Type: News
In a brief summary the Fiat CEO said the following in his speech:
Huge overcapacity
Only the finance industry has been more affected by the recession than the automotive industry. The automotive industry in the western world was characterized, even prior to the crisis, by ineffectivity and "underperformance". When things were at their best values were not destroyed, but the mentality was exactly like in Bobby McFarrin´s song "don´t worry — be happy". At the moment it´s "all worried — no one happy". Globally we have a production capacity of 94 million cars and the demand is 30 million less. One third of the capacity is in Europe. It is obvious that there is competition and price pressing with such low capacity utilization.
Unconditional national pride perilous
The automotive industry seems to be the last bastion — possibly the airline companies — for national pride. The automotive industry does not deserve to be taken care of in the way that many countries do. If the automotive industry receives aid then change must be demanded. In the USA the government has intervened with colossal bailouts — but changes have also been demanded. Cutbacks, development and tough conditions for repayment. In Europe the governments have not demanded changes. In the USA everyone is going in the same direction — unions, companies and the government. In the USA the automotive industry came face to face with reality. In Europe the industry has received aid without giving anything in return.
Automotive industry must be open
The automotive industry must be much more open towards the public. Fuel consumption, the environment and safety are important values for the public — for us all — and the automotive industry must understand and respect this. Fiat is the only manufacturer in Europe, at present, with the lowest CO2 emissions in its model range.
Chrysler won´t become Fiat
Fiat acquired 20% of Chrysler after Chrysler´s reconstruction in 2009. Fiat´s technological know-how will help Chrysler, but it is in no way the intention that Chrysler will become Fiat or the other way round. Chrysler will make its type of cars—larger cars — and Fiat will not be producing a Fiat that competes with Chrysler. In combination, Chrysler/Fiat companies complement each other. We will not come to Chrysler and tell them what they should do, on the contrary, we will listen first and then we will share our experience. Achieving success in a merger depends largely on leadership and it is important that national pride does not obscure judgment. Through its ownership in Chrysler, Fiat has a larger critical mass as a basis for development.
Only being big doesn´t help
Building large companies by acquiring companies to become bigger -- "bigger to look better" — is risky. Large organizations lead to bureaucracy and uncertainty that damage businesses. Chrysler and Daimler failed due, among other things, to these reasons. A merger should lead to something that is better for car buyers — the customers, and then it can be successful — "Bigger to be better".
Change should take place now
The automotive industry must change now but there is a risk that changes will not take place. As a result of government intervention the industry will overwinter until the macro economic conditions become better and then they will carry on a while more according to the motto "Don´t worry — be happy" until the next crisis. At Fiat everyone is required to do their best all the time and not blame others or circumstances.
Sergio Marchionne´s responses to questions:
· That he believes in the USA and Chrysler. He is not a masochist and has gone into Chrysler because he sees advantages. At Chrysler the effort is refocused on quality, service and customer service — something the automotive industry seems to have forgotten.
· That he believes that the Spyker solution will be difficult for Saab. It is difficult for small niche companies to handle a "stand alone" situation, but he apologizes if he has been too harsh in his judgment since he is not aware of all the facts.
· That truck and passenger car operations are totally different. Passenger cars have a lot of similarities to the fashion industry.
· That the passenger car industry is enormously capital demanding. In Fiat the passenger car portion takes 80% of capital but delivers only 20% of profits.
· That China is building up its car industry and will have substantial scale advantages. If we think that our industry should be in China then we must accept that they come to our markets.
· Swedish national pride is not a good reason to support the automotive industry. Look at the airline companies around the world to see what happens if protected.
· Geely is a respected company and can be a good owner of Volvo Car Corporation.
· Saab does not fit into Fiat at present. When Fiat was involved in the discussions regarding Opel/Vauxhall, Saab was included in the plans, but it did not turn out that way. At that time Fiat was thinking in terms of a restructuring of the automotive industry in Europe including capacity cuts.
· In order to succeed in the automotive industry there must be creativity and freedom in combination with discipline of steel. In Europe a new 1.21 engine is needed for the PSA Group. VW and Fiat. The most reasonable would be to collaborate on development and manufacturing — but no, everyone thinks that they can make the best version, which is why it becomes three times more expensive than necessary. The automotive industry burns money.
Panel debate
In the subsequent panel debate it was agreed that Europe does not need more manufacturing capacity — but instead fewer. Leif Östling disclosed that he estimates that in current fiscal value Saab has lost SEK 30 billion. Half of the loss occurred during its time under GM and the rest during the period prior to that. Christer Karlsson said that Fiat and Sergio Marchionne have broken the established pattern in the automotive world and have produced a product plan that is cohesive and that gives benefits of scale.
Sergi Marchionne said that we must utilize all conceivable technologies in order to reduce CO2 emissions and that there is no one solution but rather a combination must be found. He said that there are too many hawks around the table in the automotive world that all know best, each and every one, that CEOs in automotive industry are not characterized by humility. The car world is full of people who have old preconceived ideas and practices — new blood is needed.
Sergio Marchionne concluded the debate by saying that we must support change; but that he is worried that Europe has not understood that yet.
My comments
Sergio Marchionne was straightforward and explicit, but not arrogant. He is a special person in many ways and was, as usual, dressed in a sweater among all the suits. His profile is more that of a literature professor than the CEO of a large industry group, and he does not give way to statistics but keeps the debate on a higher and more general level. He is obviously different and very refreshing to listen to.
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