The Association of Business Executives QCF

International Business Case Study Fiat Automobiles S.p.A

Tuesday 4 June 2013, Afternoon

This is an open-book examination, and you may consult any previously prepared written material or texts during the examination. Only answers that are written during the examination in the answer book supplied by the examination centre will be marked.

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ABE 2013

J/601/2793

Notes
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 As in real life, anomalies may be found in this Case Study. Please simply state your assumptions where necessary when answering questions. ABE is not in a position to answer queries on Case data. Candidates are tested on their overall understanding of the Case and its key issues, not on minor details. There are no catch questions or hidden agendas.  After the publication of the Case Study, subsequent developments may occur. The examination is based on the published Case Study, and students who do not mention such developments will not be penalised. However, students may consider such developments in their answers if they wish.

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Fiat Automobiles S.p.A Fiat Automobiles S.p.A. is an Italian car manufacturer that produces Fiat branded cars, and is part of Fiat Group Automobiles S.p.A. The company, Fiat Automobiles S.p.A., was formed in January 2007 when Fiat reorganised its automobile business. The company traces its history back to 1900 when the first Fiat (Fabbrica Italiana Automobili Torino) factory opened in Carso Dante, Italy with a workforce of 150 people. In 1922 Fiat opened what was to be the largest factory in Europe, with a unique five floor assembly line that finished with a futuristic test track constructed on the buildings roof. It became the symbol of the automotive industry in Italy for decades to come. The company also became involved with the production of other industrial goods, particularly agricultural machinery and military vehicles. Fiat continued to experience growth of production into the mid 1960s, in both exports as well as domestic sales. The iconic Fiat 500 and Fiat 600 were best sellers and Fiat dominated the domestic market. During this period car ownership in Italy increased from one in 96 Italians owning a car to one in 28 Italians owning a car. Fiat took advantage of the increase and established several factories in southern Italy. The Italian car market became both the most attractive and competitive in Europe. This put pressure on production costs, as large French and German car manufacturers introduced their products at heavily discounted prices in order to gain market share. In a bid to remain competitive Fiat introduced Robogate, an innovative and flexible robotic system for assembling bodywork, in 1978. Fiat was also becoming an economic as well as industrial powerhouse, as it began to acquire other well-known Italian brands such as Lancia, Ferrari, Alfa Romeo and Maserati. These, along with the Fiat brand, would be formed into Fiat Auto S.p.A. Between 1978 and 1990 Fiat also set up numerous operations as independent companies. These included Fiat Avio, Fiat Engineering, Comau, Fiat Ferraviaria, Magnet Marelli and Teksid. During the 1990s, as more and more car manufacturers, particularly from Asia, entered the EU car market, Fiat was once again facing a crisis in the form of market competition. In order to cope, the company expanded further into the international market, making Fiat one of the most recognised worldwide producers of affordable vehicles. However, there were serious quality problems that inhibited long-term customer loyalty. Fiats main market is Europe, mainly focused on Italy, its home market, which is one of the worlds most dynamic markets. Historically Fiat has been a success in the smaller city-cars and super-mini sectors and currently Fiat has a range of models focused on the two segments. In 2011 these two segments accounted for 84% of Fiats sales. Fiat does not currently offer a successful medium family or executive car, although key global competitors such as Toyota and Volkswagen have enjoyed great success with cars in this lucrative sector. Fiats share of the European market shrank from 9.4% in 2000 to 5.8% in the summer of 2004, when Sergio Marchionne was appointed as Chief Executive. By March 2009 their market share had risen to 9.1%. This was mainly due to the successful launch of new cars, notably the Fiat 500. On 20 January 2009, Fiat and the US carmaker Chrysler announced their intention to form a global alliance. Under the terms of the agreement, Fiat would take a 20% stake in Chrysler and gain access to its North American distribution network in exchange for providing Chrysler with technology and platforms to build smaller, more fuel-efficient vehicles in the US and providing reciprocal access to Fiats global distribution network.

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In addition, the proposed agreement would entitle Fiat to receive a further 15% of Chrysler (without cash consideration) subject to the achievement of specific product and commercial objectives. No cash or financial support was required from Fiat under the agreement. Instead it would obtain its stake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one or more Fiat models for in the US. Fiat would also provide engine and transmission technology to enable Chrysler to introduce smaller, fuel-efficient models in the NAFTA (North America Free Trade Agreement - USA, Canada and Mexico) market. The principal objective of the partnership was to provide both groups with significantly enhanced economies of scale and geographical reach. On 30 April 2009, Fiat announced the signing of a series of agreements to form a global strategic alliance with Chrysler, with Fiat receiving an initial 20% stake and the option to purchase/ receive additional ownership interests in Chrysler, subject to certain conditions being met. Fiats shareholding would be capped at 49%, however, until all US government loans to Chrysler had been repaid. (Chrysler had had to borrow money from the US government in 2009 when sales fell dramatically). Marchionne was appointed CEO of Chrysler and under his leadership Chrysler has taken on a structure similar to that of Fiat and has released, in quick succession, a large number of completely redesigned or refreshed vehicles. Fiat launched the 500C - a slightly larger version of the 500 (which had been available in Europe since 2007) - in the United States and Canada in 2011, markets from which it had been absent since 1984. Prior to 2011, Fiats main presence on the continent was Mexico, where it offers a greater variety of products than in the United States and Canada. The current range of Fiat models is as following:

