By on March 28, 2012

 

Our own Ed Niedermeyer recently penned an excellent and well-thought-out article involving the whole Fiat-Chrysler imbroglio.  Now, I don’t work for Fiat. However, I do live in, arguably, Fiat’s most important production center. You can’t go anywhere without running into someone who works at Fiat. Heck, Fiat owns 50% of the car market in my city!

So, you ask? Well, sometimes I have professional dealings with Fiat people. On occasion, I go to social functions where I mingle with Fiat people from Italy, Brazil, Argentina. Being who I am and what I do, you can well imagine that at these times I drill these people with questions on Fiat and their views. I gather much valuable info on the going-ons at the company. Granted, they come with a Brazilian-sized distortion as the people here are mainly interested in Fiat in this country. However, Chrysler is at the forefront of many of the conversations I have with Fiat guys and gals these days.

As I talk to people at all levels of the company, from high brass to middle managers, I believe I have a window into o mundo da Fiat. Take a journey with me as I sum up what Fiat guys are saying. In off, of course. Just so you know, this summary is an amalgam of what I’ve been told. I kept my two cents out of it. Except for the conclusion. That much is mine.

Fiat-Chrysler management difficulties:

Oh, they’re real. Very real. Some of it has to do with cultures clashing. Others have to do with attitudes. Some guys at Chrysler cannot understand that their boss is now called Luigi and doesn’t speak or understand English very well. This happens up and down the company. Some managers resist the new reality. And some workers cannot wrap their minds around the fact that Fiat is changing everything.

At to shop-floor troubles, Fiat is implementing production changes. Full-scale, Japanese methods inspired changes. It is closely watching the workers and was dismayed at the level of disfunctional processes, methods, work, ideas found in some North American plants. They are aggressively weeding out the bad seeds. They recognize that there are many good, interested, intelligent guys on the line. These guys are being pampered and promoted. But yes, Fiat was surprised that the work ethic (not to mention the quality of the work) was not something easily found in North American factories.

As to management level troubles, suffice to say culture. Don’t want to start a flame war, but some managers really have trouble wrapping their heads around the fact that little, foreign, dark-haired people who have names full of vowels are now calling the shots. Compound that with the fact that sometimes some South Americans are paraded around as examples and go North to make presentations, suggestions and decisions.

Take that as you may. And, no, I have no proof. But I hear this comment all the time.

Fiat-Italian Management Style:

A little crazy. A lot of impromptu decision-making. Makes follow through difficult. But makes things very agile. Quick response to market realities. Though some people call it into question, one must not forget that Italy is Europe’s third largest economy (still?). Bigger than Britain (or was until recently). Yes, they have troubles. Yet they manage to do some things right. Berlusconi was a circus act and gave Italy a bad name. Monti seems much more professional and seems sincere in his efforts to modernize.

Dart:

Refer above. All the organizational, operational changes have made the launch difficult. Fiat people are mindful that the market is closely watching this launch. They are trying to get the kinks out. Many people in the company prefer it this way. The consumer will not get a “beta version” of the car. People have told me they are mimicking the Linea launch in Brazil. They delayed it over a year. Launch dates came and went (IIRC) six times. By the time the car came out, it had nary a hiccup (though the car is not a hit, their -few- owners are happy and are future buyers and word-of-mouth propagandists of  future Brazilian Fiat larger cars like possibly a Brazilian Dart, or so Fiat do Brasil hopes).

500:

Sergio Marchionne had to cite big numbers. Americans like big numbers. As it is, the car is selling what in reality they expected. Internally, there’s no surprise. It seems to be holding up well and buyers are happy. Akin to Brazil in the Linea’s case, they realize the 500 is gaining but a beachhead in the ole US of A. Because they don’t know if or when or what others products will be launched in America. Though, apparently, the 500L, Panda and Punto are heading Canada’s way soon enough.

Brazil:

They sell about 750,000 cars a year here. The Uno is a hit and giving the 25-year market leader VW Gol a serious run for the money. Their other mission critical car (the Palio family) debuted to some mixed reviews and a lot of price shock. Their new Siena had just been launched. It has been positively reviewed so far, though they’re trying to move it up market, which is always a risky move. It is yet another crucial car to maintain Fiat’s position in the Brazilian market. They sell almost (if not as many cars) here as they do in Italy. They are certainly much more profitable here than anywhere else.

