GOLDING’S TAKE: Fiat raises the bar
Not everyone has a press or analysts' conference at the third quarter of the financial year. You have to if you are deep in the doo-dah like Ford and GM. And you might be tempted to if you have got something to show off about. Fiat did.
Sergio Marchionne, CEO at Fiat makes it all sound breathtakingly simple: "The car business has learned how to generate profit," he said within seconds of starting his presentation of the results. Note that it was not a claim that he had "taught" the car business how to rid itself of its reckless ways; the business had learned its way out of trouble.
Mind you, as was revealed later on in the broadcast Q&A after the presentation, that is only true in parts. The car business still does not know how to make a profit in Europe. It's Brazil that works double hard and saves the organisation and as a result is getting more than its share of future investment.
Over US$1bn is going into Latin America in the three years to 2008 in an attempt to overtake Ford in the region. That means there must be an objective to lift market share from 12% to 15% in the annual market of 4m vehicles. GM and VW are the two on the front row of the grid.
Marchionne reckons that there will be a change to automotive profitability in Europe in the fourth quarter and that has been achieved by an inordinate amount of time, people and resources being applied to manufacturing.
He reckons that in the steady state, there are now far too many people in there, whose job it has been simply to get organisation, method and quality up to scratch. The process of introducing quality has been "outside the traditional targets of Fiat." Those people will be coming out again soon, he says and there is quite a saving to be had on headcount.
The drive is for volume to sustain the profit improvement. The organisation has 17 consecutive quarters of loss before turning the corner at the end of last year. The target is for 2m vehicles produced by the end of this year and given that the 1.5m threshold was passed at the end of quarter three, Fiat is "on track". Grande Punto has been the backbone of that. In January comes the Bravo whose job it is to give Focus, Golf and Astra a good kicking. Marchionne wants 120,000 sales a year out of Bravo.
Some believe that there is high risk in this sort of speed of development from a company famous for its ragged quality. Bravo took only 18 months from design freeze to commercial launch at the end of January next year. Marchionne knows it: "This is the biggest market segment and we have to enter it with care. Our experience in this segment has been uneven."
What he won't have enjoyed about the Q&A was that the broadcast failed while the emphasis was on quality. First his voice started breaking up, then there was a break in transmission then the whole thing went off the air for good. In the old days, a gaffe like that in a Fiat press facility would have been in the intro. These days the emphasis is on recovery which appears a genuine possibility, and it only just rates a mention at the end…