Fiat: Good Car Poor Response

Harsh V Verma/Consumer Behavior

Circulation restricted only to the consumer behavior students

The following are some of the write ups available on Fiat. On the whole what comes across is
that these cars do not enjoy good consumer attitude which manifests in poor sales performance.
Suppose you are retained by the company to turnaround the company’s sales what would you
do? Do you think this is a consumer behavior problem, especially related to consumer attitudes?
How can the attitude to Fiat be measured and then changed?

Fiat Palio in India is taking its last breath.We agree the fact, Fiat Palio is a member of  the
underperformer league even after manufacturer  contributed their best efforts to put it on success
track.The sales report of the Palio is same almost every market it is present.This inspires
irmaododecio to
redesign the existing
Palio with taking
clues from Grande
Punto.

The Palio based on

Grande Punto looks
are  appealing like
Punto especially the
head lamps and front
grille cluster.The
2011 Fiat Palio is
looking more crispy
and short in
design.The honey
comb mesh behind
the grille, though it is big is adding spice to  stunning look of 2011 Fiat Palio.We have  an 
observation the rendered version of Palio is sharing striking similarities with it’s arch rival VW
Polo.

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 The tail lamps of artist’s version of  2011Palio is a 180 degree turn from current edition
Palio.This tail lamp design looks more attractive and futuristic.The rear bumper intrudes into tail
door territory but that does not look as a mismatched item there.The surprising factor of 2011
Fiat Palio is a black plastic section used to hide the under body area and rear axles.It becomes
necessary as rear bumper has been placed well above the actual position.

We are impressed with this design at first sight.If you ask us we  will give green signal to this
Palio without a second thought.Meanwhile what stops Palio in India from succeeding in it’s
mission? a bad engine?or boring looks? share your thoughts.

______________________________________________________________________

Fiat Palio has got a big fan following in India. Lovable machine for petrolheads, Palio has
sustained the Indian market and roads for a decade. Often the first car of its buyers, Italian-born
Fiat, in recent years has had fierce competition from other small cars that are at par in terms of
cost, efficiency and looks. This has drastically reduced the density of Fiat machines on Indian
roads, one of earliest car makers in the country.
The one major factor for its poor performance in India is credited to Fiat India’s “not so good”
sales and service network. But now, after the success of Fiat Linea in Indian Auto Market, Fiat
India is coming up with new plans to re-launch Fiat Palio in India & make it a grand success
story in the coming times.
Few days back, we had reported the news of Italian car manufacturer  reducing the cost of spare
parts for the Fiat Palio by a huge margin in India
________________________________________________________________________

CHENAI: It's restructuring time at Fiat India Ltd. The Indian arm of the beleaguered Italian car
major is now preparing a strategy to become the global hub for all right hand drive (RHD)az cars
for the Fiat Group. The company will invest $100 million to upgrade its production facilities for
this purpose.

In addition, it is also looking inwards and taking off unproductive workforce. Owing to the poor
performance in the recent customer satisfaction index, two senior management members of Fiat
India have been shown the door.

VinodSahai, Advisor, Fiat told The Times of India that HarmitAhuja, GM (Marketing) and
SandeepBharadwaj, GM (After Sales) have been asked to leave. "There has to be accountability,
after all we have a great car in Palio. If the customer is unhappy, necessary amends should be
taken. Therefore, we asked them to quit the organisation," Sahai said.

___________________________________________________________________

Fiat Palio has got a vey unique fan followers in India, the number of Fiat Palios plying on our
roads shrinking for last many years. The reasons we hear for this dismal performance Palio is
Fiat’s poor sales and service network and bad styling of  FiatPalio. We are not sure about  the

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exact reasons behind Fiat Palio performance. But now the situation is improving, Fiat is planning
re-launch Palio in India, we expect this launch during upcoming New Delhi Auto Expo 2010.

Fiat commissions agency to study customer satisfaction 

N Madhavan 

Chennai: Stung by consistent poor performance in various J D Power surveys, especially those
relating to sales and service, Fiat India has commissioned a market research agency to
continuously study the customer satisfaction levels offered by the dealers.

The survey, apart from acting as an independent source of information for the company, will also
form the basis for incentivising the dealers based on their ranking, said Giovanni BatisttaRavina,
MD, Fiat India while speaking to the Financial Express in Chennai.

Fiat India's performance in last year's J D Power customer satisfaction index (CSI) was severely
affected due to poor after-sales service and availability of spare parts. This year's sales
satisfaction index (SSI), a survey looking at the satisfaction levels of customers when they
actually bought the vehicle, has again put the company very low down the spectrum. It had
scored below the industry average in sales experience and price evaluation factors.

