‘Fabbrica Italia’: how good is it for Fiat?

“There will be more Italy in the world”. A promise made by Fiat’s president, John Elkann and Fiat’s CEO, Sergio Marchionne, in April 2010 when ‘Fabbrica Italia’ was presented as part of Strategic Plan 2010-2014 for the group. The main point of that plan was to increase Italian car production in order to become of it one of Europe’s largest. In fact, by the year they confirmed the plan, Italy’s output was only of 800.000 cars per year, very far from its neighbors Spain, Germany and France. Main features of ‘FI’ were: to double production of cars (up to 1,65 million), while 70% of Fiat’s investments would be located in Italy. The plan included also the goal to increase the number of Italian cars to be exported from 44% to 65%, or in other words, 65% of the Fiats produced in Italy would be sold in foreign markets. Nonetheless the good intentions, real situation 2 years later is very different. In 2011 there were produced 790.000 cars in Italy, 5.7% less than in 2010, when Italian output was 838.000 units. Certainly the results have not been the ones planned, as Italian car market is facing one of its worst years, while the economic crisis in the continent along with labor and strike problems in Italy are definetely affecting Fiat’s output. For 2012, when Panda’s production was moved from Poland to Italy, final numbers of cars produced will be even worse. So, were Mr. Elkann and Mr. Marchionne wrong by saying production should be increased by the year 2014? how useful is it for Fiat to increase production in its native Italy?

‘We are what we do’. A Panda leaving Pomigliano Factory

Part of ‘Fabbrica Italia’ had been complied: Fiat finally decided to bring the production of its best selling mini car, the Panda, back to Italy. The second generation of it was produced in Tichy, Poland, and it allowed to offer a very competitive product thanks to low labor costs. The Panda became Europe’s ‘A’ segment best selling car. The decision to build it again in Italy was not easy as it is a core product and Italian labor costs are higher. Nevertheless they rebuild Pomigliano factory making of it one of Fiat’s best factories in the world. In exchange they moved Lancia Ypsilon’s production from Italy to Poland as Tichy factory was only going to produce the successful 500 and its step brother, the Ford Ka. Nowadays the Italian Panda continues its success in Italy and Europe but the car is not as cheap as it was, while Italian economic crisis and continuous problems with Union of workers have affected initial targets. The situation was even terrible in March/12, when transportation strike did not allow Fiat to transport its cars from the factories to the dealers, something that was terrible for the new Panda, that had its first weeks in European dealers and was part of a nice introduction campaign.

29/03/2010: 500.000 units produced of Fiat 500 in Tychy, Poland

All those problems would be enough to conclude that Italy is not the best country to produce cars especially now when emerging markets are becoming powerfull in terms of sales and production and labor costs. In terms of units produced and people employed/labor costs, all Italian factories (Mirafiori, Melfi, Pomigliano and Cassino) would not passed the exam. Brazil, Argentina, Poland and now Serbia are more efficient. But even like that, it is not enough to think that Italy is not a good place to produce cars for Fiat Group. Italy is and has been part of Fiat. It is not only the country were it was born but it is also part of its personality, of its moves around the world. Italy is a high valuable asset for Fiat as it projects its great image all over the world with its history, culture and what is known as the ‘Italian touch’. Fiat is what is has become thanks to Italians. Therefore the heart of the group must be always in Italy no matter where the brain will be located (Auburn Hills?). It means that production must go on with better perspectives in that country, along with better labor practices to make it more flexible and allow more efficient production. This would allow to have a more efficient Italy but at the same Fiat should not point all of its attention in just this market. In 2011, Italy represented 13% of Fiat-Chrysler’s worldwide sales, 26% of Fiat Group sales, and 55% of European Union sales*.  To concentrate sales in few markets result in a dangerous task. Italy is important but can not be the whole. Meanwhile, Fiat’s guys must continue to open new markets always keeping in mind 2 things: productivity and Italian touch.

*FGW data base