The market now sells 3.5 million cars. Some analysts say this will grow to 5 million in 5 years. How many markets are growing like this? If Fiat keeps their share Fiat could be selling close to 1.25 million cars in Brazil in a few years.

Now for a bit of gossip. Lots of people down here are frustrated. Brazil was Fiat’s golden boy (and cash cow). Now, all eyes are on Auburn Hills. Much money has been diverted and that is surely good for America, but bad for Brazil. However, they have to tread carefully. With Toyota and Hyundai about to launch new products at the entry level, it could well be that Fiat will (almost surely) lose market share. As the market is also not growing this year, they could end up losing absolute sales numbers. Brazil has sustained Europe through thick and thin. Let’s see if they have the ability to not throw the baby away with the dirty water.

Europe:

Yes, they’re hurting. Exactly because of that, plans have been delayed or frozen. Of course they’re doing a juggling act. If they launch the new cars now, they may sell slowly and lose that novelty factor that so spurs car sales nowadays. The kind of people who buy Fiat cars are spooked right now. They are holding on to their old cars. When the crisis blows over they’ll come back en masse. And because of the crisis they’ll be looking for more affordable cars. Of course you can’t delay forever or the cars will get stale.

Fiat’s Future:

It’s like the man (Marchionne) himself has said over and over. It’s all about the 6 million cars. Pre-crisis Fiat sold around 2.5 million cars worldwide. Chrysler about 4 million. The future was guaranteed.

Along came the crisis. Fiat shed 750,000 sales? Chrysler dropped below 3 million? (Numbers out of my head hence the question marks) That’s why a Mazda, or better yet, Suzuki (who they already collaborate with), are cited all the time. À la Renault-Nissan, they could then be a presence worldwide. Fiat and a little Chrysler in Europe, Chrysler and a bit of Fiat in North America, Fiat and a few Chryslers in South America, Suzuki with a sprinkling of Chryslers and Fiats in Asia. They could then become one of the really big elephants in the proverbial crystal store again (along with Toyota, GM, Ford, VW, Renault-Nissan, Hyundai-Kia and possibly a Chinese group or two).

Conclusion:

Lots and lots of question marks. It all depends on how it goes. If Fiat can pacify Chrysler, if the integration of Fiat-Chrysler works, if Americans really buy smaller-engine cars, if the new platforms prove successful, if they keep their position in Brazil and manage to break into Russia and China, if Europe recovers. However, there are good, solid reasons for hope of a better future. Dark clouds abound, but here and there, there are rays of sunshine.

They are well-positioned in some key markets. They’ve established a foothold in North America. They have a big presence and are a player in markets all over the world (except Asia). The cars are more reliable than ever before, yet still manage to be engaging and more fun than some of the competition and most owners are satisfied. Their new engines are renowned and studied and copied by other makers as they really do point a way into an ever more frugal future.

However, do they have the capacity to overcome the difficulties? You can be an optimist or a pessimist, but the reality is… Only time will tell.

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33 Comments on “Fiat’s Future In America And Elsewhere: A Counterpoint...”


  • avatar

    Marcello, can you elaborate on the Punto/Panda Canadian launch plans?

  • avatar
    Magnusmaster

    If they are handling the Dart like the Linea they are dead. The Linea is in every sense, a failure. The only place in the world where it sells is in Brazil, and even there, it doesn’t sell enough. In Argentina it could have sold much better, but for some reason Fiat did everything to avoid selling that car, like delaying deliveries for several months and jacking up prices, even when they had plenty of stock. Another problem with the Linea is that it’s derived from the Punto but pretends to be a C-segment car. They should replaced that model with the Viaggio (rebadged Dodge Dart) ASAP, but they decided to facelift the Linea instead. Bad idea, keep selling a model that’s already dead.

  • avatar

    Hi Derek. I don’t have that info. They’ve told me that it’s a go though. 500L first, Panda early next year and Punto when new one goes on sale in Europe. The current Punto will not be sold. That new Punto could well find its way into Canada and (possibly) Brazil via Toluca plant. 500L will be made in Toluca. As to Panda, it’ll possibly come from Europe.

