Monti Meets Marchionne, Seek Salvation In Exports, Pave The Way For Made In Italy Jeeps
Published: September 23rd, 2012
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In a sit-down with Italy’s Prime Minister Mario Monti , Fiat CEO Sergio Marchionne and chairman John Elkann came to a belated conclusion: A slump in Europe is not such a bad thing of you can sell you cars elsewhere. After the sit-down, Fiat told Reuters that it wants to “re-orient” its business model in Italy “to focus on exports, particularly outside of Europe.” This, the person familiar with the situation said, can mean only one thing: Get ready for made-in-Italy Jeeps and Imported from Torino Chryslers.
Fiat had caused an excrement storm after it said it would halt investments into its European operations and models. It furthermore fanned the flames by stating that a plant in Brazil would gets generous government aid, while Fiat gets niente from Italy. This caused Marchionne and Elkann to be called on the carpet at Monti’s office in Rome. Both probably didn’t go there with the hope that they would return with a big check.Students of the European market recall that technocrat Monti served as a European competition commissioner from 1995 to 2004, where he was not seen as a fan of the auto industry. Under him, several European carmakers were fined for their transgressions of free trade. He was a major force behind the European Block Exemption Regulation that busted cushy quasi-monopolies of carmakers, importers, and dealers and changed the European auto market into a large free-for-all. The carmakers promptly called him (not in his face) “Super Mario,” and the moniker stuck.It would be foolish to assume that the former free trade hardliner Monti would suddenly flaunt European regulations that generally forbid government support for ailing companies.
At the Monti-meeting, Marchionne and Elkann threw their hands up in “che cosa fameo???” fashion Fiat outlined its forecasts for the Italian and European markets. Then, a statement was issued. TTAC provides the translation:“Fiat confirmed its strategy of investing in Italy, at the right moment, to develop new products to take full advantage of the recovery of the European market.” Translation: Don’t hold your breath, or you’ll die.“The Industry Ministry will set up a working group to examine how to improve Fiat’s export capacity.” Translation: Ouch, now even the exporting will take twice as long.When it comes to exports outside of the European market, governments’ hands are tied much looser than in the intra-European trade. The biggest export assistance provided by the governments of Italy, Spain, Greece etc. is a low euro. A weak currency makes for strong exports. Except that Fiat’s northern colleagues made maximum use of the opportunity.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Lots of blather going on here, so I'll keep it simple. Large cars, crossovers minivans will be done in NA by Chrysler, small/midsize will be done in Europe by Fiat. I am speaking of design and engineering, as each company excels in different areas. As for production, its most likely the cars will be produced close to where they are sold in the most volume. Small cars in Europe and Large cars in NA. Saying 300's and Jeep will move to European plants is a fools game, it depends on plant capacity and demand. To build a Punto in NA, and a 300 in Europe would be economically unfeasible, and we all know Sergio is nobody's idiot. The 200 and 300 will continue to be built here and the 100 will probably be built in Europe. There will be a small Jeep built in Europe, probably for Europe, and some of those may come here, or may not. The bulk of Jeep production will stay exactly where it is as will Ram models and probably the majority of Dodges, since they are non European models. What's everybody panicking about?
The myth of salvation through export, again?! Fiat has been ignoring markets outside the EU and Brazil for too long. They have neglected or destroyed their dealer network outside of their core markets, and focused on small diesel or ethanol, hatchback, and manual cars. Sorry, but the world drives gasoline engines, sedans, big SUV and automatic gearboxes which are currently in short supply or hopelessly inept when compared to their international competitors. Most the emerging “international” markets are US Dollar friendly. Fiat Group invoices in Euro which fluctuates widely and is overvalued compared to US Dollar. That does not help the pricing, positioning or dealer margins. Internationally, the Brand equity is in tatters or at best a non existing entity. Unfortunately, the pricing does not take this into account. It takes a lot of convincing for a customer in an international market to buy a Fiat over a Kia, Hyundai, or any of their main competitors. Their main competitors have established retail values, a ready supply of independent suppliers of parts and labor ready to take over from the dealers when the warranty expires. Frankly I do not buy that Fiat will be able to conquer markets where Korean, European or Japanese Manufacturers have been investing for 20 years quickly enough to recover through international markets.