So far, the integration of Fiat Auto S.p.A. and General Motors has gone smoothly. But now the partners are facing their biggest challenge: how to consolidate platforms while remaining fierce competitors in the marketplace.
Although Fiat Auto is about to close its third consecutive year with a net loss, big savings are expected from the alliance with GM, reaching more than e2 billion in 2005.
Roberto Testore, CEO of Fiat Auto, spoke with Automotive News Europe Staff Reporter Luca Ciferri in Fiat Auto's Turin headquarters on Nov. 3. Here are edited excerpts.
After the recent moves to integrate powertrain operations into a single venture, there has been speculation that Fiat and GM could integrate their vehicle manufacturing operations into a single joint venture.
This is absolutely not part of our plans. The strategic alliance with GM covers purchasing, powertrains and retail financial services' back-office operations. As previously announced, we have also started to talk about possible cooperation on platforms, but we are still at the hypothetical level.
At Fiat we consider vehicle manufacturing to be a core activity, so I do not foresee any joint production of mainstream models. However, in the future we could consider building a low-volume Fiat inside a GM plant, or vice versa, to better utilize our respective capacities.
Which Fiat Auto models currently under development are too advanced to benefit from shared platforms with GM?
As far as our new flexible platforms are concerned, the C-D-H platform will debut in October 2001 with the replacement for the Fiat Bravo and Brava. In spring 2002 it will also spin off a station wagon. In 2003 it will be the base of the next Alfa Spider.
The New Small project, to replace the Seicento in early 2003, will be based on the new A-B flexible platform. It will only be built in Poland, as is the case with the current Seicento.
To complete the picture, there is also the 2003 New Large project, the virtual successor to the Fiat Croma. Our original plan was to base it on the C-D-H modular platform, but we are currently reviewing the possibility of using it on GM's Epsilon platform.
So the first mainstream Fiat model that could be based on a common platform is the 2005-2006 family of models to replace both the Punto and the 178 world car. Your original plan was to use Fiat's A-B flexible platform. And now?
Everything is still undecided, as the launch date is quite distant. It could remain on our new A-B; it could use the next-generation GM-Opel Gamma platform that will debut more or less at the same time; or it could come from a new common platform developed with GM.
Reports on your new flexible platforms say they cut tooling investments by 30 percent and production costs by 20 percent. They are said to be so flexible that the same line can build all sizes of cars, from the Fiat Seicento to the Alfa 166. Is this true?
No. The two figures are correct, but the 20 percent production-cost reduction is only partly due to the flexible platform. The biggest savings come from the way we designed the cars and the assembly process.
In terms of flexibility, we can vary length from about 4000 millimeters (160 inches) to about 4600 millimeters (184 inches) and width from 1700 millimeters (68 inches) to 1800 to 1820 millimeters (72 to 72.8 inches). In other words, we can cover two volume market segments, the lower-medium, or C, where we put Bravo and Brava, and the upper-medium, or D, of the Alfa 147 and 156, Fiat Marea and Lancia Lybra.
In the A segment, is it true that the 20-year-old Panda will die at the end of the year, and that the New Small car's styling will be very close to the EcoBasic concept car?
No. The Panda will continue to be built as long as demand remains strong. The styling of the EcoBasic was really liked by the press, and we are now evaluating it with potential customers. We have several styling models, and no decision has been taken yet, as the design freeze will take place in early 2001.
What about Fiat's compact sport-utility, initially conceived as a spinoff of the Mitsubishi Pajero Pinin, and Lancia's future four-wheel-drive vehicle?
Despite the fact that we really like the design of our Fiat compact sport-utility, I don't think we will build it as it was originally conceived, as a vehicle with permanent rear drive and selectable front drive. I think we will move to a product concept that's closer to a crossover vehicle, more urban and less off-road, with front drive.
Also, for Lancia's return to the C segment (the Delta was discontinued in summer 1999), we are thinking of a permanent four-wheel-drive sport-utility, although it is not the Nea concept car unveiled at the Paris show. The Nea is a possible direction, but we have other options.
In general, I would say we are considering the idea of creating a new platform for the C-D segment, to be used by Alfa Romeo and Lancia, featuring more sophisticated handling and ride solutions than on mainstream Fiat models, including specific suspensions and various four-wheel-drive options.
In a presentation to financial analysts, you said Alfa could reach 500,000 units a year in the near future. How near is this future?
I do not see any good reason why Alfa could not reach these volumes by the end of the decade. Our progression has been quite impressive: from 114,000 units in 1996 to 245,000 to 250,000 planned next year. We do not have any intention of slowing down such a momentum, also thanks to a wider presence in new markets.
Half a million Alfa Romeos a year means more models. Will you add a car smaller than the new 147?
Not at all. We are looking to profitable growth. We will maintain three mainstream lines in the C (147), D (156) and E (166) segments, plus more niche vehicles such as coupes, cabriolets and spiders. We will also explore emerging niche subsegments such as crossovers and innovative four-wheel-drive vehicles.
On the cost side, Fiat Auto has its ongoing efficiency program and incoming synergies from the joint ventures with GM. Can you give some numbers?
Our plan to cut Fiat Auto's overhead costs 20 percent in two years is proceeding well. We cut e250 million in 1999, and we are on track to save the same amount this year. We are currently setting the next target for 2001.
On production costs, we cut them 2.8 percent in 1999 and 2.5 percent this year. This has been done despite the growing price of raw materials together with the weakening of the euro, which have undercut our original target. A precise forecast for 2001 is difficult to make as we have no idea what will happen to the cost of raw materials and the value of the euro, but it won't be less than 2 percent.
As far as synergies with GM are concerned, I can only reconfirm the numbers that have already been made public: e500 million in 2001, e1.2 billion in 2003 and e2 billion in 2005. Common purchasing will contribute e350 million in 2001, e800 million in 2003 and e1.4 billion in 2005.