As far as the latest SSI survey is concerned, Ravina said that the dissatisfaction experienced by
the Fiat customers was mainly on account of the dealer's eagerness to sell the car. When a
customer steps into the showroom and asks for the delivery period of a particular model the
dealer, in order to retain the customer, gives a date which is not realistic. This eventually leads to
delays thereby affecting the satisfaction levels of the customer.

The new IT initiatives by Fiat by linking all the dealers will help solve this problem to an extent,
Ravina said. The company will be in a position to know the stock position of all the dealers and
can move the stock around, if required, to reduce the waiting time. Similarly, the dealer can
know the stock position of the company and also the status of his order before giving the
delivery date to the customer.

The company is planning to increase the number of dealers significantly in the next couple of
years. The availability of spare parts, another major irritant, has also been sorted out with supply
of spares to the dealer increasing by seven times, he added.

All these steps, according to Ravina, have been initiated keeping in mind the launch of Palio,
Fiat's soon-to-be launched model in the top end of the small car segment.

With Palio, likely breadwinner for the company in the years to come, Fiat is taking no chances.
Unlike Sienna which started off with 25 per cent indigenisation, Palio will hit the roads with 65
per cent local content so that it can be competitively priced straightaway to take on competition.

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Fiat, it appears, does not want to repeat the Sienna story where the company recently had to drop
prices sharply `to pass on the benefits' of increasing the localisation to 55 per cent.

Similarly, it is also careful on the sales and after-sales service. Dealerships are being revamped
and dealers are being trained to offer the required quality of service. The survey will be based on
a set of parameters used by Fiat in developed countries (of course Indianised) and will go a long
way in shoring up the customer perception, Ravina said.

The Tata-Fiat alliance is on shaky ground once again, with Tata group
chairman Ratan Tata saying the joint venture needs to be critically
examined to optimise its potential.

“I have to admit that so far the venture with Fiat has not been as active
as we had thought,” Tata said in an interview to JD Power.
Among other things, the Italian company needs to bring in more new
models to India, the Tata chief said.

Analysts feel the biggest challenge for Fiat is to boost the number of
product offerings it has at present. Without a wider range of products,
the company stands little chance in a market that is seeing fierce
competition from global auto biggies.

The joint venture, now nearly four years old, is still struggling to
achieve breakeven. It had suffered a loss of `260 crore in 2009-10 and
could report similar hurt for 2010-11, too, say analysts.

“It is difficult for the partnership to break even as Fiat is unable to bring
in enough products in the market. However, the company’s products
are faring well in the market as far as pricing and features are
concerned. Fiat’s sales are not growing, which is becoming a serious
concern for both companies. Only a better product portfolio might work
in the company’s favour,” said an analyst with a domestic brokerage
who did not wish to be named.
Tata, however, ruled out the possibility of the two companies parting
ways.

“Tata Motors accords great importance to the strategic alliance with

Fiat. The introduction of Fiat engines in the second generation Tata car
platform (the Tata Indica Vista and the Tata Indigo Manza) has played
a critical role in the performance and growth of these brands,” a
company spokesperson told DNA in an email response to a query.

“As for sales of Fiat products in India, both Fiat and Tata Motors are
engaged in further building volumes. There are more opportunities and
the two partners are engaged in considering opportunities, including

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considering more Fiat products in India,” the spokesperson said.

Under the 50:50 joint venture inked in 2007, the two companies are
jointly working on distribution network and back-end support, besides
co-manufacturing products at the Ranjangaon facility near Pune.

The facility has a capacity to produce 200,000 cars and 300,000

engines a year. It makes the Fiat Palio, Punto and Linea, as well as
engines for Tata’s Indica small car and the Indigo sedan. The two
companies have a network of 170-plus dealers at 130-plus locations.

Fiat sold 21,066 units in FY11, compared with 24,727 units the
previous fiscal —- a decline of 14.81%.

Analysts feel the perception about Fiat cars is still very poor in India.

“Fiat has the best engines to offer currently. However, customers are
still not comfortable in buying a Fiat product due to its legacy.
Moreover, with just two major brands —- Punto and Linea —- the
company is not able to make a mark in the market,” said an analyst
from PINC Research.

