Of all the major automakers, Fiat has undergone the greatest changes since the start of the seemingly unending global recession in 2008. The Italian company has benefited from the strong hand of CEO Sergio Marchionne on the tiller, and while Fiat’s survival has not been without problems, its Italian-Canadian boss has played a blinder.

Central to Fiat’s performance has been the shrewd acquisition of a controlling 59% stake in American automaker Chrysler in 2009. The US market has rebounded reasonably well, while Europe has continued to struggle, with the result that Marchionne has been able to use the profits from Chrysler to counterbalance the losses at Fiat.

Chrysler reported a 21% rise in US sales in 2012 compared with 2011, well ahead of the 4.7% increase in US sales at Ford and 3.7% at market-leader General Motors. Chrysler’s strong performance in its home market has bought Marchionne some valuable time to sort out structural problems in the European operations, principally major overcapacity in Italy – Fiat built fewer cars in Italy last year than Nissan built in the UK.

European market decline

In 2013, European sales continue to fall, and Marchionne concedes that the US auto market cannot fully balance the losses in Europe. ‘There’s no certainty when Europe’s sales crisis will end,’ he told reporters at the Geneva Show. ‘I don't see any glimmer of hope for a European market recovery this year.’ European car sales fell to a 17-year low in 2012. According to the European Automobile Manufacturers’ Association (ACEA), total registrations in the EU in 2012 reached 12.1 million units, down 8.2% from 2011.

The worst hit countries were those suffering from the biggest economic difficulties arising from the broad economic woes of the Eurozone, with Italy suffering a year-on-year fall in registrations of 19.9%, worse than France (-13.9%) and Spain (-13.4%). Marchionne said he saw the Italian car market falling to below its 2012 level of 1.4 million units this year, equivalent to 1979 levels.

Disastrous sales in Italy will impact Fiat’s performance in the fleet sector. Recent data from Unione Nazionale Rappresentanti Autoveicoli Esteri (UNRAE), which represents distributors and dealers in Italy, claims business cars made up 36.22% of the new cars sold in 2012, a total of 510,622. Just under half of this total is accounted for by rental business, representing 17.84% of the total new car market. The business car market fell by 13.8% compared with 2011.

According to data from the Italian Automobile Industry Association, ANFIA, the Fiat/Chrysler Group registered 415,018 cars in the Italian market in 2012, representing a 29.6% market share. This meant Italy accounted for more than half of Fiat/Chrysler’s European Union sales.

Fiat Group’s pan-European sales fell 16.1% in 2012, according to ACEA, to 779,606 from 929,551 in 2011. Of this, Fiat brand sales fell 15.2% to 570,980 (673,401 in 2011), and Alfa-Romeo sales dropped sharply from 125,924 to 86,858, a fall of 31.0%. Chrysler/Lancia sales fared better, falling 9.5% to 92,446 from 102,122 in 2011, while Jeep brand sales bucked the trend, rising 15.6% from 22,211 in 2011 to 25,673 last year.

Analysts began 2013 by forecasting a decline of 3% in the European car market in 2013 after a fall of 8% in 2012. These forecasts may need to be revised after a dismal start to 2013, when sales fell 9.5% in the first two months, and a 5% drop is now being predicted for the year.

Fiat’s European operations are expected to record a loss of €700m this year amid a plunge in car sales, which forced the carmaker to cut its 2014 trading profit forecast by a third to €5.2bn. A return to profitability is not expected until 2016.

Fleet structure

Fiat Group Automobiles offers a multi-brand fleet service to international customers via its Corporate Fleet Solutions (CFS) organisation, which has a consolidated international structure, allowing it to operate as the sole contact for Fiat, Lancia/Chrysler, Alfa Romeo, Fiat Professional, Abarth and Jeep brands.

CFS employs a total of about 100 international key account managers across Europe. These managers provide support to international clients as a single point of contact for all the levels of fleet management, including acquisition, management, and aftersales support.

Finance for fleet customers is provided via FGA Capital, operating in 14 European countries, offering customised financial packages and insurance services for private buyers, small enterprises and large corporations. FGA Capital, established in 2006, is a joint venture between Fiat Group Automobiles and leading French banking group Credit Agricole.

Corporate Fleet Solutions has signed global agreements with major corporations, including operations in the US and Latin America as well as Europe. CFS recently completed a pan-European supply deal for Fiat Professional with Kone Corporation, a Finnish-based global producer of elevators and escalators. The agreement is for the supply of 700 Fiat Fiorino vans in 2013 to Kone subsidiaries in France, Italy, Spain, Portugal, Poland, Czech Republic and Slovakia.

