Project

on

FIAT
Global Strategy and Marketing Oppartunities

SUBMITTED TO: PRO. MUKESH PORWAL

SUBMITTED BY: VIBHUM AGARWAL PGDM 2010-12

Company History & profile:Giovanni Agnelli founded Fiat in 1899 with several investors and led the company until his death in 1945, while Vittorio Valletta administered the firm's daily activities. Its first car the 3 CV (of which only eight copies were built, all bodied by Alessio of Turin) strongly resembled contemporary Benz and had a 697 cc (42.5 cu in) boxer twin engine.In 1903, Fiat produced its first truck. In 1908, the first Fiat was exported to the US. That same year, the first Fiat aircraft engine was produced. Also around the same time, Fiat taxis became somewhat popular in Europe. By 1910, Fiat was the largest automotive company in Italy a position it has retained since. That same year, a plant licensed to produce Fiats in Poughkeepsie, NY, made its first car. This was before the introduction of Ford's assembly line in 1913. Owning a Fiat at that time was a sign of distinction. The cost of a Fiat in the US was between $3,600 and $8,600, compared to US$825 the Model T in 1908. Upon the entry of the US into World War I in 1917, the factory was shut down as US regulations became too burdensome. At the same time, Fiat had to devote all of its factories to supplying the Allies with aircraft, engines, machine guns, trucks, and ambulances. After the war, Fiat introduced its first tractor, the 702. By the early 1920s, Fiat had a market share in Italy of 80%.

Type Industry

Founded Founder(s) Headquarters Area served Key people

Products

Revenue Operating income Profit Employees Website

Societ per azioni Automotive, media, financial services metallurgy 11 July 1899 in Turin, Italy Giovanni Agnelli Turin, Italy Worldwide hn Elkann (Chairman), Sergio Marchionne(CEO) Autos, auto parts financing, newspaper publishing, ad sales 35.88 billion
(2010)

992 million
(2010)

179 million
(2010)

Gianni Agnelli (in the center) and the FIaT board of directors meet President Sandro Pertini (at his right) during an official visit to the new Sevel Val di Sangro factory, 1981.In 1921, workers seized Fiat's plants and hoisted the red flag of communism over them. Agnelli responded by quitting the company. However, the Italian Socialist Party and its ally organization, the General Confederation of Labor, in an effort to effect a compromise with the centrist parties ordered the occupation ended. In 1922, Fiat began to build the famous Lingotto car factory then the largest in Europe which opened in 1923. It was the first Fiat factory to use assembly lines; by 1925, Fiat controlled 87% of the Italian car market.In 1928, with the 509, Fiat included insurance in the purchase price.

96,230 (2009) fiatspa.com

Fiat made military machinery and vehicles during World War II for the Army and Regia Aeronautica and later for the Germans. Fiat made obsolete fighter aircraft like the biplane CR.42, which was one of the most common Italian aircraft, along with Savoia-Marchettis, as well as light tanks (obsolete compared to their German and Soviet counterparts) and armoured vehicles. The best Fiat aircraft was the G.55 fighter, which arrived too late and in too limited numbers. In 1945 the year Mussolini was overthrown the Italian Committee of National Liberation removed the Agnelli family from leadership roles in Fiat because of its ties to Mussolini's government. These were not returned until 1963, when Giovanni's grandson, Gianni took over as general manager until 1966, as chairman until 1996.

Models
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1967: Fiat 124 1970: Fiat 128 1972: Fiat 127 1980: Lancia Delta 1984: Fiat Uno 1989: Fiat Tipo 1995: Fiat Punto 1996: Fiat Bravo/Brava 1998: Alfa Romeo 156 2001: Alfa Romeo 147 2004: Fiat Panda 2008: Fiat 500

Fiat Announces Strategy Up Until 2010; Marchionne to Hand Over Reins of Auto Unit
Global Insight Perspective Significance

Fiat Auto's strategy includes the expansion of its Alfa Romeo and Lancia brands, as well as new technology and strategic alliances Although the division has bullish plans, it could face competition to a key new model. Fiat is positive over its future, but it remains to be seen whether the "ambitious" targets set by the company can be achieved