The company faces problems related to its service and spare parts.
Despite having good quality products, the company is suffering to build
a strong brand name. “Fiat is not an easy brand to retail. The quality
challenges related to Tata brand is rubbing off on Fiat as well. Unless
the quality issue is not resolved, Fiat will struggle to build a brand
name in itself,” said MohitArora, executive director, JD Power Asia
Pacific.

What happens when two of the global major automobile manufacturers, who are in an
alliance, show discontent over a couple of issues? News happens. If you haven’t
guessed it, we are talking about Fiat and Tata Joint Venture which has been in news
every now and then. Reasons have been many during the past months and finally
Mr.Ratan Tata has called for an examination of the JV.

Overshadowing all the other small issues the two major ones are poor quality treatment
for Fiat owners and less number of Fiat models on display at Tata-Fiat dealerships. Mr.
Tata still believes that the venture is of great importance and is firm on its founding
business principles, yet a reexamination is needed at the time.

Mr. Ratan Tata wishes to introduce a few changes which would address the two current
problems for Fiat, a small model line-up and expensive spare parts for cars like Fiat
Linea and Fiat Grande Punto.

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 Speaking about the JV, Mr. Tata said,

“I have to admit that so far, the venture with Fiat has not been
as active as we had thought. I think that Fiat has to launch
more models into the market to keep dealers interested. It
also has to look at its cost structure in terms of parts and
components. So the joint venture needs to be looked at quite
critically and until that happens, it’s not going to be optimized. As far as what else we
can do with Fiat, I think Sergio Marchionne and I can really talk to each other. However,
at the working level, it hasn’t quite been that way. We have looked at Latin America to
do something together, but things haven’t moved as they should have done. I think
there’s nothing wrong with the concept of the deal — it is a very healthy concept.”

Considering the price sensitive market of ours the Chairman of Tata Sons wants to see
Fiat to introduce low price models with the same great handling and build quality being
offered with the current offerings. The present vehicle line-up of two models offers more
than ten variants including CRDI diesel and MPFI petrol ones with upmarket
characteristics.

No doubt the cars are extremely potent in terms of performance and impressiveness but
they are definitely not the ones who could fight hard in this price sensitive market.

Why Tata is worried about Fiat in India

SwarajBaggonkar / Mumbai June 17, 2011, 0:29 IST

When Ratan Tata said in an interview earlier this week that the four-year-old Tata Motors-Fiat
joint venture “has not been as active as we had thought”, he finally confirmed what the market
has been quite vocal about for the past few months.

At the heart of the problem is Fiat’s failure to bring in more models to India – a fact the Tata
Group Chairman didn’t forget to mention. While Tata Group still says it accords great
importance to the strategic alliance with Fiat, analysts feel the main reason for the joint venture’s
indifferent performance (Rs 260 croreloss in 2009-10 which is expected to increase for 2010-11),
is its inability to improve its product portfolio.

Due to gross underutilisation of its assets (50 per cent capacity utilisation), mainly the mega car,
engine and transmission manufacturing plant at Ranjangaon near Pune, Fiat India posted a
staggering cumulative loss of Rs 970 crore, in a little more than two years.

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Eight months ago, Fiat India Automobile did try to address the problem by bringing in a new
team to revitalize its sales, marketing and distribution network. But buyers are still not impressed
with the Italian automotive brand.

Fiat sold 21,066 units in FY11, compared with 24,727 units the previous fiscal — a decline of
14.81 per cent, and this came in a period of high sales growth for almost all automobile
companies.

Since the appointment of the new team, sales of Fiat branded cars have dipped over 15 per cent
to 13,446 units as against 15,874 units a year ago. The fall in sales is in sharp contrast to the over
22 per cent sales growth achieved by the car industry in the same period.

Fiat presently sells three models in India, with one of them — Palio Stile — not available in the
main city markets such as Mumbai, National Capital Region, Bangalore and Chennai. Fiat
executives say the sales number did not justify the upgradation to BS IV level. Fiat’s last model
launch, Grande Punto, a premium hatchback, took place two years ago.

While the Punto costing Rs 4.45 lakh, sells an average of around 1,000 units per month, much
less than the targeted 2,500 units, the Linea, an upper mid-size sedan costing Rs 6.61 lakh, sells
an average of 890 units, which is much below the 2,000 units per month targeted mark.

Under the 50:50 joint venture inked in 2007, the two companies are jointly working on
distribution network and back-end support, besides co-manufacturing products in Ranjangaon.
The facility has a capacity to produce 200,000 cars and 300,000 engines a year.

One of the steps that the JV had taken was that it re-approached some of its dealers asking them
to change the way they market their cars. The plan included appointing separate man power and
showroom space.