Fiat is also well positioned with fleets that increasingly demand low CO2 cars. According to research organisation JATO Dynamics, Fiat has the lowest average CO2 emissions of any automaker in the European market, of just 119.8g/km across its nine-model range. Fiat puts this down to modern MultiJet diesel and TwinAir petrol engine technology. In the past six years, average CO2 emissions of Fiat’s fleet have fallen by 13% from 137.3g/km in 2006.

Turnaround plan

Marchionne’s turnaround plan includes the introduction of 16 up-market niche vehicles, including a small Jeep SUV, to be built in Europe, further expansion of the Fiat 500 sub-brand, along the lines of BMW’s MINI, an Alfa Romeo SUV, a Mazda-built Alfa sports car and a major expansion of the Maserati range. Fiat wants to grow its sales of Maserati nearly 10-fold to 50,000 in the next three years, and to almost quadruple Alfa Romeo sales to 300,000 cars a year.

Much of this extra volume is likely to be put through Fiat’s troubled Mirafiori factory near Turin. The factory can build up to 300,000 cars per year but recently it has only been running for a few days each month.

Union sources told Reuters last week that the carmaker planned to build Maserati and Alfa Romeo sports utility vehicles at Mirafiori, though Marchionne said he was not yet ready to announce the company's investment programme.

Fiat’s traditional strength in small cars has seen it perform well in the private sales sector but limited its ability to penetrate the fleet sector. Marchionne’s strategy aims to address this by focusing on premium segments.

Marchionne describes the European car market as “bi-polar”, with profitable premium carmakers and loss-making volume brands. To address this, premium brands such as Alfa Romeo, Maserati and Jeep will be promoted, while Fiat will sell a reduced range centred around the Panda and 500 models, including a host of new 500 derivatives.

Production of Fiat-brand cars would be pared back to variants of just three models: its 500 and Panda small cars and the Chrysler-developed Freemont small sport-utility vehicle. There is no news of a replacement for the Punto, currently eight years old and declining in sales, or the Bravo, a stop-gap C-segment hatchback developed largely by MagnaSteyr. These models may not be replaced, as the Fiat 500 is now seen as Fiat’s core B-segment offering, especially as the new 500L gives the range a five-door option.

The plan involves investment of more than €1bn at Fiat’s modern Melfi plant, opened in 1993 to build the original Punto. This is situated near Naples in the Basilicata region, one of the poorest in Italy. The Melfi investment was described by Italian Prime Minister Mario Monti as ‘a rebirth of relations between Fiat and Italy’, following acrimonious exchanges between Fiat and Italian unions. Marchionne had earlier suspended investment in Italy under former Prime Minister Silvio Berlusconi amid concerns about political risk.

The investment will turn Melfi into a multi-model plant with a total production capacity of 1,600 vehicles a day. It will add two new models from 2014, including a small Jeep SUV that will be produced only at Melfi and which will be sold worldwide. The factory will also produce the Fiat 500X, an SUV derivative of the Fiat 500 that is even larger than the new 500L compact MPV. This will share the same platform as the small Jeep.

Fiat Professional

Fiat separated its light commercial vehicles from its cars, under the Fiat Professional brand in 2007. The vans are now sold largely through dedicated Fiat Professional dealers, and are an increasingly important weapon in gaining fleet sales. Fiat sources its two small vans, Fiorino and Doblo, from Tofas, based in Bursa, Turkey. Fiorino is part of the “minicargo” JV with PSA Peugeot Citroën, and it is largely similar to the Peugeot Bipper and Citroën Nemo. A second-generation Doblo was launched in 2010. This vehicle is also available as a small pick-up called the Doblo Work Up.

Larger vans are sourced from the Sevel JV, also with PSA. The large Ducato models are built in Italy, while the mid-range Scudo is assembled at the Sevel Nord plant in Valenciennes, northern France. Fiat has announced plans to exit this JV, and it will be replaced by Toyota in the partnership. The Scudo is being replaced by a long-wheelbase, high-roof Doblo Cargo XL model.

Fiat 500 sub-brand

Fiat 500 is effectively becoming a sub-brand within Fiat. The car has been a massive success in five years, with more than one million units produced between 2007 and the end of 2012. Most 500s are built at Fiat Auto Poland’s Tychy plant, extensively refurbished in 1991 for the Cinquecento model. Production capacity is 200,000 units a year.

