FIAT Buys Majority Interest in Yugo
May 2nd, 2008 9:25 AM
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According to Automobilwoche, FIAT signed an agreement to purchase 70 percent of Yugoslavia's Zastava in Belgrade Wednesday. This is a marriage made in Heaven — if you're a comedian. Picture Jay Leno combining Yugo jokes with "Fix It Again, Tony" witticisms. Or Stephen Colbert commenting on a car the grandchildren of Mussolini would build in joyful cooperation with the children of Milosevic. FIAT is investing 700 million Euros in a new modernized plant which will build 200,000 subcompact cars in (you guessed it) 2010 with a new mid-class car to follow. And the punchline of the biggest joke? The Yugo car Americans loved to hate was derived from a FIAT: the 127 model.
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My colleague just saw the headline and was speechless. Once he got his voice back, we started talking about how the Yugo 55 was the only car which ever had the misfortune of going over the side of the Mackinaw Bridge here in Michigan. The Big Mac opened in 1957, only one car has ever gone over the side.
"people in emerging markets have historically held onto their vehicles a lot longer than the 1st world." Ah, but people who's incomes are rising rapidly like to keep on moving up the price & prestige ladder. Look at the development of the post war European market to see how it plays out. China and India today are in many ways where Germany was in 1950. There is nothing wrong, per se, with serving replacement markets, but that isn't where the growing volumes and profits happen. A strong multi-national today might have it's baseline business in an established market and it's growth business in emerging markets. Intel, for example, sells less than 30% of it's production into North American now. 20 years ago that number was over 80%.
FIAT is a highly profitable company with a fresh model line up and makes money selling cars based off of GM's Corsa platform. Fiat sells a million of these a year. Yugo could very well be some more volume for their platforms. Or perhaps reuse old tooling...