Latest Financial Results: Fiat European Strategy Questioned
|   Saturday, October 27, 2012
The Italian manufacturer Fiat, having been seeking solutions to balance out the struggle between Italian workers, worried about their jobs, and investors, worried about profits, is beginning to have doubts about where it is going.

Along with other major automakers, Fiat, was not spared by the ongoing economic slump. Besides them, Ford said it would shut plants in Belgium and Great Britain, leading to the loss of thousands of jobs, the French from PSA Peugeot Citroen accepted state help and even the seemingly invulnerable Germans from Volkswagen announced a significant quarterly profit drop.


After October 30, when the Italian automaker is preparing to present results for the 3rd quarter, its set targets will be updated to reflect the slower European sales.

The net profit for the year is seen standing around 1.29 billion euro (1.67 billion dollars), sitting at the lower end of previous estimates of 1.2 billion euro and 1.5 billion.

The innovative Japanese technologies along with new rapid developments are factors affecting Fiat's strategies. Also, strong competition from the German market with its key players like BMW, Volkswagen, Mercedes come with strong marketing strategies, in turn affecting Fiat's own strategies.

Considering the recent alliance with the Americans from Chrysler, Fiat now has direct access to the US market. Fiat is particularly well known for making eco friendly and fuel efficient small cars, a category of cars that Chrysler doesn't have. The joint venture gives the Italians the opportunity to carve out their own place in the US market, as well as gain access to US suppliers; not only for their own cars but also for others made under the Fiat name.

Fiat really needs to implement a cost leadership strategy by putting on sale reasonable and low cost cars that are fuel efficient, which right now is something that the customers need in the present hostile financial environment. Proceeding thusly, it can mark a significant global presence. Of course, this will happen once expansion to the emerging markets of Asia, China and North America (not exactly emerging) has been completed.

"If Marchionne is not unfreezing the investments for future car launches, we need to know what he is doing," said an analyst for Autonews, rating Fiat as a "sell." "We'd also like to know what other solutions he is looking at to deal with overcapacity."

"We feel there is substantially more downside risk on Fiat's European operations than upside risk on its North American business," wrote Societe Generale, also labeling Fiat with a "sell."

A rumor, denied, of course, by the company, said that the CEO, Sergio Marchionne, wants to build Chrysler and Jeep models in 5 Italian plants.
Fiat has made a plan for economic recovery stretching from 2010 to 2014. Therfore, the company has to invest 16 billion euro in Italy, to get new car models.
The automaker is likely to maintain its goal for total 2013 investments standing at 7.5 billion euro. Halfway through that time frame things are not looking as good as it was hoped. Its overproduction issues have yet to be resolved, investments in Italy have lagged behind and workers are particularly thrilled.

"Fiat has delayed its investments in Italy for two years," said Flavia Aiello, representative of the workers at Fiat's Mirafiori factory in Turin. "We did our share. The company now has to make the move."

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