The new sales and marketing initiative demands further investments from the dealers. While
some of the dealers welcome the change, many of them agree that Fiat suffers from a low brand
recall in India leading to the lackluster demand.

“Fiat cars are not in the affordable range, they are at the premium end. Plus consumers also keep
in mind the resale value of the car when they buy a vehicle. Fiat cars generally have a poor resale
value compared to say a Maruti or a Hyundai”, says a Mumbai-based dealer of Tata Fiat cars.

But Fiat is hoping that the ace up its sleeve is the small car that will be priced below the Palio. At
less than Rs 4 lakh, it is expected to compete with Maruti Suzuki and Hyundai Motors. The car,
which is currently under development, is expected to be launched by the end of next year and
will sport a new 1 litre engine, the same configuration as the Maruti Wagon R and the Hyundai
i10. The new car, Fiat says, will go a long way to allay concerns over mileage of the existing cars
in its portfolio.This October, when Tata Ltd (UK) picked up a one-third stake in aircraft
manufacturer Piaggio Aero, it was the latest in a string of associations with Italian
enterprises for the $64 billion Indian conglomerate. For the Tatas, the Italian tryst began
after Tata Consultancy Services (TCS) bagged a product development and

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technologies contract with Ferrari on the Formula One circuit in 2005. Thereafter, the
road to Italy has had milestones in the form of a global alliance with automaker Fiat; a
domestic tie-up with clothing label Benetton; a stake in car design company Pininfarina;
and, now, Piaggio Aero.

The stakes in Pininfarina and Piaggio Aero have already translated into an upcoming
joint R&D centre in Pune and an authorised service centre for Taj Air (the Tatas'
business jets company), respectively. For these Italian majors, all of which are family-
run businesses, it has been a leap of faith in their globalisation thrust. It has been no
different for the Tatas, who are a household name in Italy today. And on both sides of
each agreement, there has been an offer the other couldn't refuse.

First bite

The Tatas' long road to Rome was, in fact, built in a day—when Ratan Tata met Luca di
Montezemolo, President of Ferrari and Chairman of Fiat, in India in early-2005. Several
industry sources link the Tatas' Italian connection to Fiat—in particular, the Agnelli
family, which owns the automotive group that is Italy's largest private company. "Both
the Tatas and the Agnellis have a century-long legacy," says one source who has been
closely involved with both groups. One theory traces healthy relations between the two
families to Ratan Tata's friendship over the years with John Elkann, the current Vice-
Chairman of Fiat. This and the family legacy may have made the Tatas a favourable
option for enterprises in Italy (about two-thirds of which are family-owned), but it wasn't
the clincher. That said, the legacy factor of the Agnellis has been instrumental in making
the Tatas a household name across Italy.

Italians use the word 'avvocato' (advocate) as a title for somebody worthy of immense
respect and affection. For several decades, Avvocato referred to only one man from the
industrial town of Turin: Gianni Agnelli, the former Chairman of Fiat, who died in 2003.
The association with Fiat in Italy would thus inextricably link the Tatas with the Agnelli
legacy.

A TCS employee in Maranello agrees: "Fiat is well

known in Italy, and also owns Ferrari, its national
pride." Following the Formula One team's run of five consecutive driver's championship
titles, Ferrari President Montezemolo's stock was at an all-time high, being at the helm
during Michael Schumacher's streak of wins from 2000-2004. Around the same time,
the TCS contract bid with Ferrari began to receive media coverage as the IT services
company came closer to bagging the contract. "When Tata was associated with Fiat's
Ferrari, it marketed itself," the TCS source recalls. "A lot of information of the Tata
Group would be published regularly. The contract itself took about two months to sign.
Over a period of time, we got good coverage in the media."

The coverage increased when Montezemolo visited India in February 2005 as part of a
team that accompanied Italy's President Carlo Azeglio Ciampi. This meeting between
Ratan Tata and the Ferrari chief is believed to be their first. All Italy came to know of the

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Tata Group. The idea of this meeting had been proposed three years earlier as part of a
strategy to salvage Fiat in India. It was the brainchild of VinodSahai.

Sahai has lived in Italy for 40 years. Between 1971 and 1984, he worked in Fiat before
moving to another company as its managing director. He returned as advisor to Fiat
India Managing Director Maurizio Bianchi in 2000. Sahai happened to know Tata Motors
Managing Director Ravi Kant from their academic days in the Indian Institute of
Technology, Kharagpur. With the poor foray of Fiat into India in the 1990s, there was a
call for revival. As part of this, Sahai presented two options to Jan Nahum, President
(International Development) of Fiat Auto, and Montezemolo.

