Category Archives: Europe

Fiat SpA to become Fiat, Inc. with U.S. move?

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A brief comment on Bloomberg News triggered an article in the Detroit News saying that Fiat might move its corporate headquarters to the U.S. following completion of the merger with Chrysler Group.

The stories cite the usual anonymous sources saying Fiat is attracted by the U.S. market financial advantages and noting Chrysler is currently the component bringing home the majority of the bacon.

Pardon us if we don’t get excited: there are two insiders who have repeatedly said that the old Lingotto factory in Turin might not be the home base of Italy’s largest private employer forever. Or even for very much longer.

One of these is Sergio Marchionne, Fiat’s CEO; the other is John Elkann, Agnelli family scion and chairman of the board.

For at least the past three years, Marchionne has been saying Fiat could move and has mentioned both The Hague and the United States as possible destinations. When Marchionne first mentioned that the company might leave Italy, then-Prime Minister Silvio Berlusconi took time off from his scandals long enough to summon Marchionne to Rome for a Saturday dressing-down. The talk subsided somewhat once pro-business Mario Monti replaced Berlusconi, but the state of flux that seems to have replaced that which previously passed for an Italian government has Marchionne looking westward again.

To Marchionne’s credit, he has repeatedly offered to keep Fiat in Italy. He has even transferred production from a very efficient plant in Poland to a plant in Italy to secure Italian jobs. Most recently, he said he would divert some production from the NAFTA region, where some Chrysler plants are running at or near full capacity, to Italy if the government would work with Fiat on the cost of exports. Most of the major labor unions have adopted new contracts but the Italian government seems to believe Fiat will stay the course merely because it has done so for 114 years and all this talk of relocating is political posturing to get financial concessions from a cash-strapped government.

John Elkann is normally more diplomatic than Marchionne, who has a penchant for blunt, if well-mannered, speaking. However, he has made no secret of his determination to put the success of the business ahead of the 114-year history of Fiat in Turin. In 2011, at the Meeting in Rimini, an annual cultural event, Elkann told reporters, “Fiat will continue to make cars; you have to see if Italy wants to make cars and if there are conditions for making cars like Fiat wants to do.”

Unfortunately, Italian politics have, if anything, gotten worse. The results of the elections earlier this year have so far failed to produce a prime minister who can put together a coalition to run the government. A lot of hopes are riding on Enrico Letta who was appointed by Italian President Giorgio Naplitano to build a government and get the country back on track.

Speaking of the turmoil, Marchionne was quoted by Italian newspaper Corriere della Sera when he said, “The certainty of running a country is essential for any industrial reality. I hope they hurry to restore credibility to Italy. Beyond the crisis, Italy is in a very difficult situation: without a prime minister and with the departure of Giorgio Napolitano, whose work in the seven past years inspires my enormous respect, there are no references.”

The signs of a potential, if not a pending move, are there. In April of 2012, Chrysler leased space in the old Dime Bank building in Detroit and had the structure renamed “Chrysler House.” The company has just two floors at this time, but there’s little doubt room could be found for Fiat’s corporate staff.

When Fiat Industrial and CNH complete their merger in the third quarter of this year, the new company will be based in the Netherlands. Marchionne, who is chairman of Fiat Industrial, hopes to have both U.S. and Italian listings for the company. Some analysts believe this could be a template for the structure of the merged Fiat automotive group and Chrysler. However, all the signs recently would indicate Marchionne and Elkann would be perfectly happy with just the New York listing and a Detroit address, especially if the European vehicle market doesn’t show signs of turning a corner.

No one is saying Fiat will close up shop and leave Italy entirely; the dislocation and financial impact of the loss of so many jobs could cripple the Italian economy. In addition, Fiat has already invested hundreds of millions into upgrading Italian plants and maintains that it plans to invest even more. However, even the loss of the headquarters would mean loss of significant tax revenues and as well as a blow to Italian pride.

Prime Minister Letta would do well to recall John Elkann’s comments at Rimini. Fiat will continue to make cars; it’s up to the Italian government whether or not they will be made in Italy.

Ford to close Belgian plant, restructure European operations

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This morning, Ford Motor Company said it plans to restructure its Europe manufacturing operations as it seeks to address changing market conditions that have left the automaker with a glut of capacity at a time new vehicle sales are at a 20-year low.

The plan includes the closure of its plant in Genk Belgium by the end of 2014 and the elimination of the 4,300 jobs there, subject to negotiations with representatives of the employees.

The Genk plant currently builds the Ford Mondeo, S-Max and Ford Galaxy minivan. The 6.7 million square-foot plant opened in 1964. Ford says it would shift production of the Genk lines to its plant in Valencia, Spain. The C-MAX and Grand C-MAX compact built at Valencia would go to Saarlouis, Germany.