Implications

Outlook

During an investor seminar to show off how the Fiat Group plans to develop itself up until 2010, it has released details of its automotive division strategy over this period. As a whole, Fiat has said that it is looking to target around 2.8 million sales globally, including the units Lancia and Alfa Romeo brands, which it is looking to expand. It also plans to increase its market share in its Italian home market to 35% from the 31.7% it saw in October. Sergio Marchionne, chief executive officer (CEO), said that the target was "ambitious", but was also looking to increase the auto units profit margin to 5% by 2010, from a position currently half of that. Alfa Romeo: Outlining Range of New Models; Looking to Break Into the U.S. Market With a 37% rise in sales during 2006 to around 160,000 units, Fiat has outlined an ambitious plan for Alfa Romeo's re-entry into the U.S. market in 2009, and with a range of new vehicles and a plan to use the U.K. model for the brands European-wide turnaround, it is looking to push sales above 300,000 units in 2010. Forthcoming models will include a vehicle codenamed "Junior" by Alfa Romeo that will be a new B-segment vehicle, positioned to target the 18-to-30 market. Priced at around 16,000 euro and measuring 4 metres, the brand described the vehicle as an "innovative concept of a 3-door sporty car". The unit also revealed details of a crossover vehicle named the "CXover". Expected to reach the market during the first quarter of 2010, Alfa Romeo has said that the cross between an "SUV and a coup" will measure around 4.6 metres and will be priced between 28,000 and 45,000 euro. A replacement for the 166 luxury vehicle will also be seen in the second quarter of 2009 and will form one of the key components for the company's relaunch in the United States. Based on the next-generation Maserati Quattroporte, the company is forecasting full-year volumes of the car at around 20,000 units in the market during 2010.

Lancia: Increasing Presence Outside Italy Fiat is looking to improve the Lancia brands visibility outside Italy over the next four years, by rebalancing its Italian/international sales mix from 80%/20% to 60%/40%. As part of the units strategy, the brand will enter the Turkish, Scandinavian and Russian markets, as well as restarting production of right-hand-drive vehicles that will help Lancia to re-enter the Japanese and U.K. markets during 2008. The brand will also be looking to cover multiple segments with single models to ensure wider exposure. For example, Lancia sees the Delta HPE as covering both C- and D-segments, and both hatchback and station wagon markets. The vehicle will also include improved design and materials to express "Italian exclusivity", and will offer gasoline and diesel engines utilising turbochargers. New Technology from Fiat Powertrain Fiat has said that it believes that petrol engines will still prevail in the European medium-low passenger car segments and has approached this direction with the launch of innovations in the future. A new small gasoline engine is also on the horizon, due to arrive with the introduction of the Fiat 500. The 0.9-litre power unit will use "Multiair" and turbocharger technology to give between 90 and 110 bhp, depending upon the application, and will replace the 1.2-litre naturally aspirated units seen currently. Other new units will also see the use of a turbocharger such as the 1.4-litre engine to be fitted in the C-segment Bravo, and a 1.8-litre engine that will produce 190 and 230 bhp, depending on the application. During the seminar Fiat said that it considers diesel hybrid propulsion to be "promising" for urban light-commercial-vehicle applications, and is currently developing the technology for the Fiat Ducato and Iveco Daily. Alternative fuels such as natural gas and hydrogen are also seen as a solution for ultra-low-emission urban vehicles. Fiat is also looking to adding biofuel to its current flex fuel applications Strategic Alliances An Integral Key During the presentation, Fiat has said that it sees alliances as key to strengthening its position and entering new segments. The company outlined its plan to build the forthcoming Fiat 'Minicargo' light van being jointly developed by PSA and Tofas and to be built in Turkey, and confirmed the production of a Tata Motors pick-up at Fiats plant in Cordoba (Argentina). Other projects included:
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Ford: A joint project with Ford to construct the next Ford Ka and Fiat 500, based on the current Panda platform and estimated to produce 240,000 units per annum (upa). Severstal Auto: Construction of the Fiat Albea, Doblo and outgoing Ducato van, as well as the new C-segment Linear saloon. Chery: The Memorandum of Understanding (MoU) signed for the supply of Chery's 1.6litre and 1.8-litre engines for Fiat cars built in China. Annual supply is expected to reach over 100,000 units. Nanjing: The addition of the Doblo, Punto and Linea all added to the product mix between 2007 and 2009.

