Fiat explained their strategy of creating flexible, strategic alliances, with the best available partners, during the investor presentation at Lingotto today. News included the confirmation that joint production with Tata Motors will get underway next year with both the Grande Punto and Linea, as well as engines and transmissions, included in the plans, while the project with Tata to build a 1-ton pick-up in Argentina was also confirmed.  This new pick-up will also be sold by Fiat in Europe. At the same time, the Grande Punto and Linea are heading for China to be built in a joint venture with Nanjing Auto. 

The new alliances now being forged by Fiat Auto are driving forward international growth which is being achieved by gaining access to markets (including Turkey, Russia, India, China, Argentina and Iran) and access to synergies (technology, products, sharing know-how, sourcing  and manufacturing). 

Autos & LCV – Rationale for Alliances

Burgeoning industrial alliances are helping Fiat Auto to strengthen its position and/or enter new segments or technologies. Examples of this include the new Fiat Sedici, jointly developed with Suzuki and manufactured in Hungary; and the forthcoming Fiat ‘Minicargo’ which is jointly being developed with PSA and Tofaş, with production earmarked for Turkey. The presentation also confirmed that a new 1-ton Tata Motors pick-up will be produced at the Fiat plant at Cordoba in Argentina and sold under both the Fiat and Tata brand names. Away from automobiles, Blue&Me was another example of a strategic partnership which was cited, this time between Fiat and Microsoft, to offer innovative automotive telematics systems. 

The raft of recent alliances also allows Fiat to capitalise on their internal know-how: granting licenses to develop the Fiat brand in new markets (e.g. Severstal Auto in Russia); licensing technology (e.g. 2.0 JTDm Euro 5 engines to Suzuki); joint product development (e.g. the new Ford sub-B segment car which is now being spun off the new Fiat 500 platform) to share R&D and capital expenditure on new projects.

It also now offers access markets where Fiat Auto has a limited presence or faces significant entry barriers. Recent successes in this area include Russia, where Fiat has teamed up with Severstal Auto for local CKD assembly of Fiat branded cars and LCV; and India, where a partnership with Tata Motors has enabled the marketing and distribution of Fiat cars, sharing of dealer network and assistance/spare parts sale. At the same time, in both of these instances, Fiat retains control over brand positioning and key technologies. 

Fiat is also in the process of developing a network of alliances on a global basis where there is a strong local market potential, together with the possibility to export to surrounding markets and the opportunity to locally source components and systems for both local and export needs. Additionally, these alliances provide the possibility to fully leverage the expertise of local partners, matching production with local resources and widening the offer of services (e.g. engineering and financial services). This is being carried out with strong local partners (such as Tata and Severstal), and done by optimising investments through full exploitation of flexible platforms and fully deploying cross-regional projects by balancing needs for standardisation with local market requirements. 

Global partners

Severstal Auto (Russia)

Local CKD assembly of Fiat Albea and Doblò models (from 2007), the new Fiat Linea C-segment saloon, and the outgoing Ducato van from the end of 2007. Target volume is 120,000 units in 2010. 

Ford
 

New products will come to market in 2007-08 (the Fiat 500 and next-generation Ford Ka), both of which are based on the existing Panda platform.
 

Projected annual volume of around 240,000 units, divided evenly between Fiat and Ford. Fiat’s expenditures in R&D/capital expenditure are reduced 40 percent as opposed to carrying out the project by itself.

PSA and Tofaş

Joint development and production of a small LCV for the European market (codename ‘Minicargo’). Production to take place at the Tofaş plant in Bursa, Turkey. The 350 million euro investment for R&D and tooling has been totally paid for by Tofaş. About 160,000 units annual output is being targeted (one third to Fiat & Tofaş).  Commercial launch is due in 2008.

Nanjing Automotive (China)

Target volume 300,000 units a year from 2010.  Strengthening the joint venture portfolio through a new two-step plan is envisioned.  The Doblò, Grande Punto and Linea (2007-09) will all be added to the assembly mix.  Additional new models to follow for further volume increase.  Significant investments in dealer development will take place at the same time. 

Suzuki

Production under license of 1.3 JTD Multijet and new 2.0 JTD Multijet Euro 5 engines. 1.3 JTD Multijet: start of production in 2007 at Suzuki plant in India for local market and export (initial volumes more than 100,000 units).  2.0 JTD Multijet: supply of engines before start of production at Suzuki plants, production in Asia expected in 2010 (initial volumes of about 100,000 units). 

Chery Automobiles

A Memorandum of Understanding has been signed for the supply to Fiat Auto of Chery’s 1.6 and 1.8 petrol engines for application in Fiat cars to be produced in China and outside China. Annual supply will exceed 100,000 units. Further opportunity of co-operation with Chery are presently under evaluation, including new brand introduction and car production. 

Tata Motors

In India, a new industrial joint venture will start in 2007 to produce in the same facility (Ranjangaon) Fiat- and Tata-branded cars and powertrains for Indian and overseas markets. Amongst others, these will include the Grande Punto, Linea and Tata models (expected overall yearly output: 130,000 at steady rate). A small diesel engine (250,000+ units per annum) and matching transmission will also be built.  Distribution: sharing of dealer network and assistance and spare parts sale (45 point of sales set up in 2006; will be expanded to 200 by 2009). The second geographical area for Fiat and Tata joint operations will be Argentina. A new 1-ton pick-up vehicle complementing the current product portfolio is to be sold in various Latin American and overseas markets under the Fiat and Tata brand names; Fiat versions will also be sold in Europe.  The commercial launch is set for H2 of 2008. It will use the existing Fiat Auto production facility in Cordoba. Full year overall target is around 25,000 units. Also at Cordoba will be specific production of transmissions for PSA, to exploit available production capacity at Fiat plant. Tata and Iveco Latin America will set up a joint venture to distribute in Brazil Iveco-Tata branded vehicles, through an expanded Iveco dealer network. 

The future of commercial alliances

About 2.3 billion euros overall investments in R&D and capital expenditure to be jointly funded with JV partners over the period 2006-10 (~90 percent without requiring financial support from Fiat); expected equity income for Fiat in 2010 of 120-140 million euros; enhancing co-operation with strong local partners in emerging countries, supporting their growth with Fiat’s technology and know-how; continuous scouting for further platform/product sharing to widen portfolio and improve synergies; and further implementation of a balanced global industrial footprint to sustain volume growth target in Europe and emerging countries.