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Fiat Case Study

1547 words - 6 pages

FIAT AUTO COMPANY IN CRISIS.A hundred years of history it is a hundred years of ideas, determination and success for Fiat. Fiat, once the largest carmaker in Europe implemented diversification of production and focused on the most promising markets which has characterized its development through its entire one-hundred-year history.In 2002 the business experienced a shakeup, they lost $704 million, but they were confident and believed in Fiat Auto's future. "I want to again emphasize that we believe in Fiat Auto", said Gianni Agnelli. Fiat Group has over promised and under delivered during the last decade.Fiat Auto in particular was suffering from the negative impact of the law rate of growth in the European economy and uncertainty over its development. The market downturn had impacted the company just at the time it was making a major effort to overcome problems that caused its sales decline and poor earnings performance and to become more competitive. Fiat Auto posted an operating loss of $704 million in the first half of 2002 and imposed retirement on 2,900 workers.Fiat's problems begin at home where it dominated with 35 percent share not long ago. Now market share has slipped to 25 percent.Furthermore, sales of Lancias were down by more than 34 percent, while even a rejuvenated Alfa Romeo has seen sales slide downhill. Another problem was including poor plant utilization. Fiat warranty costs also were 50 percent higher than competitors and likely to exceed $941 million a year. Additionally, the company also had poor margins in Italy and Europe from attempting to maintain market share. Capacity could have been reduced further by cutting back production lines rather than closing more plants while they were looking to reduce defects.Another area that needed to be addressed is Fiat's weak and unprofitable sales mix including sales to vehicle rental companies, demonstrators and self-registrations made largely to inflate sales figures. Also pricing might have been another key problem. Overpricing their products brought them in loosing customers. "Everyone from taxi drivers to students are snapping up to Japanese, French, and German cars. They cost too much for what they offer." ( article).Planning investments in products and the sales network will lead the company to a stronger position in various segments and, at the same time, greater and more profitable penetration in various markets.Reshaping the mission, the structure and the size of Fiat Group could have been another solution for getting new ideas and being more creative. Maybe was the time for a company restore, new and more qualified managements, more focused on automotive sector?The importance of Fiat and the Angelli influence to the economic and social development of Italy cannot be stressed upon enough. Agnelli carried on running the huge business like a family concern, leveraging on the industrial might of his group. As we know the company has a strong intervention from the Agnelli...

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