City-car: Super-mini: Compact car: Mini MPV: Large MPV: Mini SUV:

500, Panda Punto Bravo, Linea, Albea Idea Freemont (rebadged Dodge Journey) Sedici (developed with Suzuki with its twin Suzuki SX4)

Fiat Group sales in 2011 were 676,704 (minus 17.3% vs. 2010), broken down as follows: Model Punto Panda 500 Linea Bravo Sedici Freemont Albea Idea Total 2011 Sales 220,343 189,527 156,301 35,499 31,673 14,777 13,651 8,951 5,982 676,704 2012 Sales estimated 210.000 200,000 250,000 35,000 32,000 26,000 12,000 10,000 7,000 782,000

In 2012, Fiat formed an alliance with Mazda to develop and build a new roadster for the Mazda and Alfa Romeo brands.
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In recent times Fiat has suffered from the depressed economy in Italy, which has been affected by the Eurozone debt crisis. This has led to Sergio Marchionnes decision to cut investment in Europe. The companys loss before interest and taxes during the second quarter of 2012 in Europe, Middle East and Africa (EMEA) was 184 million ($226 million), compared to a 406 million loss in the first half of 2011. In the second quarter of 2012, all regions had positive results except EMEA, which had a smaller loss in the second quarter than in the first. Total income showed strong growth in North America and Asia, a slowdown in Latin America, in spite of the good result Fiat had in Brazil during June, and of course the poor situation in Europe, Middle East and Africa (EMEA) as a result of the European economic crisis. Total earnings were 1 billion as a result of the good performance by Chrysler in North America and Asia, while Europe reduced its losses to around 70 million. Total debt decreased to 5.4 billion, from 5.8 billion. Fiats Global Presence Appendix 1 shows the extent of the Fiat and Chrysler joint ventures presence globally. As a result of the Fiat and Chrysler joint venture there have been many distribution agreements signed which have further benefitted Fiats global sales. For example, in May 2012 Chrysler Australia group was appointed as the distributor for Fiat and Alfa Romeo in Australia. Under the agreement, the current Fiat and Alfa Romeo dealer group, which numbers 17 car dealerships and 22 commercial vehicle outlets in Australia will report to the Melbourne-based Chrysler Australia group. Fiat models offered on the Australian market include the Fiat 500, the Fiat 500 Abarth, and Ducato and Scudo models. The Chrysler Australia group of companies, which currently manages the Chrysler, Jeep and Dodge brands in the Australian market, has seen a remarkable surge in sales. In 2011 combined sales increased by 27.5%. In March 2010 Fiat signed a 50:50 joint venture with the Guangzhou Automobile Group Corporation (GAC) to build a new factory to produce the Fiat Viaggio. This will be the first Fiat model produced in China. The new plant, which covers 730,000 square metres, incorporates world-class manufacturing with one of the highest production standards in the world. These standards have now been adopted at all Fiat and Chrysler plants worldwide. GAC is Chinas sixth largest automotive manufacturer and produces cars, buses and commercial vehicles. The investment in the joint venture will be RMB 5 billion ($750 million). Automotive Industry Risks and Pressures The automotive industry is a global industry, with an annual turnover of over 2 trillion, making it equivalent to the sixth largest economy in the world. The industry operates globally, often by using alliances and joint ventures. The car industry is divided into categories based on the size of the cars. Cars in the super mini/smaller size categories are generally the best sellers. Meeting and satisfying customer demand with attractive new vehicles and reducing the amount of time required for product development are critical elements to the success of automotive manufacturers in international car markets. Demand may also be affected by factors directly impacting on vehicle price or the cost of purchasing and operating vehicles, such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and also governmental regulations. The global automotive industry is subject to various risks associated with conducting business worldwide, including political and economic instability. Natural calamities such as the tsunami in Japan in March 2011, which greatly impacted upon Japanese car plants worldwide as supplies of components were interrupted, can affect the global car industry, as well as wars, terrorism, labour strikes and work stoppages. The negative impact resulting from fluctuations in both foreign currency exchange and interest rates may adversely affect global manufacturers financial performance. Additionally, high prices
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for raw materials that automotive manufacturers and suppliers of parts and components use, such as steel, precious metals, non-ferrous alloys including aluminium, and plastic parts, inevitably increase costs of production which manufacturers may not be able to pass on to customers. In 2012, for the first time in history, over 60 million passenger cars were produced in a single year (or 165,000 new cars produced every day). After a 9% decline in 2009 (due to the 2008 global financial crisis), global car production immediately jumped back the following year with a 22% increase in 2010, to then consolidate at the current 3% yearly growth rate. Going back in recent history, in 2006 there were less than 50 million passenger cars produced in the world, an increase of 6.53% over the previous year. The increase for 2007 was about the same, and 2008 showed a decline. Analysts from various institutes had in fact forecast 2007 as the year which would end the 5-year cycle. Year 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 Cars produced in the world 60,001,402 59,929,016 58,264,852 47,772,598 52,726,117 53,201,346 49,918,578 46,862,978 44,554,268 41,968,666 41,368,394 39,825,888

