Fiat To Italy: What Have You Done For Me Lately?

by Bertel Schmitt

September 21st, 2012 3:06 PM

fiat to italy what have you done for me lately

Always good for a surprise, Fiat CEO Sergio Marchionne made an unusual announcement. Not only did he tell everybody that Fiat will receive government financing and tax breaks from Brazil, he also said when he received similar help from Italy: A ver long time ago.

“The last time this sort of transaction took place (involving public financing) involving Fiat in Italy was at the start of the 1990s in Melfi,” the statement, quoted by Reuters, said. Hint, hint: Similar government largesse is verboten under EU rules.

Fiat’s decision to delay investments in Italy came under sharp criticism lately. This is Fiat’s answer.

#BertelSchmitt #Fiat #Itakly #Marchionne

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6 comments

Dejal1 on Sep 21, 2012

He will do what he deems best for the company. That's his job. Doesn't matter what EU rules are. At the end of the day, the EU + Italy doesn't pay his salary. With Fiat sucking wind, social welfare programs (investing in Italy when the bottom is dropping out) are not high on his to do list. People tightening their built is fine, but a company doing the same thing is not?

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Dimwit on Sep 21, 2012

He has the whip hand. He's talking tough in Canada and Italy, making nice in Brazil and the US. I betcha you'll find that in Canada he's doing fine sales wise, the US has troubles and needs a gentle touch as with Brazil. Italy is a basketcase but there's no other choice. If he gives them an ultimatum they'll have to follow through or they'll get screwed. The rest of Europe can go hang, Italy first will be the motto. And he'll just sit back and smile. He's got nothing to lose.

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Bela Barenyi on Sep 22, 2012

What nobody, even TTAC, not mentions is: Some car factories/plants in Europe exist because of "subsidies" and only because of subsidies. What Bertel says is true. EU does not tolerate subisidies or to be precise, they are simply not allowed. But German companies still can and do get "subsidies". Many German companies get subsidies for building a factory/plant in East Germany. For instance, BMW did not decide to build the Leipzig plant because Leipzig is a beautiful city.One of the main reasons for buildung a plant in Leipzig was the fact that they could get "public sponsorship"/"government aid" or how Germany calls it "investment aids". Of course the EU had to green light this and asked to reduce the amount of "investment aids". At the End, BMW got 363 hundred million Euro in "investment aids" Here's a article from 2002 about this (in German unfortunately): http://www.handelsblatt.com/archiv/leipzig-als-standort-steht-nicht-in-frage-bmw-erhaelt-weniger-foerderung-als-geplant/2214918.html And while we're talking about Leipzig. Porsche has also a factory in Leipzig. Porsche claims that they didn't get "investment aids" when they built the plant in Leizpig. But last year they (=Porsche) announced to expand the Leipzig plant for the new compact SUV and that they will apply for "investment aids" in the amount of 100 million Euro. Of course the EU is currently checking/reviewing these "investment aids" whether they're okay or not. But leaving Germany aside, in many other European countries it is worse. Many of Fiat's later built factories in Italy were built because of "investment aids". Hell, Fiat even had a factory in Sicily (Termini Imerese) because of this (was closed in 2011). And even Marchionne once admitted that he would have build some of the existing factories in Italy, for instance the factory in Sicily. But this was all "before the Marchionne era". Of course the decision of Marchionne to use/buy the old Zastava factory in Serbia was influenced to some extent by "investment aids", but beside of that it was/is still a good decision, because it is "additional capacity" in a "cheap labour" country without the "pain in the ass" Italian unions who are mentally stuck in the 1970s. The new/second plant Brazilian was long planned and also a "no-brainer", because Fiat plans to sell 1 million cars p.a. in Brazil and their exisiting factory has reached its capacity. Of course the financial "aids" made the decision easier.

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Tstag on Sep 22, 2012

Rumours circulating Italy at the moment is that VW were looking round 2 Alfa Romeo factories this week.

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- Bela Barenyi on Sep 22, 2012
  
  Sorry, these rumors are crap, only circulated/spread by Italian unions. The reason why Fiat did not sell Alfa to VW was that Fiat wanted to sell at least one factory to VW, but VW didn't want to buy a factory. They just wanted to buy the badge. Beside of that, about which "two Alfa Romeo factories" you're talking about? There are no "Alfa Romeo-only" factories anymore. Arese was closed in 2005 and is abandoned since then. Only the Alfa Romeo Museum is still there, but also closed, since 2011. The Pomigliano d'Arco Plant is now producing the new Fiat Panda. Fiat has invested several hundred million Euro in this factory and has no interest in selling it (beside of that, Fiat's R&D center is located/near to this factory). The only Fiat factories, whose future is in doubt, are the Cassino and the Melfi plant. And both are not Alfa Romeo plants. Cassino produces the Giulietta (and the Lancia Delta and the Fiat Bravo, but is not a "Alfa Romeo exlcusive" plant. The Mirafiori plant (where the MiTo is produced) is out of question, because it's located in Turin, where Fiat has its headquarter and Fiat would never sell that factory/plant. Similiar rumours were spread in the last two years, but came always from stupid italian unions. These are just not true. VW has no interest in owning a car factory in Italy, because the unions in Italy are pain in the ass. If they wanted to buy an Italian factory, they could easily buy the Termini Imerese factory in Sicily (closed in 2011 by Fiat) or the former Pininfarina factory, which was rented for the De Tomaso "revival" project and which again is more or less for sale. And what many people forget: With a sale of Alfa Romeo, the numbers and the projected economies of scale don't work. Even if you consider the set sales targets for Alfa Romeo as "stupid" or not achievable, without Alfa Romeo, all the "let's share platforms" idea at Fiat does not work. Alfa Romeo is the only brand which has international potential to reach high sales volumes. No ones willing to pay high prices for a Fiat badged car, but there are enough willing to pay much higher prices for a Fiat with a Alfa Romeo badge. At the moment there's only a lack of right products (the dealer networt also might need a overhaul). And the most important part: Fiat does not need cash at the moment. They have enough cash. Marchionne's major goal at the moment is to preserve cash. Fiat has access to more than 10 billion Euro (no, I'm talking about Chryslers cash reserves, because Fiat can't get their hand on these, but in combination Fiat and Chrysler have around have cash reserves around 20 billion Euro). So, why should Fiat sell a factory now ? Or a brand ? There's no need for turning assets into cash in the shortterm.
  
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- Th009 on Sep 22, 2012
  
  @Bela Barenyi With regard to the recurring VW-Alfa question, you make many good points. I agree that Marchionne would only ever consider it if VW took a factory off Fiat's hands. So the only scenario that could work would be the brand + the Cassino plant (Torino is out of the question, and Termini Imerese wouldn't help Fiat). VW surely is not keen on such a plant but might be willing to accept it if they could negotiate a new contract with the Italian unions. And if Marchionne agreed to sell the brand. But overall it's not likely to happen. So that still leaves me amazed that Marchionne is not willing to spend any of that 10M Euro he has access to in order to get some new product on the market. If he keeps the current strategy, Fiat (and Alfa) will keep bleeding market share for years to come.
  
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