Is Marchionne doing wrong?

Sergio Marchionne has been Fiat Group’s CEO since 2004. By the time he became the Amministratore Delegato, Fiat was facing very tough times due to an internal crisis that began some years before. Sales figures of all group’s brands were struggling with problems in Italy and all over Europe, as they were trying to solve the divorce with GM. Marchionne found a company full of bureaucracy and with several problems. By the end of that year Fiat Auto sold 20.539 million euros and lost 840 million euros*. It was another bad year for the Italians who were suffering the consequences of very bad decisions taken some years before, during the 90’s when the whole group failed with lot of products all over Europe.  No matter the success of the 2 first generations of the Punto, and the arrival of the new Panda, in 2004 the situation was really dramatic and one of main reasons were quality and after-sales problems. The last years of the 90’s were not really good years to remember. Fiat was introducing a lot of models but forgot that good quality was emerging as one of key factors taken into account by consumers. Eventhough they had unique designs, cars like the Fiat Bravo/Brava, and Marea, Lancia Dedra, Kappa, and Thesis, or the Alfa 166, lacked of good quality and they were made with very low cost materials. Besides, the 3 brands were not quite well represented in several countries of Europe, something that affected the quality of after sale service. Those bad decisions in terms of the quality of the product had a big effect on Fiat’s position in Europe explained by the fact that the Italians were Europe’s largest car maker by sales figures in the 80’s and by the end of the 90’s its market share was dropping significantly. Fiat was no longer the leader.

Fiat Bravo/Brava presented in 1995. Though they had a unique design, their quality was below the average of the segment. A flop

Nevertheless, the arrival of Marchionne meant a big change on Fiat’s understanding of making and selling cars. By focusing on the launch of fresh models with better quality and calling off the agreement with General Motors, Fiat experienced a period of recovery and a better position in Italy and abroad. The first product to prove it was the Grande Punto, launched in 2005 as the third generation of the successfull B-Segment model. They offered a new car with great engines and soon the company realized the importance of efficient and low emission engines. In 2006 Fiat had the largest sales increase in Europe with 18%, above VW Group, the French and Americans, in a whole market that grew only 0.7%**. Certainly the new Punto played a key role on this result (its registrations were up 22%). Eventhough the quality was not still a main characteristic of the group’s products (the Alfa 159 launched in 2005 is a good example), consumers appreciated the new products. But Marchionne did not stop, he wanted more and he wanted to impress the market. That is why in July 2007 Fiat presented what can be considered its best product of the last 3 decades, the new Fiat 500. And they certainly hit the market with a unique car and all-new marketing strategies. In 2007 Fiat Auto (Fiat + Alfa + Lancia) sold 1.847.714 vehicles world wide from which almost 800 thousand were delivered in Italy***. One year later they sold the same amount, but in 2009 Fiat Auto sold 2 million cars , up 9%, thanks to a record year in Germany (Government support to car industry) and Brazil. By that year two events took place and changed Fiat history: the begining of international financial crisis and Chrysler bankruptcy.

The presentation of the Fiat 500 in Turin in July 2007. The small car represents the era of Marchionne and is perhaps Fiat’s best product in the last 3 decades.

What was considered as crazy move by most of specialized press, resulted in Marchionne’s best play. As is usual on him, he saw what most of people could not see. He anticipated European automotive crisis and therefore he decided to purchase Chrysler no matter the bad future it had by that time. Fiat needed a partner to expand its business and ensure its future. Marchionne knew this partner was going to be essential for the coming years. And he was right. 3 years later is not Fiat saving Chrysler but the opposite. And of course the ‘miracle’ experienced by Chrysler is the result of very good decisions made by Sergio Marchionne and his team. The recovery of the Pentastar was another goal of the Italo-Canadian manager. In 2009 he saw that Europe was in the way of collapse in terms of car sales, and that’s why he bought Chrysler so Fiat could survive. After that the story is well known by everyone. The Chrysler/Dodge products arrived in Europe as Fiat/Lancias, with very low sales objectives as the conditions of the market were getting really bad. The rebadged Chrysler 300 and Voyager was a really controversial decision but at the end is part of a mid-term strategy to give Lancia some oxygen for the coming years. At the end Lancia and Chrysler will develop their models and adapt them to their markets. If it was or not a good decision does not really matter as these models (Lancia Thema, Voyager and Flavia) are not expected to have brilliant sales figures (original sales forecast for the first year of both, Thema and Voyager, were 10.000 units each, but Jan-May/12 sales figure indicates only 800 cars were sold so far).

