Fiat builds brands to beat debts

A "new" Fiat group will appear after the restructuring

By Jorn Madslien BBC News Online business reporter in Geneva

The debt-laden Italian car and industry group Fiat is pushing its way through a lengthy brand building exercise which aims to expand the appeal of its Fiat and Alfa Romeo cars.

Giuseppe Perlo: Wants strong brands

"In the past six months and [throughout] 2002 we expect, from a strategic point of view, to stress the strength of our three brands," senior vice president Giuseppe Perlo told BBC News Online.

Fiat's efforts are more than just marketing speak.

Last summer the automotive group sent 6,000 dealers to an "intensive enthusiasm-boosting summer seminar in Milan which cost 5m euros (£3m) - as much as a major new car launch", according the car industry analysts Just-auto.com.

In addition, having spent 14bn euros on research and development, the group is gearing up for the launch of 19 new models by the end of 2005.

"A model expansion programme must be paralleled by, or preceded by, plans to expand the desirability of the brand in principle and in practice," noted the Institute of the Motor Industry.

Financial problems

Fiat, Italy's biggest industrial group, is weighed down by 33.4bn euros in debts.

Fiat's Alfa Romeo models get plenty of attention

Making matters worse, in 2001 the group suffered losses of 791m euros.

Fiat Auto's poor performance has weighed heavily on its parent.

Cost cutting efforts have already taken their toll, with 6,000 jobs due to be lost during this year and next.

Lancia's decade

Yet, Mr Perlo was optimistic "because we know that we have a very high potential in our brands".

"Alfa Romeo is really completely different from Fiat and from Lancia," he added.

Lancia: Suffered from Alfa Romeo comparisons

Which is true to some extent, though analysts have pointed out that Lancia has suffered from being Alfa Romeo's more mousy cousin.

Both brands target the young, rich and sporty and, in head-on competition, the Lancia brand has simply failed to measure up.

But that, said some observers, had more to do with marketing efforts than the products themselves.

Mr Perlo acknowledged that more must be done to lift the Fiat and Lancia brands.

"We have some results with Alfa Romeo. We need to consolidate our results for the future from Fiat and Lancia," Mr Perlo said.

Restructuring

In December, Fiat Auto embarked on a major restructuring.

"We'll need at least five to six months to have the final structure... ready to go without any stress," Mr Perlo said.

"A new organisation of all the Fiat Auto group" should be the outcome, he said.

Fiat will launch 19 new models by 2005

"A new business unit, a new group of people who are completely in charge of the development, marketing and building the product" will be put in place, he said.

As part of the restructuring, the group must also improve the profitability of its brands.

Fiat's links with General Motors should help here, said Mr Perlo, stressing ways in which the groups co-operate to reduce purchasing costs, reduce business overlaps and slash expenses.

Investors will be keen to see it work.

Fiat shares have fallen 13% since New Year when the restructuring program was launched.