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Fiat Group (F:MI) produced 2,679,451 cars, Fiat was the eighth largest automaker worldwide in 2007, producing production volume of 2.7 million cars. The company earned a trading profit of €3.2 billion on revenue of €59 billion that year.[1][2] To improve this slim operating margin, the company is cutting the variety of car models it will produce - from 19 different car platforms in 2006, to only 6 by 2012.[3] Before beginning its restructuring in 2006, Fiat's production capacities were notoriously outdated, with little cost-saving component sharing between the company's various brands. The company is still in the process of fixing this.[4] Fiat has aggressively embraced the use of a virtual engineering process that uses exclusively computer models, which are much cheaper than physical prototypes, for all aspects except the very final stages of development.[5] Using these new technologies, the company has subsequently revamped its tired fleet with largely smaller and more original designs. Overall these reductions in bureaucracy and renewed focus on original design and engineering have returned Fiat to profitability, allowing the company to pay off its outstanding debt.[6] Fiat group was unprofitable for five consecutive years between 2001 and 2005, with total losses exceeding $4 billion.[7] Despite this, Fiat's future success depends on its ability to successfully penetrate emerging markets while at the same time selling the public on its unconventional designs to gain market share in developed markets. This could present difficulties as Fiat's strategy would be split in two, as the desires of new consumers in emerging markets will likely be different from car dynamics and features necessary to attract buyers in Europe and North America to Fiat brands. These challenges are only compounded by fifteen year lows in new car sales during 2008.
[edit] Company OverviewFiat has industrial and financial operations in over 50 countries worldwide, and sells its products in more than 190 national markets.[8]   As of the end of 2007, Fiat operated 178 factories and 114 research facilities with a workforce of slightly more than 185,000.[11] While the company does much of its production in house, like any large conglomerate, it has complex relations with over 10,000 independent suppliers worldwide.[12]  [edit] Business Segments
[edit] Failed Joint Venture with GMIn 2000 Fiat entered a joint-venture agreement with General Motors (GM) to cooperate on the development of car platforms, engines, and purchasing contracts, with the hope of reducing costs through economies of scale.[24] As part of this contract, GM agreed to a stipulation that obligated it to purchase Fiat if the italian firm ran into financial difficulties.[25] This joint venture failed as Fiat lost its independence to develop innovative products and cost savings were less than expected; leading Fiat to several years of deep loses.[26] Fiat then brought in a new CEO, Sergio Marchionne, to lead what has since become a successful turnaround. Marchionne's plan restored Fiat's operational independence by allowing GM to escape it's buyout commitment for $2 billion cash.[27] At the same time, Fiat began a major restructuring that quickly cut costs and dismantled the company's large and inefficient bureaucracy.[28] This reduction of administrative complexity included building an independent design center where car design could be accomplished with less interference from executives.[29] [edit] Trends and Forces[edit] Fiat and Emerging MarketsLike all major automakers, Fiat's future growth lies in emerging economies, especially the BRIC countries. In 2007 Fiat was the largest car producer in Brazil.[30] In India, Fiat has entered into several agreements with Tata Motors (TTM), through which the two companies have developed new cars cooperatively and also established Fiat's Indian dealership network under Tata's management.[31] The company has recently signed an accord with China's Chery automobile, under which Chery will produce 175,000 Fiat designed cars beginning in 2009.[32] It should be noted that Fiat's production capacity of around 500,000 vehicles in South America far out weighs its annual production capacity in the potentially more lucrative markets, such as India: 100,000 vehicles, Russia: 110,000, or China: 175,000.[33] [edit] Environmental Concerns and Fuel Prices Inspire Fuel EconomyAs Fiat has never had a large exposure to North America, its cars have been in line with the smaller and more fuel efficient trends in Europe. This advantage has been enhanced by the company's development of two important new technologies in 2007 that allow for considerably improved fuel economy for internal combustion engines. The first, "Multijet II," allows for fuel to be injected in cylinder-heads in a more efficient manner that reduces NoX emissions, without reducing performance or increasing engine noise.[34] The company will also produce a two-cylinder automotive production engine, which because of smaller displacement can significantly reduce fuel consumption, while at the same time provide sufficient power (80 horsepower) and reduced noise and vibration to be practical for daily use.[35] Last, the company has joined a number of joint ventures with other major automakers to develop more complex new technologies such as hybrid drives and hydrogen fuel cells. [edit] Design PhilosophyA major part of Fiat's restructuring has been the wholehearted embrace of innovative and non-traditional car designs.[36] The president of the automotive division claimed: "We are trying to transform Fiat from a popular brand to a pop brand."[37] This philosophy is evident from the sharp angles and irregular shapes that distinguish the Fiat, Lancia, and Alfa-Romeo brands from other major automakers, who generally produce cars of very similar shapes. Fiat has so far been successful in stimulating sales largely by bucking these cookie-cutter designs, but the long-term sustainability of this strategy is questionable. In the eighties and early nineties, Fiat had a reputation for marketing its car designs as innovative, when many consumers found them simply ugly.[38] Similarly, BMW made an attempt toward more Avant-Garde design under the direction of Chris Bangle.[39] The company has since reverted to more traditional aesthetics as it alienated part of its consumer base.[40] If done correctly aggressive styling can be an effective stimulator of interest, but it also is riskier as the above examples show . As Fiat embraces more aggressive styling across all its models, the company is especially vulnerable to consumer tastes becoming more traditional. [edit] Competition67% of Fiat's sales are in the European Union. Although the company sells its construction and agricultural equipment and commercial vehicles in North America, the only cars it markets there are Ferrari and Maserati. Management hopes to return Alfa Romeo to American showrooms by 2009, and even take advantage of the weak dollar to manufacture Alfa's there by 2011 or 2012.[41] Because of the diversity of its products, Fiat competes with a variety of automotive and other industrial firms. Its European competitors include both the premium brands Bayerische Motoren Werke AG (BMW) and DAIMLERCHRYSLER AG (DAI), along with european mainstream producers such as Volkswagen (VLKAY), PSA Peugeot Citroen (EPA:UG), and Renault. Similarly, while not active in North America, the company competes internationally with General Motors (GM) and Ford Motor Company (F), and also internationally with Honda Motor Company (HMC) and Toyota Motor (TM).  
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