European Sales Decrease
Fiat SpA confirmed that it plans to manufacture vehicles in Italian factories that are to be sold outside of Europe. These vehicles will be made particularly for the USA as a result of a five-year decrease in sales within the European market. It has not been announced which models will be made in Italy for the American market, but they are likely to be Chryslers and Jeeps, as Fiat runs the USA’s Chrysler Group LLC. Never before has the Italian plant produced vehicles for the USA; they have always been manufactured at the Chrysler plant in Mexico.
Sergio Marchionne, the chief executive at Fiat, said that the automaker could no longer see Italy and Europe as the end of the market. He added that they must refocus itself and become a production centre for vehicles all over the world, predominantly the USA.
Inactive Italian Factories
Marchionne met with Prime Minister Mario Monti and concluded that its inactive factories in Italy should change focus and gear towards exports outside of Europe. This came about due to the drop in demand as a result of the financial crisis throughout the continent. In the USA, the market is rising and Chrysler plants are thriving. Fiat cannot do it all on its own, added Marchionne, which is why he asked authorities in Italy and Europe to aid manufacturers so that they can flourish in the global market. He believes that this could be done by making it easier to get aid from the European Central Bank as well as by changing free trade agreements so that they do not support the automotive industry in South Korea and Japan.
Fiat Owns Most of Chrysler
Fiat has owned 61.8 per cent of the USA’s Chrysler since 2009, when the government, following bankruptcy restructured it. Since then, Chrysler has made up for more than two-thirds of the profits. Still, the company predicts it will lose £560 million this year, and Marchionne is under great pressure trying to keep factories operating when car sales have depleted at their fastest rate in 40 years. The company has halted plans to invest £12.8 million into its factories in Italy until it is sure that the market will bounce back. Fiat has also stopped Italian production lines; giving workers reduced pay while waiting for production to start up again. The plants are currently running at only half their capacity, and unions have said that they cannot see how Marchionne could possibly make cars for the USA at this level. A union source at a government held meeting last week said that Fiat’s patience could lead to it completely losing its market share.
800 Million Investment - On Hold
Their flagship Mirafiori plant in Turin is causing the most concern for the union, as the £800 million investment that was promised has also been put on hold. This was to be used to manufacture a small SUV, set to be launched in 2013, as well as a Jeep SUV to be launched in 2014. The Italian government is thinking about giving some incentives to help it with its exports and to ensure that there are no job losses at its plants. However, Rome is already having problems with budget cuts and there is little breathing space left.