This figure shows the evolution of sales of main models of Fiat since 1988. Notice the continous fall of Fiat Punto since 2001, the growth of small Panda and 500, the flop of C-segment with the latest Bravo, and the disparition of D-segment. Source:

But the European automotive crisis is being worse than expected and all problems behind it are daily news. Most of all European markets drops with significant falls in what used to be one of world’s largest markets: Italy, Spain and France. The fact that car registrations fall up to 2 digits every month and the trend does not change, has turned on the alarm of all automotive CEOs. Europe is not anymore the big and healthy market of more than 15 million cars per year. Those years could be considered not only the good past but also the unreal one, as it seems car sales figures were extremely high and contaminated by government helps. Europe will keep buying cars but much less. The problem is that all car makers built their European future based on the best years and therefore they increased their production capacity with more and more plants and employes. Of course, with current conditions it is not feasible to keep the statu-quo. Things must be changed in order to face the coming years. First it came the disparition of Saab and then the big problems of the big of Europe: Fiat closed its factory in Sicily in december/10, and now PSA is fighting with French government to fire 8000 employes and close one of its French plants. The same is happening to Ford and Opel. VW sees how its best sellers Golf and Polo decline their registrations. All these problems are the consequence of a market that does not buy as before because of an economic crisis that affects all.

This figure shows the position got by main models of Fiat Auto since 1988 in Europe. In 1997 the Fiat Punto was Europe’s best selling car but its leadership has fallen and is no more in Europe’s top 10. Good evolution of minicars with Panda and 500. Notice how far is the current Fiat Bravo from the great places gotten by its predecessors in the 90’s. The same situation for D-segment where Alfa has no more representation. The Ypsilon has had a continuos fall and is no more in the top 50. The other Lancias are not popular at all. Source:

In this context Fiat’s position is not the best. It depends a lot of Italian market, one of region’s most affected. Besides, there is the debate about Italian competitiveness and labor conditions. Fiat is having aditional problems with its labor force in Italy and this is making it more exposed to the crisis. They are losing money with Italy as their plants located world wide are more competitive and generate more cash. But again is something well known by everyone. The point is the way Sergio Marchionne wants to get out of the crisis. Certainly his decisions cause always controversy. People may agree or disagree but at the end most of them recognized he is perhaps Fiat’s main ‘asset’. His capacity of work and the way he anticipates the future are without any doubt a great tool for Fiat-Chrysler group. Now, after 8 years managing the company, he must take the hardest decisions ever. And is when more controversy appears. He wants to reduce Fiat’s dependance on Europe by increasing Fiat-Chrysler presence in Asia. He wants to find a partner to become more global. He wants to increase Fiat’s capacity in Brazil. And Europe? in Europe he wants to wait. He believes the worst has not occurred and he prefers to delay the launch of several new models. Why? he believes doing the opposite would mean a suicide with current conditions. It means that a key model such as the old Punto will have to wait for its successor. It means Fiat’s decision to surpass the crisis is by doing and expending less. But is it a right decision?

The Punto is with the Corsa (both share the same platform) the eldest of the segment. French are the latest to arrive with awesome products.

Fortunatelly just before the crisis began, the new generation of Fiat Panda was almost ready. It allowed the best seller to ensure its future with a modern successor. But things do not work like that for the rest of the range and becomes dramatic when taking into account that Marchionne’s decision of delaying new launches includes the successful and vital Punto. Yes, he might not consider the fact that the B-Segment car has been Fiat’s main product for the last 19 years. The same situation applies for the other segments: in the C-Segment the Bravo will have to wait until late 2013 for a successor that will come from China, the Giulietta won’t have the expected Station Wagon version until 2014, while the Delta will be in the catalogue for at least 2 or 3 more years. Alfa will wait till 2014 to see the new Giulia for D-Segment while the MiTo won’t have a 5 door version till the same year. The SUV expected for Alfa Romeo has not even a date of presentation. The only progress to be seen in the horizon is the 500 family that will be enlarged by the arrival of the 500L by September 2012, and then in 2013 the presentation of the 500X (the small SUV). It is my believe that Fiat can delay all future launches of its cars but should not jeopardize the future of the Punto. Marchionne must have very solid reasons to put off the new generation and he constantly says that starting production of the new generation with current market conditions would be flop. And of course car companies as all others exist to earn money. If his financial and market forecasts tell him it is not the right time to launch the new Punto, then he is right. Yes, nowadays Europeans don’t buy cars as before and it seems it will be like this for 2 or 3 more years. But there is something wrong in all this. Or at least is what I think.

