Italian automaker, Fiat, returned to the U.S. market in March 2011 and began sales of its small Fiat 500 hatchback. Despite a 27 year absence in the United States, the company set ambitious targets early on and predicted that its small four-passenger car would generate annual sales of 50,000 units. However, Fiat has yet to deliver on that prognostication while the patience of franchisees is tested in the face of tepid demand and a limited product portfolio. Meanwhile, much discussion continues to take place regarding Fiat S.p.A.’s product plans across the group’s brands as well as its ongoing attempt to fully acquire Chrysler Group LLC. With so many question marks and variables at play, doubts related to Fiat’s fate in North America grow unremittingly while dealers are left to wait in the dark.

Through September 2013, Fiat has sold 96,283 vehicles during its second foray in America, but its highest annual tally is a modest 43,772 units, a feat accomplished last year. The limitation of having only one model, the 500 hatch, to sell upon the brand’s reintroduction has done much to inhibit the marque’s growth as the company struggles to lure buyers into showrooms, but hopes were raised with the arrival of the larger B-segment 500L sedan in June this year. Thus far, the automaker achieved 3,748 deliveries of the 500L sedan to bump the company’s year-to-date sales figure to 32,742 units when combined with the Fiat 500, but that reflects a nonexistent growth rate of 0.0%. The 500 hatchback realized 5.1% higher sales through May, producing optimism that adding the 500L would lead to more sales. However, deliveries have dropped a significant 28.7% since the 500L arrived in June and year-over-year growth has worsened every month since, which suggests that instead of complementing the hatchback, the release of the new sedan has led to a cannibalization of sales.

The company revealed to dealers that a paltry 45% of Fiat dealerships in the United States are profitable as word of frustration amongst dealers begins to spread and the brand’s outlook worsens. It is also likely that the percentage of profitable franchises is much lower than the figure presented due to the way many of them operate. In many cases, used car sales contribute a significant portion of the business’ profits and the structure of how the service operations are run can also greatly affect the spread of revenues and costs across different brands’ balance sheets. Not only is it in a typical dealer’s best interest to present its financial statement in the most favorable manner to the OEM under normal circumstances, Fiat dealers may have another reason to do so after getting the impression that the most successful among them would be rewarded the opportunity to sell Alfa Romeo models upon the sporty brand’s return to the United States. In January, Peter Grady, Chrysler Group vice president for network development and fleet announced, “The [Alfa Romeo] 4C is the first vehicle that comes at the end of this calendar year, and it’s going to go to the current Fiat dealers that are performing, so if you’re selling and you’re taking care of your customer, you’ll be first up for Alfa Romeo.” Given what is potentially at stake and the incentives a Fiat dealer has to look good, the reality is that the financial situation for dealers may actually be even worse than it appears.

Alfa Romeo’s completely new 4C coupe was first revealed as a concept at the 2011 Geneva auto show, previewing a future production sports car that could be sold in America. In response to the show car’s warm reception, the Italian automaker moved forward with the coupe’s development and planned its U.S. introduction for late 2013. With knowledge of Alfa’s impending arrival in the form of the 4C to go along with finally having a set date for the brand’s return to the U.S. market after years of delays, dealers around the country were anxious to acquire a Fiat dealership as a means to getting a future Alfa Romeo franchise. After slogging through two years of lukewarm sales demand, however, Fiat dealers received startling news in September when Alfa Romeo CEO Harald Wester, also CEO of Maserati, stated, "Most likely, the Alfa 4C will be sold in the U.S. through the Maserati network.” To make matters worse, Chrysler then announced that the brand’s return would be pushed back until the second quarter of 2014 despite guarantees in January from Fiat and Chrysler CEO, Sergio Marchionne, that the Alfa Romeo Coupe would make it to U.S. shores this year.

As CEO of both Fiat S.p.A. and Chrysler Group LLC, Sergio Marchionne has spent the past four years making the necessary moves to merge the two entities. If the plan were to come to fruition, the new company would constitute the seventh-largest automaker in the world, potentially allowing it to compete on the same scale as General Motors, Toyota, and Volkswagen Group. While Marchionne has been running Fiat and Chrysler as an individual company, the full acquisition of Chrysler would produce economies of scale and scope, while allowing the Italian automaker to tap into Chrysler’s strong cash flow. Due to Fiat’s challenges in the European market, the Italian automaker is struggling financially yet needs to refresh and expand the lineups of many of its brands, including Fiat, Alfa Romeo, and Maserati. Thus, the purchase of the remaining 41.5% of Chrysler that is owned by the UAW retiree health care trust fund is a necessary condition for Fiat to access the American automaker’s cash reserves and technologies required to carry out its product strategies across the Italian brands. However, Marchionne and the UAW trust are at odds with each other over what the purchase price for the remaining stake in Chrysler should be, putting all future plans at risk.

Last month, the UAW trust exercised its right to force Chrysler to file an IPO as a means to establish the market value for its stake in the company, but if the U.S. automaker were to go public, it could prove detrimental to Fiat and its prospects of a merger. If the IPO were to take place, cash-strapped Fiat may end up having to pay a much greater amount than the $5 billion demanded by the health care trust in addition to having a more difficult time acquiring the remaining shares after they go public. On the other hand, although there is a chance the value of the 41.5% stake is found to be less on the open market, the UAW retiree trust is unwilling to budge knowing that Marchionne can ill-afford to let the IPO go through if he wishes to merge the two companies. In a strategic move to prevent Chrysler from going public, Fiat announced that it would not participate in the IPO and suggested to potential shareholders that the Italian automaker may drop its plans for a merger as well as its U.S. plans for its Italian brands. In doing so, Fiat hopes to curb Chrysler’s value and compel the UAW trust to lower its demands, but the current stalemate has put things on hold for Fiat, Maserati, and especially, Alfa Romeo.

If the IPO takes place and the merger cannot be completed due to the creation of two different companies, the cash and synergies necessary for Alfa Romeo’s revival will not be accessible by Fiat, which could lead to the 4C coupe being sold as a Europe-only model while Alfa’s return to the United States is scrapped. Many variables are currently in play and the outcome of the situation is very much up in the air, but depending on how things work out, the consequences could be tremendous. For the time being, U.S. Fiat dealers are holding their collective breath with the only products set to arrive being a new Fiat 500X small crossover and the redesigned 500 hatch in 2015, along with a new 500 five-door in 2016. Unfortunately, a two year wait for new Fiat product is small consolation for dealers who are struggling to sell the brand’s models and were hoping to sell Alfa Romeos by December. The complex nature of the merger between Fiat and Chrysler may result in harm being done to many parties involved, but the ones with the greatest potential to become collateral damage are the dealers. If Fiat and Chrysler are made separate and unable to keep operations under one roof, the dealers may be left hurting through no fault of their own.