By on December 10, 2013
Fiat Punto, not long for this world.

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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21 Comments on “Fiat Punto to Be Axed, $13.2 billion Spent On 20 New Models Over Next 3 Years...”

  • avatar

    I am suprised they are axing the Punto since I thought it was still a reasonable seller for them. Also the compact (or supermini) segment is a large one in Europe. I wonder how the 4 door 500 will differ from the current 500L.

  • avatar

    This has me worried about the long term viability of FIAT and Chrysler. A $12 billion dollar reinvestment in 3 years? Where is this money going to come from? FIAT’s debt rating is already in junk bond territory.

    Look for delays in this timetable, if Sergio and his minions in Turin pulled the $12 billion number out of the air without already lining up the financials.

    I too am surprise that Punto will be axed. It their main bread winner in the VW Polo segment. The next 500 better be good.

    • 0 avatar

      That’s what I thought, where’s he pulling this out from? All this money on Fiat new products, and all the investment making Alfa sell 400K units/year, as well as building volume for Maserati at the same time.

      It just doesn’t add up.

      • 0 avatar
        Vipul Singh

        It does. I argued earlier that the financial might of a business empire almost as big as GE (Exor) would not inconsiderable, even though profits (which can be influenced by acccounting practices) are reportedly thin.

        Exor does about 150 billion in revenue each year.

  • avatar

    The talk of the 500 being expanded to include other segments has been discussed for quite some time. In fact, I believe, the thinking is that the 500 and Panda brands both will be extended to include other segments. The loss in sales are more a reflection of the general economy in Italy at the moment. It’s expected that things will turn around as the political situation settles. (if ever)

    These are positive things and should be beneficial to the overall financial situation at Fiat/Chrysler.

  • avatar

    This announcement undercuts the claims of poverty in dealing with the Chrysler VEBA’s demand for $5 billion for its 41.5% stock ownership. Either Fiat’s credit is good enough in Europe to borrow that money, or Fiat has found money for the VEBA buyout, and the cash for Fiat’s European operations will come from the Chrysler-Fiat merger. I think it’s the latter, and Chrysler fans will be looking at another “merger of equals” cash grab. At this point, Chrysler is looking like a battered spouse, “unlucky” in marriage.

    • 0 avatar

      I think these are two completely different things. VEBA’s demands are seen as being out of line, while investment in product development is seen as necessary and required now that there appears to be some recovery in the financial outlook in Europe. I believe Fiat experienced some growth in France and the UK last month. It’s just a matter of time before some of the other investments start showing returns.

      As far as VEBA goes, the sooner they’re out of the picture, the better. They add absolutely no value to the current and future status of the company. They should pay them what they want and get rid of them. It’s now time to focus on the product and its marketing.

      • 0 avatar

        How can the VEBA demand be out of line? It was part of the bankruptcy settlement that they got that ownership stake in lieu of cash payments, and that the 41.5% would be worth up to $5 billion. That figure would place Chrysler’s value at about $12 billion, and that’s reasonable, if not a little low for a company that’s making money independent of Fiat. Why shouldn’t the VEBA want the maximum allowed price for a stake that might be worth a lot more?

        BTW, the recovery in Europe is not assured, and if it happens, Italy might not be a participant. Italy has been identified by British analysts (Telegraph, The Economist) as most likely to have a debt crisis in the near future. That’s the reason Sergio wants a Chrysler/Fiat merger with incorporation in the Netherlands, to put the combined company at arm’s length with its own very shaky Italian roots, probably moving the corporate headquarters to Auburn Hills.

        • 0 avatar

          I don’t disagree about VEBA wants to maximize its return from its holdings, and rightly so. I believe that Fiat may have a different idea as to how much that would be. The IPO (or the court case ) should bring in that value into focus. Still they should get rid of them and focus on product.

          Regarding recovery in Europe, some reports indicate conditions to be improving, even in Italy. In the end, only time will tell. Fiat is making some very positive moves towards utilizing its capacity for global consumption. My understanding is that the Serbian investment is going very well. New emphasis is being given to the Polish plant with the exclusivity of some 500 platforms being built there. His plan to boost the premium brands seems to have gotten off to a good start. China looks to be improving with the new hatchback and Jeep coming on board. There has also been a new emphasis on India products. Also, I believe they’ve had their best year in Australia ever, due to pricing adjustments. So things are progressing in a positive direction.

          Incorporation in the Netherlands? So what? It will be Turin and Detroit where the decisions and product development will be made. They have the bones of an excellent company in the making. If I had the bucks, I would invest it in Fiat/Chrysler.

  • avatar

    That Punto uses the GM Opel Corsa platform, I’m surprised they’ve kept it around as long as they have.

  • avatar

    Fiat’s collapse simply means that the public finally got fed up with buying garbage.

  • avatar

    $4B per year in investments is really not very much if you want to play with the big boys. Last month VW announced that it was investing about $120B over the next four years — that’s $30B per year.

  • avatar

    Fiat/Alfa only has 6 models: 500, Panda, Punto, Bravo, MiTo, Giulietta. And some rather marginal products. The 500 is too much retro, Panda funny for your gran and the Punto old. The German brands picked up the customers interested in driver oriented cars thereby reducing Alfa sales. The French brought some interesting stuff to the smaller segment; Citroen’s DS line. Fiat is dangling together with Seat and Opel in the uncool/not appealing region. Dacia’s no nonsense image is miles better.

    I simply have no opinion anymore on news from Fiat. Much has been said and little has been taken to the market place. Marchionne either has a very big mouth or he is resolving very big problems internally. Perhaps the problems with the Italian factories consume more resources then I can imagine.

  • avatar

    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.

  • avatar

    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.

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