    That’s what people here are saying. Got that when I told an exec Fiat Brasil needs the 500L ASAP. He said no go for Brazil but gave me that Canada info.

    If it’ll happen? Who knnoes but that is the plan. For now anways!

  • avatar
    GS650G

    I think a lot is out of their control, namely the economies of the markets they are in. Aiming for the low and middle end of the market is smart but they have to be able to compete against trusted names in the marketplace.
    Finding quality issues may have surprised them but is no surprise to many customers. My biggest worry about buying cars from these reconstituted auto makers is the disgruntled worker on the line who no longer cares.

    • 0 avatar

      They were even more disgruntled under Daimler and Cerebus (sp??). They are being very, very careful with that, and a friend of mine who has been flying regularly to the US to work on that has told me they have some indicators that the environment in the factories has been improving.

      • 0 avatar
        GS650G

        Exactly. The kind of car you get from the factory is directly related to the attitudes of those who work there. Not everything is done by robots. Engineering has a big part in the final product but part of engineering is designing the production process. If (and that is a big if) FIAT can improve Chrysler’s quality, fit and finish while saving money then they deserve to succeed here.
        Fail at that and it’s over. The taxpayers will not support a third chance.

      • 0 avatar
        nrcote

        Cerberus, when Bob Nardelli was Chrysler CEO, another overpaid and underperforming executive.

      • 0 avatar
        silverkris

        I tend to agree. The UAW boss was very, very skeptical about a new boss (Fiat) when all that stuff happened – and for good reason – they had been jerked around under DCX and Cerebus. But Sergio said that whatever it is, I can tell you that I do know cars….these clowns [Cerebus] didn’t.

  • avatar
    Morea

    Any Alfa news to share?

  • avatar

    Thanks Marcello for this thoughtful counterpoint to my incurable pessimism. TTAC is at its best when we engage in this kind of reasoned, respectful discourse!

  • avatar
    Fusion

    There are some things I’d like to add / comment on:

    Your volume numbers are very far off. Pre-Crisis (i.e. 2007) Fiat sold 2.23 million cars, and Chrysler sold 2.7 million cars worldwide. Even back then, they never posessed the volume to cross to the “6 million” barrier that Marchionne feels is so important.

    In 2011, Fiat sold 2.03 million, Chrysler sold 2 million cars.

    While Chryslers decline is easily attributed to the US (since Chrysler hardly plays a role anywhere else), Fiats slight decline is a bit trickier to analyse. Between 2007 and 2011, they increased brazilian sales by 150.000 cars (including LCV’s), yet lost 300.000 cars in europe (even though they got to add Chryslers share).

    And regarding the come-back in europe: Lets wait and see. So far, the european market is still going downwards, even though we are in a crisis that (for the automotive market) has been going on since ’08. And its not like Fiat has won any market share in this timespan, because people want cheap cars (as you presume) – Fiat is continuously performing worse than the markets it is in (including its home market), unless there are scrapping schemes going on.

    The models won’t get stale if there are no new ones – they are stale right now. Fiat has one of the most incomplete lineups of volumen manufacturers in europe, are basically in no niche markets. They are selling just 10 models in europe right now (going by their own count) compared to 15 for Citroen, 20 for Peugeot and >25 for VW. And, to make matters worse, the volume models are old already. Most cars are on the market since sometime between 2005 and 2007, getting ready for replacements that are not even in development as of now. If the crisis ended right now, Fiat would not have any good cars to sell. If it ended in 2 years – it probably won’t be different.

    Don’t even start on Alfa. Model portfolio or sales. Or sales goals, which they keep missing year after year. Or US-market reentry, which has been delayed every year since it was rumored/announced for 2008.

    Yes, Fiat is in trouble [in europe] because the whole continent and especially its southern members aren’t doing well. I’d wager that they are in deep trouble and will continue to be so for quite some time, because they are just not competitive.

    • 0 avatar

      Hey Fusion! I won’t dispute your numbers ’cause like I said they were off the top of my head. The point is still valid, I believe. If they were not over 6 million they were close. As Brazil is growing that magic number would be a hair away.