20 years ago Fiat was strong in A, B, C and D-Segments. Nowadays it is just popular among mini cars. Slowly it has lost presence in larger segments, as it does not have anymore D-segment models, while in the C-Segment is losing a lot of market share. The next segment to be affected by the lack of new models will be the B one.

Fiat is not VW. It means it does not have the financial strenght to allow itself to mistake. VW can have problems with its gear box in China but its excellent position in the market allows it to answer to this problem in a short time offering the best solution. Fiat-Chrysler does not have the right to do wrong as it has had lot of problems in recent past. And is this particular topic in which I consider Marchionne is repeating the history. Fiat did wrong in the 90’s with quality problems and still suffers the consequences of bad image in the whole continent (Italy included). They realized how important is to do the right things. Now, for the first time, I disagree with Mr. Marchionne and I believe they are making a mistake as big as the one of the 90’s: they abandon current clients and tell them to move to other car makers as Fiat products don’t change. As simple as that. Yes, Fiat is saving money or at least not losing it by investing in the development of new cars. And yes, it does not make sense to invest in new C or D-Segment cars when the position of the company is not really strong in those segments. But the situation changes when talking about small car segments, Fiat’s core business. What is more risky? to invest in the launch of new Punto and the sequent low sales proper of current situation, or to lose the current Punto clients and then have less market share in this important segment? people may be delaying their decision of changing their car, but at the end every month there are almost 1 million Europeans doing so. The market is smaller but it exists, and Fiat should think about it. Or why Peugeot just launched the 208? Or Renault presented the awesome new Clio? they have the same problems of Fiat, but eventhough they continue. At the end the only beneficiary of this decision will be VW and Koreans who will increase even more their market share. If Fiat wants to sell more they must offer more. The 500L is a product that can work but is not enough. The MiTo and Ypsilon are not competitive and do not offer anything new. Dealers can not wait more for new products. European autoshows can not continue being the scenario for lack of new products. Alfa Romeo can not resist anymore with only 2 models. Fiat-Chrysler should act according to how the market evolves. They should forecast not only sales but also the production and future development costs. Just time will demostrate how right is Marchionne’s decision. But time will also prove how difficult will it be for Fiat to regain the lost clients, who will be surely inloved with their VW Polo, Peugeot 208 or Renault Clio.


** Fiat sales boost leads Europe in 2006. Fiat News New Zealand


Mondial de l’Automobile Paris 2012, the news from Fiat-Chrysler

Paris Autoshow is the next important car exhibition show in Europe. It will take place from September 29th till October 14th 2012 and is expected to be a regular autoshow without any espectacular launches due to European economic crisis. However it will be the place for the introduction of new generation of Renault Clio (the most important car in the event) and some other important cars from Germany. As it gathers all major auto press of the world, all car makers should introduce whether  a new car, a revised or new versions of existing models. From Fiat-Chrysler Group there will not be a lot of news. This is because Fiat is delaying all its launches waiting for better times and because the group is now focusing in other important markets with higher potential such as China, Russia, India or even Brazil or USA.

This is the render for Maserati Quattroporte 2013 shown by Italian car magazine, Quattroporte

The most interesting launch of the group will be the new generation of Maserati Quattroporte. It is expected to be larger, more powerful and luxury to gain more market share as the brand wants to reach 60.000 units by the year 2014 from 8.000 units sold last year. According to Quattroruote magazine, it will be lighter, but larger and will be moved by a V8 and V6 engines. Though they say it will be only presented in Detroit 2013 because they Fiat guys will be concentrated in the arrival of Super Ferrari with more than 800 hp. Another release will be the Fiat Panda 4X4, based on the current Panda but higher and better suspension. The mini car is suposed to hit the market as the unique full four wheel drive available with interesting prices. Of course there will be place for the Fiat 500L and maybe they could show the 500XL, but the reality should place it in Geneva 2013. Maybe new versions for the Fiat 500, while the Punto could get more engines. Ferrari, as said before, will show its new super car to replace the Enzo, and is expected to have more than 800 hp. Certainly it will be one of the stars of the event. From the other brands nothing new.

