Skip navigation
Product push better economic equation than plant closings Marchionne says ldquoIrsquove run the numbers both waysrdquo
<p> <strong>Product push better economic equation than plant closings, Marchionne says. &ldquo;I&rsquo;ve run the numbers both ways.&rdquo;</strong></p>

New Products, More Exports, But No Plant Closings in Fiat Restructuring

Italy will focus on building higher-margin models for Alfa, Maserati and Jeep, while many new Fiat-brand vehicles will come from outside the auto maker&rsquo;s home country.

Fiat won’t close any more plants as it seeks to regain its footing in Europe, relying instead on growing volumes for the Alfa Romeo, Maserati and Jeep brands, CEO Sergio Marchionne says.

The Italian auto maker’s revised medium-term plan calls for several new products for those marques, including a new small Jeep to be built in Italy and sold in both Europe and North America in 2014.

Fiat will make investments in several of its European plants as it rolls out the new models and shifts production in Italy to higher-margin Alfa, Maserati and Jeep models, while relying more on plants outside its home country for lower-priced Fiat-brand vehicles.

Marchionne says the auto maker will scale back its vision for the Lancia brand, saying it will protect the uniqueness of the profitable, locally built Ypsilon model but rely solely on Chrysler derivatives to fill out the rest of the Lancia lineup.

The combined Fiat-Chrysler is targeted for annual vehicle sales of 4.6 million-4.8 million units in 2014, down from the 6 million-unit goal set in 2010. Marchionne projects hitting break-even in Europe in the 2015-2016 timeframe.

“It’s reasonable to assume there won't be any substantial price recovery, at least in the short term,” Marchionne says.

The product program includes four all-new and four refreshed models for the Fiat brand between 2013 and 2016; eight new and one restyled model for Alfa and six all-new vehicles for Maserati.

Jeep will launch its new U.S.-built Liberty in Europe next year, add a new small model to be built at Fiat’s Melfi, Italy, plant the following year and bring four new imported vehicles to the market over the subsequent two years.

Marchionne says the product-program/plant-investment strategy is the “best economic choice” the auto maker could make and will prove a more profitable path than simply taking down production capacity. “I’ve run the numbers both ways,” he says.

By shifting to higher-content vehicles at facilities such as Fiat’s underutilized Mirafiori operation in Italy, the auto maker will be able to preserve existing jobs while operating more profitably.

With the product plans and growth targets, Marchionne says, Fiat would have to open a plant elsewhere if it closed one in Europe. “That wouldn’t make a lot of sense.”

Fiat already has all the vehicle architectures and the “majority of powertrain knowhow” it needs to execute the product plan, the CEO says.

“We don’t have to go shopping for missing pieces,” he says. “We’ll be able to start rolling this out within the next 12 months.”

The Melfi plant is the first facility targeted for investment, and Marchionne says the plant will run “three shifts flat out,” once the new Jeep is in production.

That model will have a “large market presence in Europe with some overflow to the U.S. market,” he says.

Fiat reports it earned €286 million ($371 million) in the third quarter on revenue of €20.4 billion ($26.4 billion). That compares with €112 million ($145 million) in net profits on revenues of €17.6 billion ($22.8 billion) year-ago.

Expansion of Chrysler- and Jeep-branded vehicles in key markets such as Brazil and China helped offset losses in Europe, while slight upticks in sales of the Ferrari and Maserati performance brands fueled the profit increase.

Fiat saw its greatest gains in the Asia/Pacific region, with revenues up 39% from year-ago. Shipments of vehicles, 85% of which were Chryslers or Jeeps, moved from 23,000 units in third-quarter 2011 to 26,000 in third-quarter 2012.

Marchionne credits success in that region to the re-launch of the Chrysler 300. Forthcoming is the Chrysler Grand Voyager minivan and Fiat Viaggio, a variant of the Alfa Romeo Giulietta and Dodge Dart compacts, in China.

“Every time we try to leverage ourselves in the C- or higher segment, it was, to put it bluntly, a very unsuccessful attempt,” Marchionne says of Fiat’s lack of success in China, adding the auto maker now is maximizing its relationship with Chrysler to occupy those segments.

Revenue rose 38% in North America with sales of the Dart compact gaining momentum, the auto maker says. Third-quarter shipments in the region totaled 504,000, up from 409,000 in like-2011.

In South America, revenue was up 4%, hampered somewhat by currency-exchange rates and increased depreciation costs for new product launches.

Revenues dropped 13% in Africa/Europe, with shipments falling to 203,000 from 239,000 in like-2011. Italy in particular suffered historic revenue declines, the auto maker’s worst result since 1976.

“The so-called decline, for lack of a better word, of the European market was something that realistically could not be foreseen,” Marchionne says.

[email protected]

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish