Thursday, July 12, 2007

Why Fiat is Cool Again ! - The "New" Fiat 500 (Cinquecento)

The ANNOTICO Report

Fiat's launch of the new Fiat 500 (known to Italians as the Cinquecento) is more than the launch of a car, Fiat officials dub it a "new beginning".

Fiat debuted in Turin on July 4th. The company flew in 7,000 people from 63 countries, including some 4,000 car dealers, 1,000 journalists and 100 financial analysts. Eight government ministers and assorted celebrities attended a show choreographed by Marco Balich, the creative director of the Winter Olympics in Turin. The car was displayed in the main squares of 30 Italian cities.

 Yet with a price tag, at 10,500-14,500 ($14,400-19,900), hefty for a small car, some observers question whether non-Italians will choose the new 500 over rival models made by Renault, Volkswagen and otherslet alone BMW's even more expensive Mini.

But the reaction of the usually hard-bitten motoring press suggests otherwise. In recent years no small car, not even the new Mini (designed by Frank Stephenson, the man behind the new 500), has been greeted with such enthusiasm.

Only four years ago Fiat, Italy's biggest industrial group, had the look of a company that had given up the will to live. At this low ebb, Fiat's chairman, Umberto Agnelli, brother of the legendary Gianni, who had died the year before, succumbed to cancer.but not before identifying Sergio Marchionne, a 52-year-old Italian-Canadian, as the man to inject new life into Fiat.

Since taking over in 2004, Mr Marchionne has been both effective and lucky. He has cut costs, laid off workers (not easy in Italy), increased the sharing of components between models and formed alliances with other carmakers to speed development. But his biggest stroke of luck was that even before his arrival, Fiat had once again started to make cars that people wanted to buy, such as the new Panda in 2003 and the Grande Punto in 2005. Earlier this year its European market share ticked up to 8.5%

Why Fiat is Cool Again

The Economist

July 12th 2007

The launch of the Fiat 500 crowns the Italian carmaker's comeback. But will it last?

FIAT knows how to throw a good party. An estimated 100,000 people celebrated the launch of the new Fiat 500 (known to Italians as the Cinquecento) in Turin on July 4th. The company flew in 7,000 people from 63 countries, including some 4,000 car dealers, 1,000 journalists and 100 financial analysts. Eight government ministers and assorted celebrities attended a show choreographed by Marco Balich, the creative director of the Winter Olympics in Turin. The car was displayed in the main squares of 30 Italian cities.

The new Fiat 500's retro-chic styling has huge nostalgic appeal in its home country, where it is synonymous with la dolce vita of the post-war years, when the original Cinquecento motorised ordinary Italians. Yet the price tag, at 10,500-14,500 ($14,400-19,900), is hefty for a small car. Some observers question whether non-Italians will choose the new 500 over rival models made by Renault, Volkswagen and otherslet alone BMW's even more expensive Mini.

Fiat's top brass, however, has few doubts. After three cathartic years to turn around the group, this is not the launch of a car, but the launch of Fiat, gushed Sergio Marchionne, who took over as boss of the Fiat group in 2004. For John Elkann, vice-chairman of Fiat and representative of the dominant Agnelli family's interests, the revival of the little car exactly 50 years after the launch of the first Fiat 500 was nothing less than a new beginning.

For once, this may not just be management hype. Only four years ago Fiat, Italy's biggest industrial group, had the look of a company that had given up the will to live. So sickly was its auto division that without a 3 billion ($2.8 billion) bank bail-out in 2002, the group would have faced bankruptcy. Between 2001 and 2004, the firm lost 8 billion on its car business, which includes great names such as Alfa Romeo, Lancia, Ferrari and Maserati. At this low ebb, Fiat's chairman, Umberto Agnelli, brother of the legendary Gianni, who had died the year before, succumbed to cancerbut not before identifying Sergio Marchionne, a 52-year-old Italian-Canadian, as the man to inject new life into Fiat.

Since taking over in 2004, Mr Marchionne has been both effective and lucky. He has cut costs, laid off workers (not easy in Italy), increased the sharing of components between models and formed alliances with other carmakers to speed development. (The new 500 shares a floorplan and many components with the Fiat Panda and the new Ford Ka, due next year.) He extracted 1.55 billion from General Motors in 2005 as compensation for unwinding an ill-considered put option to buy Fiat's car business. But his biggest stroke of luck was that even before his arrival, Fiat had once again started to make cars that people wanted to buy, such as the new Panda in 2003 and the Grande Punto in 2005. Earlier this year its European market share ticked up to 8.5%.

The new 500 raises Fiat's game further. Some analysts have questioned the impact it will have on Fiat's future, arguing that it is a niche model that will be built at a rate of only 120,000 cars a year. But the reaction of the usually hard-bitten motoring press suggests otherwise. In recent years no small car, not even the new Mini (designed by Frank Stephenson, the man behind the new 500), has been greeted with such enthusiasm.

But as Fiat itself shows, fortunes in the car industry can turn with extraordinary rapidity. Fiat hopes to maintain its winning streak by introducing over 20 new models by 2010. Yet it needs to be careful. Its brand is not yet strong enough to absorb more than a couple of slip-ups, and the re-launch of Alfa Romeo in America will be difficult and expensive. So is the 500 a dazzling digression, or confirmation that Fiat is back? With small cars back in fashion, the betting is on the latter.

http://www.economist.com/business/

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