Fiat Punto to Be Axed, $13.2 Billion Spent On 20 New Models Over Next 3 Years
Fiat Punto, not long for this world.
Sources tell Bloomberg News that Fiat Spa will spend as much as 9 billion euros ($12 billion) over the next three years developing new models for for the European market. The Italian automaker hopes the strategy will end losses on the continent and restore drastically underutilized Italian factories to profitability. Many of the new models will be based on either the Fiat 500 subcompact or the small, low cost Panda. A five door version of the 500 will replace the Punto. The Punto, last restyled in 2005, has long been a fixture in Fiat showrooms and as recently as 2007 it accounted for almost a third of the Fiat brand’s sales in Europe.
Though Fiat wants to use its Italian factories better, the Punto’s replacement will be built in Poland to save on costs. Sergio Marchionne believes that “made in Italy” works with upscale brands like Maserati and Alfa Romeo. The upcoming Maserati Levante SUV will be made in Fiat’s Mirafiori factory.
Not able to access the profits that Chrysler is banking because it’s not wholly owned by Fiat yet, Marchionne must find a way to staunch the parent brand’s bleeding red ink in Europe. Fiat has previously announced that it hopes to develop about 20 new models for Europe by 2016, including eight Alfa Romeos. Some of those cars are a 500 based SUV along with Italian made Jeeps to be introduced alongside the open version of Alfa’s 4C sports car.
Fiat has lost market share in Europe for the past four years, with deliveries dropping 47% over that period and market share going form 9.3% to 6.2%. The Italian automaker has had almost 2 billion euros in operating losses since 2011, including over 300 million euros in loses for the first three quarters of 2013.
Many of Fiat’s 30,700 production workers in Italy have been furloughed this year, most of them for more than five months.
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No big surprise at all. The Bravo first and the Punto next were going to be axed. Those two segments in the EU are either unprofitable or very low margin. A large company like VW where they make billions from China and the US can afford to preserve market share. Furthermore their volumes might even make them profitable for those segments in the EU. A relatively small company like Fiat needs to think differently and that's what they are doing. What's wrong with a profitable 5 door 500 replacing an unprofitable Punto? It's good business. Profit should be priority not market share. The next Bravo and Punto may be feasible if it comes from their Turkish factory.
It's actually not a lot of money to develop 20 new models. Some of which need to compete with JLR, BMW, Audi and Mercedes. Fiat and Chrysler badly need to merge because in truth both companies would have bleak futures without each other.