Alfa Romeo is enjoying sales success, Ferrari F1 team is winning champions after champions, Lancia is improving steadily... all sounds good news to Italian auto industry. However, the sky over Italy is dark, just because of one reason - the FIAT empire is collapsing!

2 years ago, FIAT sold 20% stakes to General Motors to get a stronger partnership and cost sharing. This is the first sign that the Italian giant is no longer as powerful as it used to be. In the mid-80s, 3 out of 4 cars sold in Italy had the 4-stripe trademark on the grille. Today, FIAT’s share of domestic market drops to around 1/3, and worldwide sales is declining by 15% in the first quarter this year. During the period, it made a loss of close to US$300 million and debt is accumulated to $4 billion.

Aging chairman Giovanni Agnelli, the hero of Italian industry, used to insist the jewel of the crown, crown of the country, Ferrari, keep firmly in Italian’s hands. In fact, when he accepted the plan that sold Fiat Auto’s shares to GM, he split Ferrari from Fiat Auto (which consist of Fiat, Lancia and Alfa) and reorganized it under the control of Fiat SpA, keeping Ferrari (hence Maserati as well) away from the American. However, the situation now is so poor that Agnelli has to agree with the plan that float Ferrari on stock market. FIAT just need the one-time cash to reduce its debt.

Whether Ferrari will be shifted to foreigners’ hands is unknown. We hope not.

However, FIAT’s problems are unlikely to be solved so easy. The main problem still lies in products. Punto, once the dominating force of FIAT’s fortune, is facing strong competitions from many new superminis launched last and this year. It is still some years from replacement but is already showing its age. In fact, a couple of months ago FIAT stopped its production lines at Melfi plant for a few weeks in order to clear the stock of Punto. 

Stilo is even worse. Just launched a few months ago with high hope, FIAT is already experiencing one of its biggest sales disappointment in years. It proves that when a Fiat loses Latin taste it becomes nothing. 

There are many more deep-rooted problems of its lineup, such as the reluctance of launching a mass production Scenic-style MPV (the spaceframe Multipla is a small-scale production), the delay of the Panda / Seciento replacement, the lack of a big family car... all these are unlikely to be solved soon, especially the company is now cutting budget thus will delay future programs.

As you can see, Fiat’s management made countless of mistakes in product planning. Just cutting cost and slimming production will never solve the problems. What it needs is some sensible products just like what Nissan is introducing, or simply another Carlos Ghosn-style saviour. How about Ferrari’s Di Montezemolo?

Mark Wan