Italy’s largest manufacturing company Fiat is faced with growing problems after the economic downturn in 2009. After loosing hundreds of millions of dollars in the last year just in the European market alone, Fiat has been faced with moving its manufacturing to other more affordable parts of the world.
Fiat was originally founded in 1899 by Giovanni Agnelli and has always manufactured its cars in Italy. And even though the company is confronted with hard times, Fiat states, “that it won’t give up on its home market, even as sales drop and European losses are estimated at 700 million euros this year.” The company overall is trying to focus on efficiency and exporting solely in Italy. Fiat has also put a freeze on all future investments for the company, which is also causing controversy because this could lead to more and more job losses in Italy. Fiat’s CEO Marchionne also said that, “he did not see the Italian car market recovering until at least 2014.” This is causing Fiat to postpone the production of future new car models.
Brazilian government has offered the company an incentive package if Fiat were to consider moving some of its manufacturing plants there. The demand for Fiat is much higher in Brazil than in Europe for the moment and the Brazilian government sees several potential economic rewards. But managers at Fiat have several things to consider as well. For the company to stay afloat in the long term Fiat might have to consider moving its manufacturing to places like Brazil where labor is cheaper. Also moving manufacturing to South America it will allow exporting costs to decrease seeing as the automobiles will have to travel less distances. And if Fiat moves to countries that are more sustainable they will begin to focus on targeting a market that can increase the amount of cars produced.
Fiat has already not completed two future investments and has to consider how they will make up for their lost profits. Fiat needs to investing less into the Italian government and economy and focus on their production changes so that they can increase their own revenue. Layoffs are going to continue as long as the company continues to stay in Italy so they are better off sending operations to Brazil and they hopefully expanding the operations in Italy once again in the future when economic times are easier.
http://www.bloomberg.com/news/2012-09-22/marchionne-meets-monti-as-fiat-pushes-talks-on-state-aid.html
http://biz.thestar.com.my/news/story.asp?file=/2012/9/24/business/12070906&sec=business
I had no idea that Fiat was experiencing such a downturn. Recently I have been seeing several different marketing campaigns for Fiat, including a CTA advertisement on the side of an “L” train. This must all be in the hopes that they can rebuild their American market and continue to keep production close to home in Italy. However, due to the state of Italy’s current economy this does not seem a very feasible or realistic option. I agree, that Fiat should take Brazil’s offer and expand there operations for the time being. To continue to bolster job growth, they could have their Italian Fiat experts go to Brazil in order to ensure the products are being made accurately and consistently. Hopefully, production in Brazil will create some profit growth and production will eventually be able to return to Italy.
I have also seen an increase in advertising for Fiats in America, after years of not really seeing them anywhere in the American car market. It is interesting that Fiat has not outsourced their production already if the South American market for their cars is rapidly growing. I agree that they should consider building a manufacturing plant under Brazil’s offer, especially since Brazil is a rapidly growing economy. This may not even cause Fiat to lose as many jobs as they may already be losing continuing to produce solely in Italy.
I cannot believe how many fiat commercials and ads I see everyday. It is hard for such a foreign looking car to make it in the US market. I could see Fiat making it big in a few other countries before it starts to become popular in the US.