Last week, at the annual Morgan Stanley automotive conference, Luca de Meo, head of the Fiat Brand, presented a progress report outlining the current position of the Turin based car company. With a new management structure in place, fresh energy and a clear-cut strategy have been injected into the company. Fiat Auto are now on a growth path with sales, particularly in Western Europe, rising strongly. "In Western Europe, for the year to date to May, sales of Fiat-branded cars were up 28% for 2006 compared with 2005, an improvement better than that of all other competitors." The A and B segments in particular have seen strong improvements, with the Panda (96,154 units May YTD 2006) and Punto (186,548 May YTD 2006) models. Germany, UK and Ireland have seen the strongest sales growth, whilst Greece, Sweden and Norway still require improving.

One of the central themes of the report was the new Fiat C-Segment project, codenamed Progetto 198, which has been officially christened with the name Bravo. The Fiat Bravo will be launched in the first quarter of 2007 and will rebuild the credibility of the Fiat marque in the C-segment. Development time was cut from an initial budget of 32 months to an impressive 18 months by exclusive use of virtual engineering, with no physical prototypes being constructed. The first units of this vehicle will be built directly on the assembly line using actual tooling. A run of 20 initial units will be built for crash and durability tests. Full production of the Fiat Bravo will start in November 2006, at the central Italian based Cassino plant. Magna Steyr were contracted to develop the bodywork and interior of the Bravo, whilst Fiat Auto engineered the rest. The Fiat Bravo will be a sexy Italian hatchback, with excellent quality and reliability. From a technological standpoint, the Bravo is targeted to achieve a full 5 points in the Euro NCAP crash test. A new generation of turbocharged gasoline engines will be offered, as well as advanced on-board electronics. Above all, the Fiat Bravo will be competitively priced.

Fiat is witnessing continuous improvement in brand image, with 2006 being a vital year which will see strong acceleration. Research has shown that price and financial considerations remain the main reasons why the Fiat brand is preferred, although vehicle size, design (including ergonomics), driving characteristics and technical aspects are becoming increasingly relevant. Key drivers of the new Fiat brand are ‘Simplicity’, ‘Style’, ‘Speed’ (of decisions), ‘Surprise’ and ‘Smile’. Fiat plan to take on the competition by doing the unexpected, accelerating time to market and implementing new fresh advertising and marketing techniques. Fiat are cooperating with Ikea with the design of simple new dealerships. Style and the ‘I like it’ factor are at the heart of Grande Punto buying decisions, whilst interior design over the old Punto model has also been largely improved according to an early buyers marketing survey. 

Fiat plan to strengthen their leadership and reinforce profitability in the small car segment. An example of the latter is the new Fiat 500 project, where cost management has seen halved development costs due to cooperation with Ford. Production costs of the Fiat 500 will also be low with production set to take place at the successful Tychy plant in Poland. Fundamentally, the reduction of costs is being achieved without compromising brand repositioning, with a high flexibility remaining for brand differentiation.

The Punto and the Panda are world number 1 in the A and B segments for Western Europe. Better leverage of research and development costs and operational expenditures across segments, reinforcement of distribution capabilities and a cautious expansion of the international reach are further key points in the Fiat strategy. A fundamental point is also the revitalization of the brand image, with quality, technology, safety, and customer care all being areas where Fiat are placing tremendous effort.
 

The Fiat Panda lesson is very much still alive, with large profit margins being made by the successful small car. Particularly the new ‘high end’ versions of the Panda model such as the Cross have been successful, with more being sold than the base spec model. The profit margin is several times higher for the well selling high end models.

‘Fiat for the people, Fiat by the people’ is the slogan of the new Fiat 500, representing Fiat’s customer focus. A new website dedicated to the Fiat 500, www.fiat500.com, has seen high traffic and valuable feedback. With its stylish Italian design and good performance, supplied by efficient yet sporty Multijet and Starjet engines, the Fiat 500 will certainly appeal to a wide audience, who will appreciate its excellent price to equipment ratio. Safety will be ensured by a good Euro NCAP score, airbags, and electronic stability programme, whilst the car will also be environmentally friendly with EURO 4 and 5 engines, natural power technology, and diesel particulate filters. An Abarth version of the Fiat 500 will also being offered. Alongside the Fiat 500 and Fiat Bravo, a new family car is also being developed.

A range of objectives have been set forward to improve the Fiat dealer network between now and 2008. An immediate objective is to improve network profitability by 1 percentage point. By 2007 Fiat aim to reduce the number of underperforming dealers to below 15%, to improve standards compliance (image and processes) to 100%, and to achieve 100% quality coverage. 

Several strategies are also in place for international expansion. Strong importers are being recruited for new countries, such as Egypt and Australia, whilst current expertise in Brazil and Turkey is being used to further develop the South American and Eastern European markets respectively. New products have been introduced using the “world car platform”, including a Grande Punto for Turkey and the Fiat Idea in Brazil. Furthermore, Fiat are using industrial partnerships to enter new markets, with Severstal in Russia and Tata in India being prime examples. “We believe in the opportunity to concentrate our investments on few stronger products building on our leadership in small cars. We intend to selectively seize opportunities in markets outside Western Europe,” concluded Luca de Meo last week.

By Paddy Granger