The 500 launch followed the successful pattern of the BMW MINI, offering a very stylish retro car to a younger, hipper audience. One problem with the 500 model has been a lack of upgrade path. Around 60% of 500 buyers move on to something bigger, usually outside the Fiat range. So, as with MINI, Fiat is expanding the “Fiat 500” nameplate into a sub-brand with a range of models.

The first of these is the Fiat 500L, a five-door compact MPV. Although it shares its name and many styling cues with the 500, it is a completely different car, built on the GM-Fiat small car platform at the former Zastava factory in Kragujevac, Serbia, which Fiat acquired in July 2008.

Fiat has invested €700m in return for a 67% stake in the former state-owned company, plus an additional €300m of investment from the Serbian government. The original plan to build a small, Smart-sized “Topolino” city car there was shelved in favour of the 500L.

Fiat’s joint venture factory in Serbia, founded in 2008, could produce up to 180,000 500L units this year for export to the US and Europe, which would be close to the plant’s capacity. Last year the former Zastava plant produced about 30,000 500Ls after build started in July. Total capacity at Kragujevac is 186,000 units per year, but how quickly production is ramped up will depend on market conditions, said plant director Nunzio di Bartolo. The 500L will only be built there, and will be exported to more than 100 markets.

As well as the 500X, future Fiat 500 derivatives include the 500 Trekking, a two-wheel-drive crossover type vehicle that uses Fiat's traction+ system, and was unveiled at the Geneva show in March. Electric versions of the 500 have also been launched.

UU market relaunch

The 500 is also built at the Chrysler plant in Toluca, Mexico, for North American markets, and in 2011 Fiat used the 500 to re-enter the US market for the first time since 1984, selling the cars via Chrysler dealers. Toluca-built 500s are also shipped to Brazil and Argentina.

Fiat said it is on track to reach 100,000 sales of the 500 in North America, two years after its launch there. North American chief Tim Kuniskis projected Fiat's total North America sales will hit the 100,000 benchmark in April or May, after selling 26,290 cars in 2011 and 55,600 units last year. ‘The rate of growth is pretty substantial,’ he said. The 500 electric car is being launched in April 2013, followed by the 500L in June.

Toluca production may be only temporary. Fiat could make Tychy the sole production base for the next-generation 500 model, due in 2015. The Polish plant has spare capacity following Marchionne’s decision to move Panda production out of Tychy and back to Italy.

Production of the third-generation Panda started in the last quarter of 2011 at the Pomigliano d'Arco Plant, which had been earmarked for closure, but was spared following an agreement between Italian Prime Minister Mario Monti and Fiat not to close any Fiat factory in Italy.

Chrysler/Lancia

Lancia and Chrysler are now effectively one company. Chrysler cars are sold as Lancias in all European markets apart from the UK, where the Chrysler name has been maintained as Lancia’s poor reputation for rusty cars in the 1980s is still considered a millstone.

Nowadays the Lancia range comprises just one Italian made car, the Delta, which will finish production this year. From 2014, there will be no Italian-built Lancias – apart from the Polish-built, 500-platform Ypsilon, all other Lancias will be made in the US: Thema (Chrysler 300C), Voyager and Flavia.

And while European sales are relatively low at 92,000 units in 2012, global combined Lancia/Chrysler sales topped 400,000 last year.

Alfa Romeo

Sergio Marchionne is adamant that Alfa Romeo will play a major role in rebuilding profitability for Fiat, by expanding its range from the current core models of Mito and Giulietta. Nevertheless, rumours that the brand is for sale refuse to go away.

US publication Ward’s has recently reported that discussions between Fiat and VW Group over the possible sale of Alfa Romeo have surfaced yet again, claiming there have been talks about the transfer of the Alfa Romeo brand to VW Group’s Audi division, as well as a possible transfer of Fiat's Pomigliano plant to Audi.

Fiat and Audi have both denied that any talks have taken place, though VW has stated a desire to own Alfa Romeo. In 2010, VW Group supervisory board chair, Ferdinand Piech, had said VW wanted to acquire Alfa. When Fiat flatly rejected the idea, Piech responded that VW was ready to wait for it.

One sign that Fiat is not ready yet to relinquish Alfa is a new deal with Mazda Motor Corporation for Mazda to produce a new Alfa Romeo Spider roadster at its Hiroshima plant in Japan, starting from 2015. The roadster will be based on the next generation MX-5 and developed for global sale.

‘The agreement foresees for both Mazda and Fiat to develop two differentiated, distinctly styled, iconic and brand-specific roadsters featuring rear-wheel drive,’ Mazda said. ‘The Mazda and Alfa Romeo variants will each be powered by specific proprietary engines unique to each brand.’