It shows how it looks the new Fiat Panda 4×4 according to

Is a pity brands such as Alfa or Lancia, or even Fiat don’t have anything really new. Paris is a big event where all Europeans brands show their best. It would be the perfect place to present new generation of Fiat Punto, that should not be delayed anymore as it is a core product of the company. Alfa Romeo should have the new Giulia or at least the Giulietta Station Wagon or MiTo 5 doors, but again they will take more time and therefore there will be less sales. Lancia should present a deep restyling of the beauty Delta, which is rapidly loosing market share in Italy. Maserati should not only present the new Quattroporte but also the new E-segment sedan (supposedly called Levante) if they really want to multiple their sales by 10. And Jeep should be thinking of a great successor for its compact Compass. Marchionne could be waiting more time to save some money, but consumers might not be waiting more to change their car. And it works even more when talking of the Punto. Paris 2012 will be the place.

The lack of competition and disgrace of Alfa and Lancia

To describe Alfa/Lancia situation and think of their future is a difficult thing to do, besides becoming a bit boring as is a frequent topic among car specialists. However, the fact that both brands are perhaps facing their worst crisis ever, is a good reason to go deep and find the origins of this bad situation and maybe find a solution. One of the main characteristics of capitalism is competition. In an open market the usual thing is to find several offers competing to get customer’s attention and purchase. It has worked for centuries and has become the rule for modern world. Competition is getting hard as globalization allows companies from every corner in the planet to sell their goods or services globally. It works like this for every sector and, though it may be considered unwanted sometimes, is really important for the health of a company.

Alfa Romeo Giulia Sprint GTA and Lancia Fulvia in late 60’s. Photos by and Straightspeed Blog

Before they were absorbed by Fiat, Alfa Romeo and Lancia had the worst of the wars between them. With a lot of differences, their goal used to beat each others’ in order to get more sales piece of Italian premium segment. Their rivalry was even seen in races while they were always launching new models, most of them extremely popular and still remembered today. The fact that they were always trying to beat each others’ allowed them to survive to several crisis and at the same time become more and more competitive with interesting offers. That is why successful models like the Alfa Giulia, Duetto, or the first generation of Giulietta, or the Lancia Fulvia, Stratos or first generation of Delta were all conceived. They used to work really hard to win the match. Great products, the best quality and awesome designs were the result of this fight. And it was certainly a good thing for them as they were growing up always innovating and becoming better. That’s how competition works: if one wants to survive one needs to work hard, otherwise you are out.

Alfa Romeo 164 and Lancia Thema in late 80’s. One of first models of both brands under Fiat hands. Photos by Octane and

Lancia became part of Fiat in 1969 after the acquisition of Ferrari and Autobianchi. Then in 1987 was the turn for Alfa Romeo. Both brands are now part of Fiat Group and are dealing with a lot of problems to survive. So after decades of hard competition Lancia and Alfa Romeo stopped looking each other as eternal enemies and became brothers of Europe’s largest car maker by that time. Certainly the move by Fiat allowed both brands to survive, but at the same time it created their worst problem: the lack of competition. Without any direct competitor their work became easier in the sense that they did not have to worry so much about what the other one would be doing. Now they were part of the same company and they could share projects and save money. In one hand this allowed Fiat to concentrate its power in Italy with several brands, but in the other one the lack of competition made of these 2 brands to become ‘lazy’. No competition, no worries. No worries, no development. And no development (or at least slowly development) is the main cause of the problem they have now. One would think that there is in fact competition, and a real tough one: BMW, Mercedes and Audi are very strong nowadays. And yes, they are now the rulers of premium segment even in Italy as Alfa and Lancia are not competitive and lack of real premium products. But by the years they were absorbed by Fiat, European markets were not as opened as they are now. There were more restrictions to imports and at the same time more government help to Fiat Group. In this context, they did not really have to worry about premium segment as they had the whole market for them.

