Bill Pugliano
In the space of about a week, Sergio Marchionne is turning Fiat SpA into a global auto maker, expanding into two key markets of the future with major investments in Russia and China and boosting the auto maker's already strong presence in South America.
Fiat's Italian-Canadian chief executive officer outlined the strategy in Toronto, where he arrived Friday morning after announcing a €2.4-billion ($3.4-billion) joint venture on Thursday with Russian auto maker Sollers, based 1,000 kilometres east of Moscow.
In the next few days, Mr. Marchionne told reporters, Fiat is expected to sign a deal for a joint venture with Guangzhou Automobile Group Co. Ltd. in China.
The two deals will give Italy-based Fiat a major presence in two of the BRIC countries. Those are Russia, a market that was devastated by the meltdown, but which Fiat expects to recover to generate sales of about 4 million vehicles annually by 2016; and China, one of the hottest markets in the world and one that was barely touched by the global automotive slump.
"One of the things you can do in a period like this is either throw yourself into a state of utter despair or start planning for a future that looks half-decent," Mr. Marchionne said before a Toronto luncheon held to raise money for the Abruzzo earthquake relief fund. He is a native of that part of Italy.
"These are all things that are effectively intended to globalize the operation," he said.
Other potential mergers are on hold for now, he said, while Fiat digests Chrysler Group LLC and works on the other elements of its global expansion.
He travelled to Toronto after a whirlwind week that began with a trip to Mexico, where he unveiled a $550-million (U.S.) investment to build the Fiat 500. Then it was off to Turin, Italy, and Fiat's headquarters on Wednesday, before he headed to Russia on Thursday and the Toronto luncheon Friday.
The Fiat 500 will be the first Fiat model to appear in North America as part of the company's deal to take a 20-per-cent stake in Chrysler after the third-largest Detroit auto maker emerged from Chapter 11 bankruptcy protection. The Chrysler plant in Toluca, Mexico, that will make the Fiat 500 will ship about half its estimated 100,000 annual output to South America.
The Russian element of Fiat's global strategy is risky, said Warren Browne, who headed GM's operations in Russia and is now an industry consultant.
Current production capacity in Russia is 3.1 million vehicles annually and the country imports another 500,000 vehicles, Mr. Browne noted, compared with demand of 1.65 million. Output of 500,000 from Fiat would raise the total for sale to 4.1 million, while he is forecasting demand of just 3 million by 2016.
Mr. Marchionne said Fiat's analysis is based on vehicle ownership increasing.
On a separate issue, he said he has some sympathy for Toyota Motor Corp. and the crisis it is experiencing with recalls of more than 8 million vehicles worldwide.
"But we are competitors," he said.
"I really do not wish for Chrysler or Fiat to go through an event of this calibre."