      As to I presuming peoplw wanting cheap cars, that’s not what’s in the article. Like I said, I’m summarizing Fiat people’s thinking. If their thinking is right or wrong, who knows? What they toold me and I tried to express in my article is that, while yes the cars are a bit long in the tooth (situation that is being remedied right now in Brazil) in Europe, they are holding o n for a while ’cause their buyers are not buying. If you look closely at southern European country numbers you’ll notice that while all makers are down, BMW and the like are less down. The richer folk have not put off buying new cars as much as more middle class and working people. So, like in US, in Europe there is some sort of pent up demand. These people will buy again. How soon? That’s the juggling act they’re trying to do. Keep the cars fresh and ready to come out as soon as things normalize.

      A difficult proposition no doubt. But it kind of makes sense. Why put out new cars for people who are not buying new cars? Though the Panda belies this reasoning quite a bit, that’s what I’ve heard. Again, who knows of they’re right.

      As to model range, well Marchionne may have hinted as to what’s going on. Maybe it’s the fabled rationalizing of the brand. Fiat doing just small cars, Lancia big cars, Alfa sorting one. But that’s just speculation on my part.

      As to the cars being uncompetitive it’s a matter of opinion. I think the 500 and Panda are best in class. The Bravo not so much.

      I guess we’1lll just have to wait and see.

      thanks for the interest!

      • 0 avatar
        automaniak

        I’m quite optimistic about Fiat’s future in Europe.
        With present old and limited line-up they have simply no chance.
        No matter how deep crisis we have.

        And we don’t have to wait much time to see if Fiat Group can be competitive or not. It’s all about 2013/2014.

        2012
        Panda
        500L

        2013-2014/15
        Uno (not sure model name but small, low cost car anyway, produced in Poland)
        Punto
        Bravo HB + sedan (Dodge Dart)
        C-crossover
        Freemont (new Dodge Journey)
        SUV (new Dodge Nitro)

        Lancia Musa (badged Fiat 500L)
        Lancia Voyager (new Chrysler T&C)
        Lancia Flavia (Chrysler 100)
        Lancia Delta (new Chrysler 200)
        Lancia Agrippa crossover (Chrysler 250x)
        Lancia Thema (new Chrysler 300)

        Alfa MiTo 3d FL
        Alfa MiTo 5d
        Alfa Giulia sedan + SW
        Alfa C-crossover
        Alfa 4C
        Alfa Spider
        Alfa E class

        Maserati SUV
        Maserati E class
        Maserati S class

        plus Jeep

        When they put all stuff on the market we can talk about Fiat in Europe.

      • 0 avatar
        th009

        But whether Panda is best in class or not, it, too, is getting older. Marchionne cuts back investment on new models, while Winterkorn specifically continues investing during the downturn in order to be ready for the market to return. And that’s the #1 reason why Fiat’s European market share continues to drop.

      • 0 avatar

        Everybody’s suffering. Europe, Brazil, all money is going stateside. Howevedr, development still exists, they’re just doing it slower. Sometimes one must prioritize. I guess they think US will rebound sooner than Europe and Chrysler will be bigger than Fiat in short order.

        The way they’re investing will make this come true sooner rather than later.

  • avatar
    Volt 230

    If they quality issue is taken care of, these cars will do well in the US, people generally do like them, specially the Alfas and would enjoy the driving experience, the one thing that is keeping them away is the quality and reliability issues

  • avatar
    automaniak

    I’m quite optimistic about Fiat’s future in Europe.
    With present old and limited line-up they have simply no chance.
    No matter how deep crisis we have.

    And we don’t have to wait much time to see if Fiat Group can be competitive or not. It’s all about 2013/2014.

    2012
    Panda
    500L

    2013-2014/15
    500 lift
    Uno (not sure model name but small, low cost car anyway, produced in Poland)
    Punto
    Bravo HB + sedan (Dodge Dart)
    B-crossover
    C-crossover
    Freemont (new Dodge Journey)
    SUV (new Dodge Nitro)

    Lancia Musa (badged Fiat 500L)
    Lancia Voyager (new Chrysler T&C)
    Lancia Delta (Chrysler 100)
    Lancia Flavia (new Chrysler 200)
    Lancia Agrippa crossover (Chrysler 250x)
    Lancia Thema (new Chrysler 300)

    Alfa MiTo 3d lift
    Alfa MiTo 5d
    Alfa Giulia sedan + SW
    Alfa C-crossover
    Alfa 4C
    Alfa Spider
    Alfa E class

    Maserati SUV
    Maserati E class
    Maserati S class

    plus Jeep

    When they put all stuff on the market we can talk about Fiat in Europe.

