Paul Horrell 07 November 2012

Paul Horrell: The Inside Man on Fiat

Paul has a warning for industrialists: ignore your core business at your peril

Paul Horrell Fiat column

One day in early September 2005 I went to Italy to drive the brand-new Renault Clio Mk3 for Top Gear, and the next morning I hopped onto a local flight to another part of Italy to grab first dibs in the driving seat of the Fiat Grande Punto. Here were two of Europe's main players launching their new superminis in mano-a-mano competition. Europe made the best small cars in the world, and Renault and Fiat were pretty well top dogs for heritage and desirability.

This week, seven years and a month later, I again jumped on a plane to Italy for the launch of a fresh Clio. And the next morning I again took another local flight across Italy. But, destroying the pleasing symmetry, it was to test the Mk7 Golf.

Of the new Punto, there is no sign. There won't be until 2014 or later. Fiat has decided that in these cash-strapped times, making a new small car for Europe would be investment wasted. Fiat has decided to put the money into new-model ventures in China and Latin America instead, and into the 500L mini MPV which will go to the US as well as Europe.

Why has a new Punto been put in the 'too hard' category? Because they can't cut corners. Those of us who buy superminis in Europe are the fussiest in the world. Yet from the seller's side, price competition is bloodier and more cut-throat here than anywhere. Vauxhall, Ford, Fiat, Peugeot-Citroen, and Renault area all losing money on small cars in Europe. Competition from the Japanese, building their Jazzes and Jukes in Britain and Yarises in France, has intensified. The Koreans have appeared from nowhere to apply uncomfortable heat, manufacturing in Turkey and India as well as at home. From above Audi has arrived with the A1, and Benz will be here with a new Smart Forfour. In better economic days, it might be possible for all concerned to sell enough cars to keep their heads above water. But these are the worst of days.

So, to take a cynical and short-term view, there's sense in Fiat leaving the Punto on life's hard shoulder, the forlorn rhythm of its hazard lights gradually dimming and slowing. But to take a longer term view, I'd argue that it's close to reckless. Fiat's boss Sergio Marchionne is a brilliant manager and finance man, a spreadsheet jockey of dazzling competence. But he's not a car man and doesn't connect with ordinary car buyers. To him it's perfectly reasonable that Fiat walks away from its loyal customers because it finds it inconvenient to provide for them. And he presumably expects that when times are better and he swans back in with a new Punto, they'll gratefully return.

But they surely won't. There's a whole generation of Italians whose father drove a Fiat 127, then an Uno then a first-generation Punto which he still uses to creak down the cobbled streets to the Piazza in his little town, where he parks on the pavement and has his coffee with his equally ancient mates. This same generation had a couple of Puntos too, then the facelifted Punto Evo, then a Grande Punto and now a facelifted one of those. But they're running out of patience. If they've got richer and snobbier their next small car will be German. If they retain that age-old pragmatic Italian attitude to basic transport, they'll go Korean. Right now Marchionne can't be bothered with the Punto generation and has given them two fingers. When in two or three years' time launches a new car and asks them to come back, they'll likely elect to return the compliment.

Seven years ago, Fiat was at the top of your mind when you thought about a supermini. Soon it'll be an afterthought. And without a big-selling car in that vital category, how can Fiat possibly be a major player? 

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Since publishing this column in the December 2012 issue of Top Gear magazine, we received this reply from Richard Gadeselli, VP International Corporate Communications at Fiat

I have just read Paul Horrell’s latest column in the December issue of Top Gear. He is mistaken.

We have been clear on the fact that the current European crisis is so deep that making credible forecasts is nigh impossible. Hence our decision in 2009 to continue investing in North America, Latin America and Asia Pacific in view of the more stable market conditions present there. We have intentionally delayed industrialization investment in Europe for certain projects until we can see a return to a more rational car market.  And, as I’m sure you will agree, this has been the right course of action.

It is incorrect of him to believe that the Punto will not be replaced. We have never said this. What we have always stated is that the European B-segment is crowded, with little scope for profitability (as he correctly states) and therefore we need to avoid producing a now-typical ‘me-too’ B segment hatchback. Therefore, Fiat will have a presence in the B-segment – but not in the way you envisage.

Best wishes,

Richard Gadeselli.

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