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Posted by: Gail Edmondson on January 25, 2007
If Fiat Chief Executive Sergio Marchionne keeps hitting his targets, the Italian automaker is likely to go down in automotive history as the industry’s most dramatic turnaround. On Jan. 25 Marchionne announced a 21.3% rise in automotive division revenues to $30.8 billion. Fiat Auto earned a operating profit of $378 million — compared with a loss of $365 million last year. It was Fiat Auto’s first profitable year since 2000, and triggered Fiat Group’s first dividend since 2002 — a payout of $359 million.
Equally impressive, Fiat is clawing back market share in Europe, where in 2004 it seemed in a death spiral. Fiat ended the year with a market share of 7.6%, up from 6.5% a year earlier — in a stagnant market. It took share from the once fearsome French automakers, Renault and Peugeot.
So what’s Marchionne’s secret? And why can’t Detroit’s executives replicate the formula?
Yes, getting the products right is vital. But what’s fueling Fiat’s turnaround is more subtle. A big part of Marchionne’s success comes from ditching Fiat’s bad old bureaucracy, smashing its antiquated organization and forging a can-do culture. Above all, he empowered a talented young team, clearing the way for them to fix what ailed Fiat. One of them will take the helm at Fiat Auto this year, while Marchionne steps back to concentrate on Fiat Group. Of course, you have to be able to recognize talent and creative heads in the first place. That’s Marchionne’s skill.
But hey, we knew the 2006 results were coming in on target. The real excitement is next week’s unveiling of the new Fiat Bravo, a compact car that must be successful to keep Fiat’s turnaround on track in 2007. It’s predecessor, the Stilo flopped. And the compact car segment is the most hotly contested in Europe, dominated by the VW Golf. Now we will see what Fiat’s can-do team can really do.
Want the straight scoop on the auto industry? Detroit bureau chief David Welch , Dexter Roberts and Ian Rowley bring daily scoop, keen observations and provocative perspective on the auto business from around the globe. Read their take on such weighty issues as Detroit’s attempt at a comeback, Toyota’s quest for dominance and the search for an efficient car.