The usual deal on a Fiat launch is that the company takes over a hotel or a restaurant. For the Fiat 500 launch Fiat took over Turin, writes Rob Golding. So small was the car and so huge was the party that the occasion appeared to scramble the laws of commercial economics.
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But Sergio Marchionne, the CEO of Fiat Group, explained it to an extent: “The 500 means a lot to this firm because it represents what Fiat is today and what it wants to become.”
Marchionne – just three years into his rescue of the Italian motor industry standard-bearer – is now very impressed with his team of managers who have begun to restore the dignity and credibility of Fiat. He is also very impressed with the new small car that they have designed and built. So are the critics; more in a moment.
Because of that, he also is now very confident in his own growth plan: “We have a four year plan running out to 2010. In 2004 we made a profit of EUR50m. In 2010 we will make EUR5bn.”
That is one extraordinary forecast. But there’s more. Simultaneously, he kicked sand in the face of his rivals: “In that time, we will rise by two places in the rankings of global car makers.” That means the French duet of Renault and Peugeot – both with newly appointed chief executives with as much form in financial turnarounds as Marchionne.
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By GlobalDataI would love to be a fly on the wall at the next executive meeting of Acea, the European carmakers club which Marchionne chairs this year. “So Sergio, you are going to take your scruffy little Italian company past us within three years are you?”
The Fiat 500 which has given rise to all this ebullient self-confidence is good. It’s a good drive – quiet, big-car ride, responsive, sharp-handling; it’s a good revival – as successful as BMW’s modernisation of the Mini.
It has attractive interior design. And it is tiny (3.55 metres long). Panda and Twingo look huge as they come alongside.
But most importantly: “It surpasses Japanese quality standards.”
That is not an independent assessment. It is a direct quote from Marchionne. Fiat is well past the point where it makes empty boasts and pushes substandard cars to a dwindling band of gullible motorists. Enough else from Marchionne’s Fiat has proved true for this to be considered scientific and accurate – though it would be nice to know who measured it and how.
For the financial analysts though, there was an awkward disparity between the tiny car and profit potential. Most makers regard their entry-level cars at a device to get new customers into the brand who can then be up-sold.
Marchionne addressed that by saying that the revival of the 500 and the reminder of the cars’s 50-year heritage was an important part of the rebuilding of the brand. It was all about capturing hearts and changing minds about Fiat and its products. In that role 500 would contribute to profit.
Ask Luca De Meo though, the Fiat brand CEO, and he is more hard-headed. While accepting that small cars in general do little more than spread the overhead cost, he says: “This car is almost out of the category.” Meaning?
“We had to decide whether to make this a cheap small car or the best small car in the world.”
Having taken the latter course (Press acclaim is pouring down the delivery pipe as we speak) he can move prices up. Fiat will price at a premium to the new Ford Ka, which is the next car off this shared platform and comes out of the same Polish factory at Tichy.
Mini did a great job on branding and pushed the average transaction prices 20% above base price through voluntary content additions. There is a huge image campaign coming for 500 that will push the range price category through the top price of EUR13,000.
“We make good contribution on Panda (270,000 built a year compared with 120,000 proposed for 500) and I think that 500 can be more profitable.”
Now there’s another bold boast: a small Fiat with 120,000 copies, a premium price and a positive contribution? That does take a bit of digesting.
Those with an eye for a good party might like these few bare statistics:
Fiat invited 7,000 dealers and opinion formers from all over the world. It took over all the central City squares for displays. It had a concert/exhibition/display on a stage floating in the River Po which with the help of video links to giant screens in the squares was seen by 250,000 people. It featured choreographed dancing fireboats, motorised floating cars, flying 500s swinging from a crane, Marilyn Munroe and a firework display that was beyond awesome.
In a piece of analysis slightly less diligent than is normal, I reckon that party will have cost EUR128 for every 500 sold this year. I do hope those 60,000 buyers will not begrudge us our modest pleasure.
Rob Golding
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