“The proposed restructuring of our European manufacturing operations is a fundamental part of our plan to strengthen Ford’s business in Europe and to return to profitable growth,” said Stephen Odell, chairman and CEO, Ford of Europe.

“We understand the impact this potential action would have on our work force in Genk, their families, our suppliers and the local communities. We fully recognize and accept our social responsibilities in this difficult situation and, if the restructuring plan is confirmed, we will ensure that we put in place measures and support to lessen the impact for all employees affected,” Odell said.

Ford had telegraphed its punch by calling a meeting of employee representatives without disclosing the subject of the meeting. Workers leaving the plant after their shifts were certain the meeting was to announce the plan to close the plant.

Ford said it will provide details of its plans for Europe during an analyst call on Thursday, October 25.

Marchionne, Winterkorn: “We’ve been friends for years”

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The appointed hour came, the adversaries met face-to-face – and nothing happened. After all the tough talk, Italian financial newspaper Il Sole 24 Oro reports that Fiat CEO Sergio Marchionne and Volkswagen AG CEO Martin Winterkorn emerged from this mornings European Automobile Manufacturer’s Association (ACEA) meeting all smiles and shaking hands.

“We’ve been friends for years,” said Winterkorn.

Marchionne remains ACEA president and both Fiat and VW remain members. The various automakers will pursue their individual strategies for surviving the European slump.

In a separate report, Daimler AG CEO Dieter Zetsche told Bloomberg News that the meeting actually focused on achieving mandated CO2 reductions, trade and other matters.

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Fiat, VW fight as Europe crumbles

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The Paris Auto Show opens to the media on Thursday, but among all the shiny new cars and beautiful, smiling models and well-dressed, smiling VIPs, there will probably be at least one face that isn’t all smiles.

Sergio Marchionne wears many hats, but two are particularly uncomfortable at the moment: CEO of Fiat SpA and president of ACEA, the European Automobile Manufacturers Association.

At the moment, Fiat is bleeding sales and market share as its home market continues to contract in an economy that could most gently be called “down.” For the first eight months of 2012, Italy’s leading automaker and largest private employer has posted the worst year-over-year sales record of any of the major car companies and Marchionne doesn’t see things improving until at least 2015.

“We need to rethink the business model to which we are accustomed.” Sergio Marchionne told a group in Turin. “We have to realize that given the current demand for and predictions of the coming years, Italy and Europe can not be the end markets for us. Their capacity has become too small. We can and must think of the automotive industry in Italy with a different logic, orient it in a different way and equip it to become an important center of production for export outside of Europe.”

“In our case,” said Marchionne, “this means above all exporting to the United States, as well as the rest of the world. This applies not only to Fiat but for all companies wishing to pursue this strategy. It is the only way to maintain a strong industrial base in our country. A base which, as history has shown, is a guarantee of employment, skills and economic stability.”

Marchionne recently traveled to Rome in answer to a summons from Italian Prime Minister Mario Monti. During a five-hour meeting, Marchionne presented his plans for Fiat and said that he needed the government to make exports more feasible so that Fiat could put idled Italian factories to work producing Chrysler and Jeep vehicles for the U.S. and other markets.

Even other Italian businessmen are upset with Marchionne’s handling of the crisis, including the suspension of the investment of billions of euros in Italian production that was promised if the Italian labor unions would accept new contracts with more stringent conditions and hints from Marchionne and Fiat chairman John Elkann that Fiat might relocate to another country.

Diego Della Valle, CEO of Italian leathergoods company Tod’s, accused Marchionne of being the real problem. Della Valle was quoted in the Italian press as saying “(T)he crisis exists for those that have nothing to sell. These improvised Fiat [people] want to tell us that it’s no longer convenient to make cars in Italy and tell serious entrepreneurs like us that innovation is no longer possible during a crisis.”

Marchionne responded by saying that what Della Valle considers an investment wouldn’t cover the cost of developing a new fender.

Italian newspaper Corriera della Sera reported comments from Elkann: “What we have suffered in recent weeks, in Italy, is not acceptable. We can not ignore the harsh conditions of the European context: we do not hide problems, we face them and seek solutions. We have heard commentators, analysts, experts in areas they do not really know, politicians looking for easy targets, people talking about it, and they do not tell the truth. It’s time to really speak the truth, without hiding the problems but saying plainly how things are.”

Capping everything off is the ongoing war with Volkswagen, which Marchionne accused of starting a bloodbath in the European market by instigating price wars that exacerbate the economic woes of other manufacturers as well ramping up production while other companies are dealing with excess capacity. Volkswagen shot back with a demand that Marchionne resign as ACEA president as he was unfit to serve.

