Sergio Marchionne is always surprising. Yesterday, at the annual meeting of ACEA, European auto association, in Madrid, he said there will be a reduction on capital expenditure about 500 million euros for Fiat Group Automobiles in Europe. The reasons he has are the bad situation of European economy that according to him will last for more years than expected, the future of the continent, and over capacity problems. Marchionne is now focusing more outside of Europe as a strategy to depend less on Europe’s troubled market and therefore the investments of the group, which according to him has cash enough, are going abroad: China, Russia, India, Brazil and the US. This cut affects the introduction of new generation Punto which was expected for beginning 2013 and has been Fiat’s best selling model for years. Regarding this issue and possible alliances Marchionne pointed “with several people, and in some cases our architectures, including the one for the Punto, are involved in the talks”. Meanwhile he said there is enough cash to continue to increase its stake in Chrysler from 58.5% they have now up to 61.8% paying 200 million euros. For the rest Marchionne said there are no conversations with the other owners of the company.
These are certainly bad news for Fiat’s clients who are waiting for new models as the current range begins to look old. In the last 2 years Fiat Group Automobiles has launched 2 all-new models (Lancia Ypsilon and Fiat Panda), 4 rebadged cars (Lancia Thema, Voyager, Flavia and Fiat Freemont) and 2 concepts (Alfa Romeo 4C and Fiat 500 Zagato), while is expected the arrival of Fiat 500L and later the Alfa Romeo MiTo 5 doors, Giulietta SW and new Maserati Quattroporte. In one hand he is saying Fiat has enough money to buy Chrysler and in the other one he says no more money for Fiat models in Europe. There might be good reasons for this decision, but it is without any doubt a very risky one. Fiat is not the only one facing problems in Europe. French and Germans are also dealing with over capacity problems, sales drop and very bad perspectives for coming months. Eventhough Renault will introduce its new Clio in Paris/12, Peugeot has done the same with its 208 in Geneva/12. Opel will propose the new A-segment Adam in Paris/12, and Ford will show the new Mondeo also. Mainstream brands are moving. Fiat’s decision is to delay launches waiting for better times. It can save money but it can be very very harmful for future sales as people will move to other brands if they can’t find new models. And this bad scenario works even more when talking about Fiat’s best selling car in Europe, the Punto. B-Segment is Europe’s largest segment and Fiat should not compromise the future of this core product just because things are not as planned. The delay strategy can work with other segments in which Fiat is not strong (C, D, and so on), but in those small segments, where Fiat is known for doing the best cars, they can not hesitate. Instead they should develop more versions of future Punto, and not only 3 and 5 doors. The future will show how good this idea is.