Problems at home: 1.4 million cars in 2012

Picture by “Fiat 500 USA”

Very bad news are coming from Italy, Fiat’s historical market. According to UNRAE – Unione Nazionale Rappresentanti Autoveicoli Esteri, Italy’s main car importer association, the drop on sales during the first four months of 2012 will be a constant during the whole year. If coming months are as bad as the first 4 months in which the market dropped 20%, 1.430.000 cars will be sold in the country, or 18% less than previous year and the worst result since 1979 when 1.397.039 cars were delivered. Economic crisis is reflecting so well in this important sector which has been also affected by new taxes, VAT, Superbollo and so on, and high prices of gas. Some had began to talk about un-motorization of society, a word to describe the opposite situation when Italians began to buy and buy cars in the early 60’s.

This situation is really complicated specially if it is about a large market as Italy, in which not only Fiat but other as Germans, have a lot of investments. Those numbers would locate Italian car market in equal situation to Korean or Canadian numbers, both of them with lower populations. Fiat’s CEO, Sergio Marchionne, said that it is urgent to change European legislation in order to get more efficiency and quality decreasing unnecesary costs and at the same time begin to look outside and make of European car market a key player with its exports to markets abroad. And that is certainly what Europe must do.

Employees stand next to a new Fiat 500L during the inauguration of a new factory in Kragujevac on April 16, 2012. AFP PHOTO/ ALEXA STANKOVIC

In a market that has stopped to grow and is getting old, the answer must be to develop new technologies, and be the place for research and development. While others keep growing and expanding their car markets, Europe should focus on technological leadership and added value to new ideas and concepts of cars. On the other hand they have to increase their exports to key markets such as South America, Northern Africa and the Middle East. Otherwise there would be extra capacity of their production plants and some of them should be necessary closed. But what Europe needs urgently is a change on its regulation about job flexibility. If job regulation continues like it is now, foreign competition will keep gaining market share and so European manufacturers will have more problems to solve.

In this context, Fiat has to look carefuly the production processes it has in the continent. Italy is with no doubt the heart of the group but its dependence on its labor force is forcing it to lose market share as its products are not being as cost competitive as competition from abroad (Koreans). They have to defend their natural market (with market share no less than 25% and a goal of 35%), while go abroad and increase production numbers in Poland, Turkey and the new Serbia. Those plants have to give Fiat better tools to increase its capacity to offer great cars with low production costs. Meanwhile in Italy, the new Panda made in Naples and next arrival of 500L must do their work to stop sales drop.