On the realities of the European market, Fiat’s Numero Uno is unequivocal: “The European car market is a disaster. Anyone working in the automotive industry in Europe today is experiencing varying degrees of unhappiness. Everyone is suffering from the pains of hell in his own way. ”

“It (the market) slipped off a cliff,” Marchionne continued, “one that does not seem to hit bottom. The latest forecasts indicate that this year the demand for cars in Europe will not go more than 12.5 million units, the second lowest level in twenty years. And the outlook is far from rosy.”

Ford, General Motors, PSA Peugeot and Renault all need to close factories and reduce headcount. Fiat needs to do the same if it can’t make its export plans work. Unlike labor laws the U.S., European laws make such reductions difficult. Earlier this year, Marchionne, as president of the ACEA, tried to put together a coalition of manufacturers to persuade the various governments that cuts were vital to survival. Volkswagen, which is hiring thousands of workers around the world and ramping up production, BMW and Daimler AG had the benefit of a relatively strong German economy and wouldn’t join in the effort.

While it has a relatively small market share in North American, Volkswagen is actually one of the world’s top three automakers. In Europe, it’s the proverbial 800-pound gorilla with both the capacity and the wealth to reshape the market.

For the first eight months of this year, Volkswagen AG has claimed a 25.0% share of all light vehicle registrations in Europe. PSA Peugeot, which is the runner-up to VWAG in Europe, has an 11.9% share, less than half that of Volkswagen. By comparison, the gaps in the U.S. are much smaller: General Motors has an 18.1% share, followed by Ford with a 15.6% piece of the pie.

The imbalance was even worse in August, when Volkswagen’s take was nearly a point of share higher than the combined shares of the next three automakers, PSA Peugeot, Renault and General Motors of Europe.


NEW PASSENGER CAR REGISTRATIONS BY MANUFACTURER
AUGUST
Manufacturer 2012 Share 2011 Share Change
VW Group 204,034 28.2% 200,809 25.4% 1.6%
PSA Group 81,562 11.3% 93,006 11.8% -12.3%
Renault Group 61,749 8.5% 70,940 9.0% -13.0%
GM Group 53,586 7.4% 65,143 8.3% -17.7%
Ford 43,401 6.0% 60,861 7.7% -28.7%
Fiat Group 37,687 5.2% 45,816 5.8% -17.7%
BMW Group 42,894 5.9% 48,987 6.2% -12.4%
Daimler AG 39,464 5.5% 39,592 5.0% -0.3%
Toyota Group 32,214 4.5% 34,105 4.3% -5.5%
Nissan 22,668 3.1% 23,802 3.0% -4.8%
Hyundai 26,499 3.7% 27,402 3.5% -3.3%
Kia 20,830 2.9% 18,553 2.4% 12.3%
Volvo Car Group 10,100 1.4% 11,866 1.5% -14.9%
Suzuki 9,849 1.4% 10,635 1.3% -7.4%
Honda 8,567 1.2% 7,219 0.9% 18.7%
Mazda 7,367 1.0% 8,091 1.0% -8.9%
Jaguar/Land Rover Group 4,052 0.6% 2,725 0.3% 48.7%
Mitsubishi 5,022 0.7% 7,352 0.9% -31.7%
Other (est.) 10,938 1.5% 12,554 1.6% -12.9%
Total 722,483 789,458 -8.5%
YEAR-TO-DATE
Manufacturer 2012 Share 2011 Share Change
VW Group 2,144,093 25.0% 2,133,084 23.2% 0.5%
PSA Group 1,025,240 11.9% 1,183,299 12.9% -13.4%
Renault Group 728,764 8.5% 868,351 9.4% -16.1%
GM Group 701,912 8.2% 795,275 8.6% -11.7%
Ford 644,997 7.5% 732,807 8.0% -12.0%
Fiat Group 557,090 6.5% 668,170 7.3% -16.6%
BMW Group 518,856 6.0% 532,978 5.8% -2.6%
Daimler AG 438,490 5.1% 446,299 4.8% -1.7%
Toyota Group 368,082 4.3% 369,162 4.0% -0.3%
Nissan 295,054 3.4% 306,035 3.3% -3.6%
Hyundai 291,276 3.4% 263,366 2.9% 10.6%
Kia 222,629 2.6% 180,381 2.0% 23.4%
Volvo Car Group 151,567 1.8% 169,611 1.8% -10.6%
Suzuki 106,174 1.2% 119,417 1.3% -11.1%
Honda 92,216 1.1% 97,583 1.1% -5.5%
Mazda 86,899 1.0% 96,713 1.1% -10.1%
Jaguar/Land Rover Group 79,396 0.9% 57,946 0.6% 37.0%
Mitsubishi 54,592 0.6% 81,772 0.9% -33.2%
Other (est.) 84,641 1.0% 100,251 1.1% -15.6%
Total 8,591,968 9,202,499 -6.6%
Data Source: ACEA (European Automobile Manufacturers Association)