Alfa Romeo 146 and Lancia Delta in mid 90’s. Photos by and

The same situation would apply to Fiat brand but with less bad consequences as it has opened its market outside Europe. Nevertheless, Fiat became Italy’s unique car maker without any direct competitor after buying all its Italian competitors. In the 80’s Fiat used to be Europe’s largest car manufacturer thanks to its successful models like the Uno and first generation of Panda, which were not only popular in Italy but everywhere in Europe. Even VW used to take Fiat as a referent of the market to develop its products. Actually the first generation of VW Golf was conceived taking as a reference the Fiat 128. But then without any direct competitors in its native Italy, Fiat had nothing to fear and began to be less strict in quality while its competitors from the north were working harder. At the end it is known the result. The lack of competition had a very bad impact on Fiat’s development. Something that did not happen in Germany, France or even Sweden. In the first country VW had to deal with Ford and Opel, Audi did the same with Mercedes and BMW, while in France Renault was always working to beat Peugeot-Citroen. In Sweden Volvo was working more and more to fight properly with the extinct Saab. Meanwhile those brands who ruled alone in their countries were absorbed by others: Skoda and Seat by VW.

Latest Alfa Romeo Giulietta and Lancia Delta. Photos by and

But inside Fiat Group there is also the opposite case that confirms that the lack of competition is harmful. Ferrari is perhaps Fiat’s most successful brand in terms of recognition and good awareness. Its success can be seen not only in F1 championships but in sales that grow every year. Those good numbers have been the result of hard work always trying to beat its eternal rival, Lamborghini that became part of VW empire some years ago. Both companies continue to compete without contemplation and that is why they offer the best of the best. It all proves that competition is good and necessary, and car makers must be careful about going forward to keep their place and always offer the best. Alfa Romeo and Lancia did not do it like that and now they suffer the consequences, but is time to think of the future and possibilities for them to survive and find a place in the market. Personally I think Alfa Romeo has more potential as it can become the perfect brand for pure Italian fashion mid size sedans and sporty cars just one step before the German premiums. People love Italian style and it’s recognized everywhere, so why not make useful of this and positionate Alfa as the stylish brand of the group? with Lancia is more difficult. It has lost its past of sportiness and has not been able to be known as a real premium brand though the big effort made by Fiat. People just don’t know about it or don’t believe in their luxury ‘wanna be’. For me Fiat must accelerate the integration with Chrysler and become of Lancia the italian chic brand for family cars with some touch of elegance and luxury. Now that both brands work together, they should focus on their future.

Lancia Ypsilon surprises in troubled Greek market

For the second month in a row, the Lancia Ypsilon got very interesting results in Greece. Although this market is facing difficult times because of the deep Greek economic crisis, and therefore car sales figures are extremely low, Lancia has managed to place its B-Segment hatchback within the top 10 during April and in 14th place during May. It is practically the only market after Italy where demand of Ypsilon places it among the best selling cars. In fact in April 2012 the Lancia sold 92 units, 2.1% of the market, the same quantity of Fiat Puntos, and for the first time, above the results of popular VW Polo. One month later the Ypsilon is not in the top 10 anymore but still enjoys of a healthy 14th place with 97 units delivered, 1.8% of market share, 11 units more than Fiat Punto! YTD figures indicate the Ypsilon occupies place #21 with 344 units sold, much much more than the 130 delivered during the whole year 2011. Certainly the Ypsilon has arrived in the worst moment for Greek sales, but it seems people like the good mix of luxury interior and nice optionals in a compact 5 door package. Greek people are a bit snob when buying cars as for most of them having a Mercedes or BMW is the dream of their lifes no matter the economic conditions. Nevertheless the current crisis has shifted their idea of luxury as this premium brands are loosing market share, while small cars continue to increase their presence. Fiat-Chrysler group has been always popular in Greece thanks to small 500, Panda (the most popular among car rentals in all Greek islands), Punto and now the Ypsilon. Greek car market has dropped 41% in Jan-May/12 to 26.902 units and is expected to be the biggest fall among European markets this year. Fiat-Chrysler brands have fallen 39%, below total market’s thanks to great permormance of the Ypsilon: Fiat -46.5%, Alfa Romeo -46%, Lancia +348%, Jeep -72% and Abarth -48%.


