Thursday,
October 12, 2006
FIAT Redoubles Efforts to Reclaim Image,
Customers, with "Punto",
"Cinquecento" & 'Ka"
The
ANNOTICO Report
Sergio
Marchionne as newly appointed chief executive at Fiat
Group in June 2004 was hiring and firing in a
veritable "cleaning the piazza,"
Not
that long ago the company was the epitome of European cool. But a series of
models, conceived by stuffy stodgy bureaucratic types,
was seen as lackluster, and dulled Fiat's reputation with buyers, and
resulted in Fiat leaking 1 billion euros in cash a year. Market share, even in
Fiat's home market of
An
alliance with General Motors Corp. had gone sour, but the dispute was
resolved in Fiat's favor in 2005, when GM paid 1.55 billion euros.
Fiat also moved to improve its credit standing when it exchanged 3 billion
euros of bank debt for 14% ownership.
Marchionne has seized the chance to forge
partnerships with several other major manufacturers. With Ford Motor Co. for
a new "Cinquecento" (Italian for "500"), the iconic
miniature Fiat of 40 years ago beloved by film buffs. Ford will also use the
platform, called "Panda", to develop a new generation of its
'Ka" city car.The staid "Stilo", will be retired.
Fiat also has expanded its alliance with Peugeot of France and forged
distribution or development deals with Severstal of
Russia, Suzuki Motor Corp. of Japan, Tata Motors Ltd. of
Marchionne next has to deal with a crisis at Alfa Romeo, and
long-neglected Lancia.
And, finally, Fiat has a major success on its hands. The company's new "Punto" small car has been a hit.
Sergio
Marchionne seeks to revamp the Italian automaker's
personnel and clean up its finances.
By
Adrian Michaels
Financial Times
October 9, 2006
Step one for Sergio Marchionne when he arrived as
chief executive at Fiat Group in June 2004 was hiring and firing. Rarely has
the Italian phrase "cleaning the piazza," which denotes starting
afresh in a seemingly ominous manner, been as appropriate.
Marchionne even filled some posts at the storied
Italian manufacturer more than once. He was apparently unhappy with his
appointment in January 2005 of Karl-Heinz Kalbfell to
lead Alfa Romeo, part of the stable at Fiat Auto. The next September, Kalbfell was moved elsewhere in the operation, to run Maserati. Last month Kalbfell
left Fiat completely.
Even as Marchionne steers the Turin-based company's
efforts to regain its touch with car buyers, cleaning the piazza and with it Fiat's income statement demands much of his focus.
"This was an incredibly hierarchical command-and-control leadership struc! ture,"
the executive told the Financial Times. "I spent a lot of time searching
for people who were not just younger in age but were untouched by that and were ready to engage."
Marchionne moved fast out of necessity. Fiat was
leaking 1 billion euros in cash a year, about $1.2 billion at the time he took
over. Market share, even in Fiat's home market of
Marchionne had pressing financial issues to fix along
with the changes in personnel. An alliance with General Motors Corp. had gone
sour, and the two automakers were arguing over an agreement that could have
forced the Detroit-based company to acquire money-losing Fiat Auto. That was
resolved in Fiat's favor early in 2005, when GM paid the Italian company 1.55
billion euros to walk away.
Fiat also moved to improve its credit standing when i!
t made a deal with bank lenders to exchange 3 billion
euros of debt for shares in the company. Three Italian banks still own 14%.
The GM agreement had a crucial effect beyond Fiat's finances. Marchionne has seized the chance to forge partnerships with
several other major manufacturers. The alliances involve the sharing of the
risks and costs of developing new models. They go some way toward answering
criticism that Fiat can no longer survive on its own and must ally with a
rival.
Fiat will be sharing underpinnings with Ford Motor Co. to develop a new
Cinquecento (Italian for "500"), the iconic miniature Fiat of 40
years ago beloved by film buffs. Ford will use the platform, called Panda, to
develop a new generation of its Ka city car.
Fiat also has expanded its alliance with Peugeot of France and forged
distribution or development deals with Severstal of
Russia, Suzuki Motor Corp. of
And, finally, Fiat has a major success on its hands. The company's new Punto small car has been a hit, helping the auto unit eke
out a profit for the fourth quarter of 2005 after more than four years of
quarterly losses.
Marchionne has been methodically dealing with the
issues one at a time. After Fiat's own models had been addressed, he started to
talk about a crisis at Alfa Romeo, where he saw a marque
aiming unsuccessfully to compete against large BMWs and small Volkswagens
alike.
Then he started to shake up CNH Global, the company's agricultural and
construction machinery arm. CNH has been profitable, but its performance has
lagged behind that of competitors.
Lancia, the long-neglected brand elsewhere in the Fiat stable, came next, with
plans to relaunch in
Investors are relatively happy about Fiat's! prospects,
considering that from 2001 to 2004 the company lost nearly 8 billion euros.
Fiat shares have leaped in the last year and hit a four-year high last month.
But all that does not mean survival is guaranteed. The company has to show that
it can follow the success of the Punto with more hit
models. It will soon replace its staid Stilo, a small
family car. The new Cinquecento could be crucial.
Analysts are divided about whether the strategy of sharing production and
development costs will help Fiat stay on its own in the long run.
"Peugeot has been optimizing its cost base and has still run into trouble,"
said Philippe Houchois of JPMorgan Chase & Co. in
http://www.latimes.com/business/
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