferrari subsidiary, 90% owned by Fiat. Di Montezemolo, a member of Italian industrial royalty with ties with Fiat’s founders, evidently didn’t see eye to eye with Marchionne over numerous issues, including the poor performance of Ferrari’s Formula One racing team.

“Luca and I have discussed the future of Ferrari at length,” Marchionne said Wednesday in a statement. “And our mutual desire to see Ferrari achieve its true potential on the track has led to misunderstandings which became clearly visible over the last weekend” when the team showed badly at the Italian Grand Prix.

Reporters asking di Montezemolo, who is working under a three-year employment contract, whether he might be leaving were told that he would be the one to decide. Not so, Marchionne said, contradicting him publicly and asserting his role at the company as capo di tutti capi, boss of all bosses. Indeed, Marchionne will succeed his subordinate.

This was no mere clash of alpha males. Ferrari plays a key role in the share offering because it is deemed exceptionally valuable, due to the prestige of the luxury Italian motor car’s brand. So far, Marchionne has dismissed suggestions that Fiat Chrysler might carve out a separate public offering for Ferrari – but that could become a tactic depending on how Fiat Chrysler’s offering goes later this year.

August’s sales numbers demonstrated that, besides Ferrari, Fiat Chrysler possesses other significant assets, namely the Jeep brand (up 49%), Ram pickup trucks (up 33%) and its two minivans, Chrysler Town & Country and Dodge Caravan. It also was the 53rd consecutive monthly gain in sales for the automaker, which prompted Jessica Caldwell, senior analyst of to call it “an impressive streak for a company that was all but left for dead five years ago” in an interview with USA Today.

Despite the company’s growth and profitability, Fiat Chrysler still lacks the global scale needed to contend with the likes of Toyota, Volkswagen and the Renault-Nissan Alliance – which Marchionne often points out. Only with a major influx of fresh capital from a share offering – and perhaps a debt offering – will the automaker be able to renew and refresh vehicle models and perhaps to acquire a smaller automaker. The company’s Alfa Romeo luxury franchise has just launched in the U.S. with its first model and will need massive investments.

Before the end of this year, investors likely decide whether they will give Sergio Marchionne more time to grow his company into a world-class competitor.