Source: Best Selling Cars Blog and Association of Motor Vehicle Importers Representatives

What comes for Lancia/Chrysler

Graphic by

Graphic by

Two brands and two continents. That’s how they work together and will be even closer as future models arrive. At the beginning only Lancia got the mission to adapt Chrysler brand models to its European range of models. But in the coming years they will develop common models exclusively for their targets. Meanwhile the situation of them is becoming really different.

The 2011 Lancia Ypsilon, an instant hit in Italy and Greece but no where else

The 2011 Lancia Ypsilon, an instant hit in Italy and Greece but no where else

Lancia has been always the brand of championship’s success of Italians. They all remember the best years of this historical brand and some of them keep their old cars as a treasure. Unfortunatelly those good years are quite far from today as Lancia is trying to survive in a complex European context. First it was a problem of quality of its products (from early 90’s to mid 00’s) and then came the European crisis that has affected more those small brands without a distinctive image. Anyway the position of Lancia is now very complicated as it depends a lot on the Italian market: about 85% of total sales* come from Italy and it’s a brand with no presence outside Europe. This big concentration of sales in only one country has made of Lancia one of the most threatened brands of Fiat Group. In term of models the situation is less concentrated: the popular Ypsilon (launched in 2011) counts for 62% of its sales (90% of them are sold in Italy though), and then comes the beauty Delta with 18% (81% sold in Italy) and 17% for the Musa (93% of them sold in Italy). And according to recent data it seems the rebadged Lancia Thema (aka Chrysler 300) and Lancia Voyager (aka Chrysler Town & Country) have not gained a good position within their segments (especially the Thema). On the other hand, Lancia has lost its identity and Europeans do not recognize it as a major car brand.

Chrysler 200: 120% of sales growth in Jan-Apr/12 in USA. Photo by

Chrysler 200: 120% of sales growth in Jan-Apr/12 in USA. Photo by

In the other shore of the Atlantic ocean, Chrysler brand is now going through a rebirth after its death in 2009. When things went really bad, its market share was extremely small and its products were identified as low quality ones, Marchionne and his team began a tough work to redefine its position in the market and gain people’s trust. That’s how Chrysler is now one of the few car brands to have 10 months in a row of growth sales although it has not launched any all new model since many years ago. The restyling of 200 and 300 has been enough to get the attention from customers in the US and Canada, while the popular Town & Country minivan continues its success. Its presence is clearly concentrated in North America (Nafta market, 98%) but the name is also known in the UK, Japan and Brazil, and soon in China.

A Lancia render exercise. Graphic by

A Lancia render exercise. Graphic by

After taking into account the current position of both brands, it is clearly urgent to change some things about them. First, Lancia must acelerate its change image campaign in Europe in order to have better market share outside Italy. They have been doing pretty well in the first quarter of 2012, but there is still a long path to go. In terms of models, they should conceive future models as more global ones rather than Italian image. It is true that are really different style and original (especially the Delta) but this kind of design is not the one Europeans are looking for. Besides, the quality perception must be equal to its competitors in order to combat its terrible low quality image. And finally, they should work on repositioning brand’s mission which should be as stated: “to become Europe’s best mid-luxury C and D segment offer” that should complement Fiat’s model range as higher class mid size cars with a ‘unique’ Italian style.

The Chrysler 700C concept to anticipate possible future lines of the next Town & Country. Photo by

The Chrysler 700C concept to anticipate possible future lines of the next Town & Country. Photo by

Chrysler must replace as soon as possible its sedans as they are getting old and then it could keep its sales growth. The 200 and 300 can be working now but the competition is getting difficult as the total market keeps its recovery path. In terms of geographic position certainly the US market will continue to be its main arena, but it can gain some market share in other interesting markets such as China (they love large sedans), Russia (they love luxury cars), and the Middle East (they love big American cars). Therefore the model range should be complemented by larger sedans (E segment) with special versions for extreme luxury. Chrysler should become the best option when thinking of a C, D and E segment mid-luxury sedan in America, and ofcourse think of a great sucesor for the great Town & Country with several body type options.

*According to FGW data basis