    • 0 avatar
      th009

      But that plan was before Marchionne’s latest cutback on investment on new models …

      • 0 avatar

        As stated in article, Fiat management can do an about face in a very quick time. Partly this is due to them being smaller than say, GM or VW, partly it’s the Italian way – with all the good and bad that such entails.

        Don’t get too hung up on what Marchionne says. The company doesn’t function that way.

      • 0 avatar
        automaniak

        No, it’s up to date plan. We have many delays here fm 2012 to 2013/2014 and some cuts (like Alfa D-SUV).
        It’s absolutely impossible they can delay it further. But first of all it’s officially confirmed by Fiat management.

        Don’t forget Marchionne describes 2013/2014 as ‘big years for group’. It’s because of flood of new models during this period.

  • avatar
    ciddyguy

    Unlike Edward, I tend to look at things in a positive manner, IE, the glass half full, rather than half empty.

    Though I DO worry at times with some of the speculations but see that it is going back and forth, depending upon the source and the inherent slant the writer has, for or against, one or both companies.

    I also tend to hold on, keeping the faith until the fat lady sings and right now, it’s way too early to tell exactly which way this will go.

    It’s a well known fact that merging two corporate cultures tends to be difficult at best for most, if not all, especially for the more entrenched higher ups that have been used to doing things the same way for years and often can’t see the forest for the trees and see that perhaps the old ways are not working like they should. Change by itself for many is a difficult proposition and thus fight it tooth and nail but it seems perhaps some of this is starting to improve as you indicate.

    I know a lot of the issues that have brought on delays stems from issues/situations no one knew about as things seem to be changing day by day in Europe and here in the US so Fiat has had to change course several times to adjust to the new conditions that suddenly crop up but sooner or later, they WILL have to begin production of at least some new models and get them into the stores because sooner or later, people will begin to buy, not necessarily because they want to, but due to need (car dying or whatever).

    I think as newer models come online for Chrysler and Fiat, things will slowly improve for both companies but it won’t happen today or tomorrow though.

    Nice, thoughtful writeup there Marcello.

  • avatar
    claytori

    Um… about the reliability bit. I know of one person who has purchased a Fiat 500 who works in my office. He performed an extra oil change at 3500km. Then when he went in for his first scheduled oil change at 13,000km he asked the dealer to check out a bit of noise from the engine. He is now driving a rental Caliber while waiting for a new engine.

    I rented a Fiat Punto in Spain last year. While it performs a basic transportation function, I wasn’t impressed with it.

    • 0 avatar
      ciddyguy

      Anecdotal evidence at best and I’ve read of a guy here in the US who had to have his entire motor replaced, not rebuilt due to a premature failure in the head gasket.

      I don’t know what the final result was, but in the end, it could be simply a defective head gasket from the supplier or it was installed incorrectly as it allowed coolant to mix with the oil.

      He was on a long trip of around 100 miles when it happened and found a local Fiat dealer who went out of their way to assist him, kudos for the dealer and their service dept.

      He’s still driving his Fiat, an early build Prima Edizone at that.

      So far, that’s been the worst issue I’ve run into with this car and it seemed to be a one time thing, a fluke more or less.

      And this car being a N.A. version is built in Toluca Mexico and that seems to be the overall story with the 500, the Panda (the car the 500 is based on) and the Ford KA, also based on the Panda and I’ve read that the Panda is one of the more reliable and more popular models from Fiat and was to have released a new refreshed/update of it this year and the current Panda was originally released in 2003.

  • avatar
    djn

    Recife…. que saudades!

  • avatar
    billfrombuckhead

    True car has Chrysler sales again leading the way for America in auto sales for March 2012 with a 30% increase. Wonder if Chrysler stays in first place in Canada.

    No one can claim they aren’t one of the most exciting car companies in America.

  • avatar
    fredtal

    Chrysler seems to be doing good now, not sure if that is Fiat’s doing. For Fiat cars to succeed in USA they need to be reliable. We need a few more years to know.


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