Category Archives: Europe

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Europe: “We need to get this issue under control”, Marchionne

Here there are the main highlights of Sergio Marchionne’s interview with Luca Ciferri, Editor-in-Chief of Automotive News Europe:

  • Inevitable the move of merging Fiat and Chrysler by the year 2014
  • Big effort on relaunching Europe operations
  • 2013 total sales target: 4.3 million from which 2.6 million (60%) correspond to Chrysler. It means Chrysler sales will grow 8% while Fiat ones would decline 6%
  • Problem with distribution of production in North America
  • “Success” for the coming Chrysler 200, to be presented in Detroit 2013
  • Regarding Chrysler 100 he thinks “is a great idea to provide dealers in the U.S. with two options in the compact segment”
  • If Chrysler 100 gets produced will come to Europe as the new Lancia Delta
  • Reason for poor results of Lancia Thema/Flavia/Voyager: selling a premium brand in a difficult market is tough. The market is getting smaller
  • The Dodge Dart effectively started rolling out in late September. The target is unchanged
  • He wants different body types for the next generation Chrysler Town & Country and Dodge Grand Caravan. Marketing study is on the way
  • Fiat 500 results in America: great product. Different approach from different people in charge of its sales
  • Jeep can reach 1 million units but it does not have the capacity right now
  • The new SUV from Maserati, the Levante, will be built in Mirafiori, Turin with a lot of the underpinnings coming from the U.S.
  • Jeep’s production in China: the company will remain in USA. It can do CKD units but everything coming from U.S. market.
  • Alfa Romeo to VW: “there are some things that are not available for sale… I have zero interest in selling Alfa”

Source: Automotive News

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Fiat in trouble. VW Up! hits the market

Fiat is in trouble, big trouble. It is not only a matter of its home market, Italy, or the delay in plans for new products. The problems with its factories and Fabbrica Italia are just some more to the latest one. What used to be the main strength of the group is now being hit hard by Europe’s largest car maker. VW is having great results with its trio Up!/Mii/Citigo and it means that Fiat is feeling the success of the Slovaks with less sales figures for its couple 500/Panda. Last month is the best example as sales figures for the Italian couple drop while the VW trio seems not to feel the crisis. As I have done it during the last months, the analysis takes into account the sales figures for Fiat 500 and Panda vs. the trio together, Up!, Mii and Citigo, as they are the same car. The analysis includes the countries where there is data available every month: the largest markets, Germany, France, Italy and Spain (except the UK) plus Netherlands, Ireland, Sweden, Denmark, Poland, Czech Republic, Slovakia, Slovenia, Austria, Switzerland, Romania and Greece. 16 countries that can tell a lot about sales trend of these small cars. Due to lack of data important markets as the UK, Belgium and Portugal are out of the monthly analysis. Nevertheless even though the UK is not included (is the second largest market for the 500 in Europe), the results for August indicate that Fiat should be worrying a lot.

Though Fiat invested 800 million euros in the plant of Pomigliano for the production of the new Panda, the small car continues to lead the ‘A-Segment’ but far away from initial forecast. Photo by: Automobilismo.it

In August 2012 the trio sold 12.041 cars*, which means more than double of Fiat 500’s registrations and almost 4.000 units above the Fiat Panda, the historical leader. This trend was evident in July when the Up!/Mii/Citigo was just 51 units behind the Panda. But last month sales figures dropped for the Italian couple while the Slovak trio did not experience it that way. Compared to July figures, the 500 was the most affected one, down a massive 40%. Then comes the Panda, down 37% and finally the trio from VW Group, down only 9%. The results are really bad for Fiat specially if it is considered the fact that both models represent more than half of the brand sales in Europe and now the Punto is becoming a rare model to see in the top best-selling cars outside Italy. It is also even more complicated taking into account that the Panda is an all new model with no more than 10 months old, and the investment required for it was around 800 million euros. At this point is when Marchionne says that there is not enough market for new models, specially if that market is being conquered by VW in all segments. In the other hand there are some people who say that there is no such cataclysm and August bad results for the small couple are just punctual. Some how that position is right.