The first involved private equity and independent operations with a manufacturing plant
in Ranjangaon, overseen by the management team Fiat already had in India.
Alternatively, Fiat could tie up with Tata Motors, have Ravi Kant on the joint board, and
benefit from access to local know-how and dealers. For some time until 2004, the first
option seemed likely, leading to two private equity firms shaking hands with Fiat India's
then Managing Director Hebert Demel. But it petered out.

A decision took three years to be formalised, in the aftermath of Fiat Chairman Gianni
Agnelli's death in 2003 and the succession planning. In 2006, the Tatas and Fiat
developed the strategic alliance. "There is a comfort level between the two companies
because the relationship has been handled on a professional level—there are no
sentiments attached," insists Sahai. "The business relations are not because of the
family. But yes, Ratan Tata has developed a strong friendship with Montezemolo since."

The tie-up has its critics. Says one car manufacturer: "If you see Fiat's performance in
the three years preceding the Tatas' involvement, average sales were about 17,000
units. In the period since the tie-up, their average sales are at 3,000 vehicles. I don't
know what the alliance has got Fiat." To be fair, the agreement has kicked in only over
the past year; so these are early days.

But what the Tatas may not have expected is the tremendous goodwill the tie-up
generated for them in Italy's corporate sector. It has strengthened ties between Ratan
Tata and the Benetton family, notes Sahai.

Families' pride

The Italian foray has operated in a broader context. At the turn of the century, many
large and medium companies in mainland Europe felt the need to expand beyond home
markets. Benetton was among the few Italian companies that tapped international
markets successfully in the 1980s.

By 2000, more Italian firms began to go global. And, the Sonalika Group, Ashok Leyland
and the Tata Group, among others, have been good foils for them in India. "They find
Indians good business partners," says Rahul Saxena, Chairman of India Business

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Forum in Milan. "There is a willingness among locals to partner with Indian firms, and a
level of comfort in India."

After inking an alliance with Fiat, the Tata Group tasted another success in

September 2007. Its retail chain Trent inked a strategic partnership with Benetton,
under which the Indian company would manage Benetton's Sisley brand
across major Indian cities. Trent runs the Westside departmental stores and
the Star Bazaar chain of hypermarkets.

Six months later, the €713 million car-design firm Pininfarina, which has chalked out its
own revival plan, invited the Tata Group to participate in a capital increase. Pininfarina
has been involved in design, engineering and manufacture of niche vehicles of global
auto manufacturers, including Jaguar, Ferrari and Peugeot. Ratan Tata is reported to
have subsequently taken a stake in the company, though the Tata Group has declined
comment. Pininfarina also refused to comment. What is certain, though, is that the R&D
centre in Pune will be up in 2009. "Tata will support this centre with contracts and
participate with a minority interest," according to a Pininfarina spokesperson.

Indian companies have been investing more in Italy over the past five years, says
Saxena. After buying a stake in Piaggio Aero, the Tatas' Taj Air facility is being utilised
to provide maintenance, repair and overhaul services to the P180 Avanti II aircraft. Taj
Air personnel will avail of annual training courses at PiaggioAero's maintenance training
centres in the US and Italy.

Taj Air (part of Tata Group's Indian Hotels) will oversee the maintenance, servicing and
distribution of the Avanti II aircraft in India, says MehernoshKapadia, Chairman of Taj
Air. "There are two aircraft expected to come into India over the next three to four
weeks. We expect to get three more by March 2009. If marketed well and with our
support base, the Piaggio airplane in India has great potential," he says. The fuel-
efficiency of Piaggio's Avanti II fleet is expected to bring in more corporate clients in a
tight year for the aviation industry.

Overall, it has been a huge vote of confidence for the Tata Group. "In some ways, both
Jamsetji Tata and Giovanni Agnelli (Fiat's founder) are iconic figures in their own
countries," notes Saxena. "The Italians have always looked up to the Agnellis just as the
Indians look up to the Tatas or Birlas. They are industry icons."

On the ground, the Indo-Italian connection has found outlets beyond the race track in
Maranello, the headquarters of Ferrari. The canteen there serves Indian cuisine (dal,
rice and vegetable curry), which came as a pleasant surprise to TCS employees there.
"This is the first time I have seen a customer do this," says an Indian senior software
engineer. "It shows their willingness to bridge the cultural gap."

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