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Demel must identify Fiat's problems, offer solutions in Geneva

Turin. When Herbert Demel calls his heads of department and their staff to hall "C60" at Fiat Auto's Turin headquarters, he lets others do the talking at first.

Sometimes Demel allows his staff to speak for such a long time that his subordinates assume he is dreaming.

Then suddenly the new Fiat boss throws one or two questions into the room and puts his finger on specific problems. That's new at Fiat.

At the Geneva auto show Demel will have to speak openly about those problems -- and he will also have to present his rescue plan for the troubled Italian automaker.

"If Demel doesn't make significant changes he will not only make history as Fiat's first non-Italian CEO but also as its last -- and as the one with the shortest time in office," an insider in the Italian auto industry forecasts.

"Fiat has had the same problems for decades and never manages to get a grip on them. Some things have even gotten worse," said Friedrich Karl Bonten, spokesman of the European Fiat and Lancia dealer association.

He said Fiat still faces quality issues, logistics problems and overcapacity.

An internal study by Fiat showed that only 71 percent of all cars the company produced were faultless.

On top of that faulty cars often cannot be repaired for weeks, as the necessary parts are not available.

German dealers complain that Fiat is flooding the market with cars to keep the automaker's seven plants running at full capacity.

This leads to price reductions of up to 35 percent, damaging dealers' profits and the brand's image, complain dealers.

Increasing numbers of Fiat dealers are going bust in Germany. Last year 35 dealers went bankrupt compared with eight in 1999.

Fiat executives hope a product offensive will revive the automaker's fortunes.

They are putting their hopes on what Fiat does best -- making small cars.

The Panda, Idea and Lancia Ypsilon have already been successfully introduced. Several new versions and the new Punto will follow.

A new micro car called the "City-Joker" will be launched in 2007.

The Trepieno concept gives hints of the new micro car. The concept will be exhibited at the Geneva auto show. The Trepieno's retro design harks back to the old Fiat 500.

Fiat will enter a new market segment by launching a compact SUV at the end of 2005.

By 2006 Fiat Auto hopes to achieve 80 percent of its sales with models that did not exist before last year.

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