CEO Marchionne to Step DownFrom Auto Division in 2007 Sergio Marchionne has said that he will step down as the automotive units CEO during 2007, but will maintain his position as head of the Fiat Group until 2010 and beyond. Marchionne told the assembled analysts: "I think there is enough talent in the group so I won't hire anyone from outside the company." No names were mentioned as to who would be chosen as his replacement. Outlook and Implications From a position of weakness, Fiat has managed to turn itself around and make bullish plans for the next four years. With the launch of the Bravo and 500 in 2008, and plans for Lancia and Alfa's expansion to complement the core brand, Fiat is hoping to maintain the momentum that began with the launch of the new Punto in 2005. Fiat has also looked to expand internationally with the investment in Latin America announced last month (seeLatin America: 25 October 2006:Fiat Plans US$1-bil. Expansion in Latin America) and other global ventures noted above. However, the Bravo could see some very strong competition from the Euro-orientated Kia cee'd and Toyota Auris, which are both being brought to market in the coming year. Also upcoming is the impending redesign of General Motors' (GM) Astra, and the arrival of a cheaper-to-produce Golf VI. With these competitors, the Bravo could be an even bigger "make or break" vehicle than the Punto. Fiat has also used a lot of extra resources through the marketing, manufacturing,, and research and development (R&D) costs that have seen a negative free cashflow. Although these have been booked upfront, the company will want to pay this off rapidly in order to reduce the charges it is faced with. This is part of the plan that Marchionne and his team have put together, with a target of turning this around from 2 billion euro of debt in 2006 to a net cash position of 3 billion euro in 2010. The automotive divisions targets are positive and with the launch of 23 new models and 16 revised products the company could continue its product-led revival. However, as Marchionne said, the targets for the company are "ambitious". Whether it will end up being too ambitious remains to be seen.

NEW MARKET OPPORTUNITY

In the space of about a week, Sergio Marchionne is turning Fiat SpA into a global auto maker, expanding into two key markets of the future with major investments in Russia and China and boosting the auto maker's already strong presence in South America. Fiat's Italian-Canadian chief executive officer outlined the strategy in Toronto, where he arrived Friday morning after announcing a 2.4-billion ($3.4-billion) joint venture on Thursday with Russian auto maker Sollers, based 1,000 kilometres east of Moscow.
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Fiat to undergo radical revamp Alfa Romeo could be built in Canada Overcapacity woes stalk auto makers

In the next few days, Mr. Marchionne told reporters, Fiat is expected to sign a deal for a joint venture with Guangzhou Automobile Group Co. Ltd. in China. The two deals will give Italy-based Fiat a major presence in two of the BRIC countries. Those are Russia, a market that was devastated by the meltdown, but which Fiat expects to recover to generate sales of about 4 million vehicles annually by 2016; and China, one of the hottest markets in the world and one that was barely touched by the global automotive slump. One of the things you can do in a period like this is either throw yourself into a state of utter despair or start planning for a future that looks half-decent, Mr. Marchionne said before a Toronto luncheon held to raise money for the Abruzzo earthquake relief fund. He is a native of that part of Italy. These are all things that are effectively intended to globalize the operation, he said. Other potential mergers are on hold for now, he said, while Fiat digests Chrysler Group LLC and works on the other elements of its global expansion. He travelled to Toronto after a whirlwind week that began with a trip to Mexico, where he unveiled a $550-million (U.S.) investment to build the Fiat 500. Then it was off to Turin, Italy, and Fiat's headquarters on Wednesday, before he headed to Russia on Thursday and the Toronto luncheon Friday. The Fiat 500 will be the first Fiat model to appear in North America as part of the company's deal to take a 20-per-cent stake in Chrysler after the third-largest Detroit auto maker emerged from protection. The Chrysler plant in Toluca, Mexico, that will make the Fiat 500 will ship about half its estimated 100,000 annual output to South America. The Russian element of Fiat's global strategy is risky, said Warren Browne, who headed GM's operations in Russia and is now an industry consultant. Current production capacity in Russia is 3.1 million vehicles annually and the country imports another 500,000 vehicles, Mr. Browne noted, compared with demand of 1.65 million. Output of 500,000 from Fiat would raise the total for sale to 4.1 million, while he is forecasting demand of just 3 million by 2016.