Fiat is a worry. Sergio Marchionne, the fifth chief executive in five years, has decided that he has to grip the many-headed monster of the distribution network in order to turn the lights back on at Fiat Auto.
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Anyone who has known the Fiat dealer network fully understands why it earns 20% of the average earned by all the other brands. That’s because it’s terrible. The reason that it’s terrible is because it sells Fiats and for very many years Fiat has sent them cars of chaotic quality in spasmodic quantities and with little feel for customer care. Even in its home market Fiat is now a discount brand. So the good dealers go off and sell something else and the dealers who can’t get hired by anyone else sell Fiats.
Marchionne is right on the button when he says that he has to “upgrade our promotional skills and the perennial and continuing problem of the lack of quality throughout our dealerships.” He has made a start by spending €190 million on dealer and distributor channels and he has appointed a team of 40 people who will decide “the level of service delivery we are at” and how to make it better. One of the strong themes so far is that the variety of brands (Fiat, Alfa, and in some places Lancia) creates ineffectiveness in the dealer message.
Well sure. We all know well what sort of a rats’ nest it has been for VW/Audi, for Peugeot/Citroen, for Mercedes/smart, for Jaguar/Land-Rover – and many others – to scramble and unscramble the cohabiting brands. But it takes years to grapple with national dealer networks, not months. Many are unwilling to co-operate with a crusader because they have seen so many men on white chargers from head office before. Many cannot afford to co-operate with the demand for white marble showroom floors. Many would rather just go off and sell something else that creates less aggravation. Fiat has no control relative to the control it has over its own affairs.
Hats off to Marchionne for trying. But there is not going to be a result in the lifetime of Fiat Auto unless everything else is right first.
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By GlobalDataYesterday’s results showed some comfort. Compared with the second quarter of last year, Fiat Auto losses are down to €88 million from €238 million and auto revenues are up in line with inflation (thanks mainly to currency and richer product mix.)
But we are not exactly talking glowing with health yet. Group net debt in the manufacturing businesses is still €9 billion.
Later in the year we get another sensible but risky move. New Punto Grande comes out and it isn’t a Punto at all. Far from being Fiesta size, it’s nearly a Focus. It’s sensible to recognise that there is no money in small cars but then Fiat’s heritage is built on… small cars. Little wonder that they have decided to keep the old Punto running in parallel for a while – just in case.
Marchionne reports that he has inspected the leadership of the company now and given it his approval. Manufacturing is in good shape, he says (not before delaying the Alfa 159 to get the quality right). The other big thing that is wrong, other than the ability to sell product, is the number of people employed by the business. “We will continue to lay off white collar workers because the current structure is excessive.”
So as a warm-up bout before dealing with the slippery issue of the worldwide dealer network he gets the Italian government and the unions to deal with. Lucky he has a reputation as a tough turnaround guy.
Rob Golding