The new versions of the 500 may be helping but after 5 years in the market the small Fiat should be thinking of a successor

Last month’s results can be explained from several points of view. First of all August has been always a month of small numbers all over Europe as people go out for vacations. Second, European car market is certainly passing thru perhaps the most difficult times in decades. And third, Italian market is becoming one of the worst in terms of sales fall. Just in August the market was down 20%, which is the biggest fall among big European markets. For example, in August/11 almost 1.800 Fiat 500 were sold in Italy, and one year later 1.700 were sold (down only 4%) so at the end the bad result for the 500 could be explained as a ‘seasonable’ thing, more than really bad results. The same situation for the Panda and Italy: one year ago 4.532 units were sold against 5.011 last month. Of course, if those numbers are compared to July ones, the conclusion would be completely different. What happens in Italy every August does not happen that much in other European markets. Germany for example saw its total car sales to fall 5%, year-on-year, but at the end the total number is not far from previous months. So it is important to consider what happens in main markets for the models analyzed. As the 500 and specially the Panda depends a lot on Italian market, their total sales figures for Europe will be strongly affected by the Italian result. In the other hand the Up! depends a lot on German market (42%) but that market does not collapse in August.

This figure shows the main 3 markets for each model. The left number indicates the market share of that market on model’s total sales. The right number indicates the market share of the model in that market. It means Italy represents 31% of Fiat 500 sales in Europe, while that model has 3% of Italian market sales. Fiat Panda sales figures include the second generation numbers. VW Up! sales figures include Skoda Citigo and Seat Mii numbers. Source: bestsellingcarsblog.net

But if Italy and Germany are not considered, certainly VW is winning the match. The trio sold more than 2.000 units in small markets as Denmark or Netherlands, while they sold some more in France, Romania, Austria, Slovakia, Slovenia, Sweden and Switzerland. Fiat did well in Germany and the Netherlands with the 500, while the Panda did not do bad in Austria and Denmark. French sales figures for the Italian couple are really bad and it contributes to less numbers, as traditionally France has been an important market for both models. The good markets for ‘A-segment’ cars are now being conquered by VW. It means Denmark and the Netherlands, where this kind of cars is very popular (because of high taxes to all cars). Other important markets (in terms of units sold and not in terms of  ‘A-Segment’  market share) such as Spain and France, Fiat still dominates the battle. Year-to-date numbers show that the Slovak trio surpasses for the very first time the Fiat 500 with 2.300 units. If the three models were considered as a unique model, the 500 would not be anymore the second best-selling ‘A-segment’ car in Europe. The Panda is still the best-selling small car but initial forecast and the capacity of Pomigliano plant are far away from current results.

Source: bestsellingcarsblog.net

*Not included Mii and Citigo Italian sales numbers

 

 

Click here to see Fiat Panda/500 vs. VW Up! September 2012

Click here to see Fiat Panda/500 vs. VW Up! July 2012

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European car industry crisis. A possible solution?

Europe’s debt crisis and its impact on car industry has become a regular topic among automotive analysts. On a daily basis, specialized press and automakers’ CEOs talk about it in several statements which sometimes can result in an alarm for coming months. And it’s true, the worst has not come yet and it is why VW CEO, Ferdinand Piëch, opened up the discussion about the future of European car makers. He said that current crisis will eliminate one of the big ones of the region as the market will continue to get smaller and production over capacity will be that big that at least one big car maker will disappear. This statement must be analyzed carefully as it comes from Europe’s largest car maker and one of the few that is not having problems at all. No matter whether it is true or not, what Piëch wants is to create even more chaos and uncertainty not only among other car makers having problems right now, but among car buyers who will choose those brands with a ‘brilliant’ future. VW is against Sergio Marchionne’s proposal of controlling over capacity by all car makers in the continent. They earn money thanks to great and boring products while they make use of overseas earnings (China) to compensate the possible losses they could have in Europe. Meanwhile the other ‘big’ are dealing with their own problems: Opel struggling with everybody to keep being protected by GM; Ford loosing more than 1.000 million euros; PSA dealing with French government to close one of its big factories; Renault looking at its operations in South America and Asia to endure the storm; and finally Fiat dealing with a big fall in its native market and fighting with labor unions to rise the productivity.

Ferdinand Piech from VW. Sergio Marchionne, Fiat. Carlos Ghosn, Renault-Nissan. Piech says one big European car maker will disappear by the end of the crisis. Marchionne wants to decrease European production levels, while Ghosn says nothing important will happen during the crisis. Photo by: Automovil Online, Jeff Kobalsky, El Comercio

Today, Renault-Nissan’s CEO, Carlos Ghosn, said nothing extreme will happen. But the thing is not to predict what will happen in the coming years. What all carmakers must do is to find quick solutions to current problem. Of course the first ‘remedy’ is to fire employees. PSA is planning to fire around 10.000 workers so they can reduce expenses and therefore the losses. Meanwhile Marchionne said today that Fiat will not close anymore plants in Italy but will send workers home for more days. All these decisions will solve the problem for some months but at the end the real problem will be the same: more production capacity than demand for the coming years (some say until 2020). After considering this terrible scenario it came to my mind how this 5 big carmakers could get out of the crisis. They have a lot in common and share the same threat, VW domination in Europe. All of them can be classified as mainstream car companies which produces all kind of vehicles, from small A-Segment cars up to big LCV. If they do not move VW will pass from current 23% market share to a bigger part of European market and from that moment trying to stop it will be almost impossible. So, if they are so similar and have the same problem, why not to join forces? it is not about an alliance as it is known so far. But it is about creating a special group composed by GM, Ford, PSA, Renault and Fiat, only for Europe in order to get out of the crisis and stop VW growth. But how could they join forces if they are competitors? how could they share any project if they have interests not only in Europe but outside?