Jeep

Jeep is arguably the brightest star in the Fiat-Chrysler galaxy. Last year the SUV brand sold a record 701,626 units worldwide, up 19% on 2011 and on course for a goal of 800,000 units by 2014. New models are planned, including a European-built small Jeep SUV, as well as expansion into new markets such as China and India, which could propel Jeep beyond one million units by the end of the decade.

Potential for growth…

China

Fiat has had difficulties finding a partner in China. It used to produce passenger cars in partnership with Nanjing Auto, but left that loss-making joint venture after Nanjing was merged with SAIC Motor. Then an August 2007 agreement with Chery for a 50:50 joint venture intended to build 175,000 Fiat, Alfa Romeo and Chery cars a year fell through in 2009.

Finally, in 2010 Fiat entered into a 50:50 joint venture with Guangzhou Automobile Group (GAC) to create GAC Fiat Automobiles Co. A new factory has been built in Changsha, and this started production in 2012, initially producing a localised version of the Dodge Dart sold as the Fiat Viaggio. The JV also distributes imported models such as the Fiat 500, Freemont, and Bravo in China.

In February 2013, this JV was expanded to include Chrysler Group, and a new framework agreement to expand the cooperation on passenger car manufacturing and sales in China was signed.

According to the framework agreement, the joint venture between GAC, Fiat and Chrysler Group International will expand its operations to allow the localisation in the coming years of more models from the Fiat portfolio to be introduced in the Chinese market.

The JV will also build Jeep brand SUVs in China for the Chinese market. This would resume Jeep output in China, which dates back to the mid-1980s via a JV with Beijing Automotive (BAIC) but which ended several years ago after Daimler and Chrysler split, with Mercedes-Benz keeping the partnership with BAIC.

Russia

Fiat-Chrysler is extremely weak in Russia, with a very small 0.29% market share. The group sold 7,867 cars of all brands, down 56% on 2011 following the ending of a car-making JV with local automaker Sollers at the end of 2011. Only Jeep performed well in 2012, up 125%, and accounting for 60% of Fiat-Chrysler sales in Russia. If Fiat decides to re-enter manufacturing in Russia, it is likely to be with Jeep SUVs.

India

As with China, Fiat has a patchy record in India, despite a long history in the country. Now Fiat has set a new agenda for the Indian market, focusing on niche and specialist sectors rather than challenging small car market leaders Maruti Suzuki and Hyundai.

Fiat ended a five-year distribution deal with Indian industrial giant Tata in 2012, though it will continue to build engines and cars locally with Tata. However the Punto hatchback and the Punto-based Linea saloon have not caught on in India, and Fiat chief executive, Sergio Marchionne, has admitted that the company had not got the product offering right.

Meanwhile Fiat has set up its own dealer network in India, currently with 57 dealerships, but scheduled to reach 112 by year-end. These will focus on fast-growing areas such as SUVs, including Jeep Cherokee and Wrangler models, as well as sporty Abarth versions of the Fiat 500 and Punto models. In total, Fiat-Chrysler plans to launch nine new or refreshed models in India in the next two years.

Fiat is timing its move well – LMC Automotive forecasts that India’s car market, currently around 2.6 million vehicles, will grow to about 6.9 million in 2017. Fiat is targeting a 1% share of the market in 2013, and is aiming for 5% in the long term.

Mercosur

Outside Europe, Fiat’s most successful ventures are in Mercosur, where it has factories in both Brazil and Argentina. Fiat Automoveis began making automobiles in Brazil in 1976 at its major factory in Betim. A wide range of cars are produced there, many of them still based on the Project 178 Palio/Siena “world car” platform developed in the 1990s.

Fiat is market leader in Brazil, and has been for 11 straight years, taking 23.06% of the market in 2012. If Chrysler, Dodge, Ferrari, Jeep and Maserati are included, market share rises to 23.26%, or 845,337 units, up 11.3% on 2011.

The result in terms of units means that Brazil is Fiat-Chrysler’s second largest market after the US. In 2012 Fiat launched new Siena, a restyled Punto, a minor update of old Siena/Palio Weekend, and upgraded versions of Bravo and Uno, which is still made as an entry-level car.

Argentina has been more problematic as a result of a fluctuating economy, but Fiat’s current manufacturing plant in Cordoba opened in 1996, making Siena and Palio models. Production was suspended in the early 2000s, but resumed in 2008. Fiat built 73,000 cars in Argentina last year, but that was down significantly – 35% – on 2011.