Fiat accompli

Apart from manufacturing cars, Fiat also owns companies that produce trucks, car parts and farm equipment all over the world. Right now, the company is facing its gravest crisis in its 104-year-old history.

Most of the problems lie with flagship Fiat Auto, which posted an operating loss of Euro 1.34 billion last year and Euro 334 million in the first quarter of this year, as decades of underinvestment, inefficient car-making and Italian government coddling have caught up with it. Not to mention, increased and often, better competition in the form of Volkswagen, Ford and the various Japanese automobile companies.

While its World Car platform did look promising during the first few years of incorporation, gains from the exercise haven8217;t been quite up to the manufacturer8217;s expectations.

The roadblocks

Post the Uno fracas, the manufacturer8217;s comeback effort with the Palio hit a roadblock with the launch of the Tata Indica. Both the Palio and the Indica were designed by the same firm I.DE.A and looked exceedingly similar. The company8217;s first car 8212; the Siena 8212; came at a time when there were not too many mid-sizers around, but overpricing and shoddy service back-up stalled sales.

The Palio8217;s entry, while it did shore up the firm8217;s performance, happened too late in a market that had market savvy firms like Hyundai and VFM that is, value for money offerings like the Indica from Tatas. Even though the September 2001 launch of the Palio helped bring down the company8217;s huge losses by 65 per cent in 2002 from a Rs 1,200 crore loss the previous year, amidst the justified jubilation, there was also an element of something really important left undone.

According to Fiat dealers, the lack of right products increased their losses as well as that of the company8217;s. The falling sales of the Palio coincided with the relaunch of the Siena as the 8216;New Siena8217;, a three-box variant of the Palio.

This, of course, didn8217;t help at all as regards the old Siena stocks, the dealers were saddled with, which in turn prevented them from picking up the Palios. 8220;A lots of dealers were dissatisfied with the way the company handled the old-Siena-to-New-Siena move. Despite a discount of a lakh, the customers were reluctant to buy the old Siena,8221; says a dealer.

The famous grouse

Fiat8217;s products, according to most auto analysts, are reliable and perform well enough. However, the bane of the manufacturer8217;s shaky outing in India has been its service network. Right from the Uno to the Palio, the manufacturer has been unable to provide service back-up to consumers. While steps have been taken by various Fiat India CEOs, the basic malaise has still been left unattended. Says Dr Suresh Kamat, a Fiat Uno owner for the last four years, 8220;My car is still as good as new after five years, but the quality of service leaves a lot to be desired. The entire ownership experience has soured due to the company8217;s lackadaisical service back-up.8221;

Another Fiat owner, a finance professional is more or less of the same opinion 8212; about the cars being good performers, but is least impressed with the service provided by the company8217;s dealers.

If lack of a dedicated service network has been Fiat8217;s bugbear, the costs of spare parts for its cars are relatively expensive, contributing to the feeling of resentment among its customers. Fiat India officials have constantly sought to replace non-performing dealers with new ones and also talk about a pronounced emphasis on training and after sales service, but none of these have managed to alter public perception.

While it does look like a case of putting on a brave face, most of Fiat8217;s tried and tested dealers do not think that the Indian arm could get the chop. A Mumbai-based dealer said, 8220;We8217;ve been receiving circulars from the company updating us on the situation, and the commercial director himself has assured us of continued support. Fiat just can8217;t give away like that. We strongly believe that the rumours about a possible closure of the Indian plant are totally baseless.8221; The dealer also added that sales of Palio diesels were moving along briskly. Another dealer said that there was no reason to worry at the moment. There is a constant supply of spare parts, and the situation is not as bad as it is made out to be.

Uncertain future

Should Fiat India8217;s Kurla facility be among the 12 plants that will face closure, we8217;re then looking at a finito scenario. Very much like what happened to PAL Peugeot8217;s Kalyan plant and Daewoo8217;s Surajpur operations see box.

While there is the possibility of General Motors GM picking the facility up8212;the US auto giant has an alliance with Fiat and Suzuki, and holds a 20 per cent stake in the Italian company, the chances of that happening are slim. Daewoo8217;s Surajpur plant is still awaiting a buyer.

Even assuming that Fiat India escapes the block and continues operations in India, to change public perception will be a very difficult proposition. As an auto analyst had once said, Fiat makes some great cars, but it doesn8217;t know how to sell them.