VW is becoming a giant in Europe. If the other big ones don’t do anything they will have even more difficult times in the coming years.

One of the possible solution for them could be to specialize each company on what it can do best only in European market. If they stop competing among them they could get better sales figures producing the cars they do the best. And if European market is divided into segments, well they could divide the market and their production according to the segment they dominate. In other words each car maker would be assigned one segment to produce a car to be sold under all brands. So, if they are 5 car makers they could select the top 5 European main segments by sales figures and then assign each one to a specific car maker. For example, Fiat is the absolute leader of A-Segment in Europe, so for the coming years and exclusively for Europe, Fiat would only produce small cars in its Italian factories to be sold not only under Fiat brand but also as Peugeot, Citroen, Renault, Opel and Ford. Following the example, PSA could produce in France the B-Segment car for all brands. Then Renault could do the same for C-Segment, and Opel could make the D-Segment offer in Germany, while Ford would be in charge of producing all MPVs of the European ‘alliance’. Doing so, the big 5 would benefit from cost savings as they would work together in the development of each car, while they could enhance their local production as more units would be required to fulfill the demand of not only one brand but five. In the example, Fiat would not produce 250.000 units of its 500 and Panda but would have to increase the production up to 600.000 or 700.000 units that means the A-Segment for the 5 makers (last year around 1.2 million units were sold in Europe and VW did not count for anything of them as they had not launched the Up/Mii/Citigo yet). Fiat would increase the production of small cars using its plants in Italy, where it now produces other segments such as the Punto or Bravo. The production of those segments would move to other factories of its allies. In the example, it means that the Punto would now be the result of a unique model developed by all 5 car makers but produced in PSA factories. Of course, for every segment, each car maker would apply a deep design work to differentiate each model from the other brands and keep the family feeling.

Source: Fiat Group’s World Data basis

There are several real examples of this kind of deals and Fiat is part of them. The 500 and Ford Ka produced in Poland, or the Fiat Doblo and Opel Combo produced in Turkey. Or the Suzuki SX4 and Fiat Sedici in Hungary. The difference now would be that not 2 but 5 car makers would be involved in the deal. Of course not all segments have the same size. In 2011, almost 1.2 million units were A-Segment, B-Segment counted for more than 3.3 million, not far from 2.9 million cars sold of C-Segment. Over 1.5 million cars were  D-Segment and all MPV segments sold 1.6 million units*. Therefore in the example, Fiat would be in charge of a segment which is much smaller than the one assigned to PSA or Renault. How they could solve these differences? if for example, Fiat has to produce the A-Segment it would focus all its plants to build the small car but it could also produce some part of the B or C segment car, so PSA would not only produce the major part of B-Segment but some part of it would move to Italy to compensate for the smaller part Fiat got. In other words each manufacturer would do what it can do the best but would not have a dominant position in terms of production. Does it mean that a company like Fiat would have to stop building the Punto, Bravo or the Giulietta to give some space to more production of the Panda? yes. For the coming years Fiat would not have an authentic B, C, D or MPV offer but the result of a work together with Opel, Ford, PSA and Renault. Doing that Fiat would benefit from lower development expenses and from the increase of its production in Italy, while the competition would not be as hard as it is now, with not only VW in the field but several others trying to get more market share with a price war. It also means that at the end the 5 big would decrease a part of their production capacity but in a controlled way and all of them doing it, something that Marchionne has been saying from the beginning of the crisis.

As they are independent companies the idea must only work in Europe and the ideas and developments got by the team work can not be taken by anyone to develop car outside Europe. If the problem is in Europe the solution must be exclusively over there. Problems? a lot. First of all, none of the carmakers cited before will want to share independence especially with direct competitors. Second, some carmakers have developed their own models for next years: Fiat presented the Panda in 2011, Peugeot showed the 208 in 2012, while Renault has just shown the new Clio. It also means that all of them must reduce current production levels and maybe fire more people, but at the end they could do it carefully and after an agreement between them, while the big VW could be finally worrying about real tough competition. What would VW think about this idea?

*FGW data basis