Then there’s the money: Ford is looking at a billion-dollar loss on its European operations this year; GM could lose as much as $1.3 billion on its Opel and Vauxhall brands and Marchionne has said Fiat will likely lose about $900 million. Volkswagen, on the other hand, predicts 2012 profits in the neighborhood of $14.6 billion, though the company has said it doesn’t expect profits to grow as they have in recent years.

All in all, it is a tough balancing act, even for an executive as talented as Marchionne, and his straightforward style might work against him. Martin Winterkorn, Volkswagen’s equally talented CEO, needs to be won over, for the benefit of all manufacturers operating in Europe. Winterkorn, on the other hand, needs to be able to preserve Volkswagen’s momentum as the German automaker pursues its goal of becoming the world’s largest car company.

Speaking of Fiat, which he has already resurrected once, Marchionne confessed, “In the last eight and a half years I have constantly sought to involve a partner in our activities in Italy. I was not successful, I declare my complete failure. There is no one who wants to take on one of the Italian burdens. And let me be clear on one point: the problem is not the workers, but the system.”

Now all Marchionne has to do is fix the system.

Carmakers embark on Hydrogen Road Tour

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September 13 marks an extraordinary milestone in the history of fuel cell vehicles (FCV). Mercedes-Benz, Honda, Hyundai and Toyota will team up for the European Hydrogen Road Tour 2012, a special, one-month, nine-city European tour to show that hydrogen-powered FCVs are not technologies of the future, but are ready for today.

A total of seven fuel-cell cars will participate in the tour, showcasing each automaker’s hydrogen fuel cell system.

Starting in Hamburg, Germany tomorrow, the FCVs will visit Hannover, Bolzano in northern Italy, Paris, Cardiff, Wales and Bristol, Swindon and London, England. The tour will finish in Copenhagen. The tour will be supported by local organizations in each city with H2 Logic Denmark providing mobile refuelling stations in some stopover cities.

The tour offers the public an opportunity to experience fuel cell technology. This year’s tour marks the first chance for people in several of the stopover cities to actually drive a FCV.

The goal of the tour is to raise awareness of FCVs among politicians, industry leaders, the press and the public and demonstrate that fuel-cell technology exists today and the only thing holding it back is the need to improve the hydrogen distribution infrastructure.

The European Hydrogen Road Tour 2012 is part of the “H2moves Scandinavia” project, the first European Lighthouse Project for hydrogen funded by the European Fuel Cells and Hydrogen Joint Undertaking program established by the European Commission and European industry stakeholders.

The experience that has beeen gained from operating 19 FCVs in Oslo and Copenhagen shows that the technology is reliable now even in harsh Scandinavian winters.

Michel Gardel, Vice-President Communications for Toyota Motor Europe commented: “Toyota has been active in fuel cell technology for the last 20 years and we are working to commercialise our next-generation fuel cell car by 2015. The European Hydrogen Road Tour is a great opportunity for our company and partners to demonstrate the readiness of the technology to European consumers.”

Dr. Christian Mohrdieck, Daimler AG’s Director of fuel cell drive development points out the importance of this technology: ”On our way to zero-emission mobility fuel cell electric vehicles – with their great range while at the same time short refueling times – will play a central role for the future. However, the success of this technology depends crucially on certain conditions being in place, such as the availability of a nationwide hydrogen infrastructure.”

Thomas Brachmann, Automobile Engineering & Research, Honda R&D Europe GmbH remarked that “Honda believes fuel cell electric vehicles are the ultimate mobility solution, providing a practical, clean and near silent answer to transport requirements. The European Hydrogen Road Tour offers a great opportunity to give the public, the media and government officials a chance to experience this zero emission technology for themselves.”

Allan Rushforth, Senior Vice President and COO of Hyundai Motor Europe describes their reasons for joining the tour: “Hyundai is proud to be playing an integral role in the European Hydrogen Road Tour 2012. The Hyundai ix35 FCV clearly demonstrates not only our commitment to producing hydrogen fuel cell electric vehicles, but also the benefits of FCV. As the availability and performance of this technology improves, we can look forward to FCVs providing sustainable mobility to future generations while dramatically reducing climate change.”