One in four cars produced in the world comes from China. More than half of the cars in the world are produced in Asia and Oceania, whereas Europe produces almost a third. It is estimated that over 1 billion passenger cars travel the streets and roads of the world today. The1 billion-unit mark was reached in 2010 for the first time ever. In the United States alone, 250,272,812 highway registered vehicles were counted in 2010, of which 190,202,782 were passenger cars. (Bureau of Transportation Statistics, US Department of Transportation.) (Appendix 2 lists the global production of cars by the top 20 countries in 2011.) China was the worlds third-largest car market in 2006, as car sales in China soared by nearly 40% to 4.1 million units. Soon thereafter, China took the lead and became the worlds largest car market, as low vehicle penetration, rising incomes, greater credit availability and falling car prices lift sales past those of Japan. Furthermore, vehicle penetration in China still stands at only about 40 vehicles per 1,000 people, compared with approximately 700 vehicles per 1,000 people in the mature markets of the G7 group of countries. The industry is subject to various laws and governmental regulations including environmental matters such as emission levels, fuel economy, noise and pollution, and laws and regulations relating to safety. Many governments also impose tariffs and other trade barriers, taxes and levies, and enact price or exchange controls.
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The market for cars in the BRIC nations (Brazil, Russia, India and China) is estimated to be very large but a note of caution must be considered, since although increased wealth and the move towards greater urbanisation are two of the macro factors driving demand there has also been a massive increase in traffic congestion. This has led many cities within the BRIC nations to take steps to reduce car usage. In the two largest Chinese cities, Beijing and Shanghai, the local governments have introduced restrictions on driving similar to the congestion charge instigated in London. There has also been investment in mass transport systems such as the Shanghai Metro, which had over 2 billion passenger journeys in 2011 and which, at 434 kilometres in length, is the longest in the world. In India the major conurbations such as Delhi have built similar systems. The car industry in India is growing and the potential market size is enormous but there have been problems with regard to production as Appendix 3 describes. The increase in urban congestion in the West has also seen a decline in car usage. This has yet to lead to a fall in demand for new cars, but it has been forecast by some experts that the phenomenon of peak car ownership will be reached within a few years and afterwards demand for new cars will fall dramatically. In January 2011, the Society of Motor Manufacturers and Traders (SMMT) in the UK predicted that sales of new cars in the UK would fall by 5% in the next year. SMMTs Chief Executive, Paul Everitt, said 2010 had been a year of recovery for the motor industry but that conditions would be extremely challenging in 2011. He added, We are in a difficult period in terms of public expenditure, concerns about job losses and tax increases. The worldwide automotive market is highly competitive. There are many factors that affect competition and these include: product quality and features, brand values, the amount of time required for innovation and development, pricing, reliability, emissions, safety, fuel economy, customer service, warranty conditions and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in further downward price pressure. Each of the markets in which the major manufacturers compete has been subject to considerable volatility in demand. In the United States car sales have shown signs of recovery whilst the outlook in Europe was seen as gloomy. For example, in the third quarter of 2012 sales in the US increased by over 10%, with the Japanese carmaker Toyota doing particularly well as their sales rebounded after the supply shortage caused by the earthquakes and tsunami in March 2011. The US car industrys recovery was the result of a number of factors, including car owners seeking replacement cars following the end of the recession in 2009, low interest rates and cheaper loans. By contrast the outlook for car sales in Europe is weak and the announcement in January 2013 by Honda UK of major redundancies in its plant in Swindon UK, as a result of poor sales in the EU, is indicative of the market decline. The Eurozone debt crisis, sluggish economic growth and nonavailability of credit (in spite of record low interest rates) has meant that overall sales are expected to be depressed for at least 2 years. However, within this forecast it is expected that not all manufacturers will suffer equally. The traditional mid-market European car makers such as the French manufacturers Renault and the PSA Peugeot Citroen group, as well as Ford, General Motors and Fiat, are expected to see falling sales and profits in Europe. However, there has been a boom in sales of the high end manufacturers such as Jaguar Land Rover, Lexus, Audi, Mercedes and BMW as a result of their expansion into the mass market with aggressively priced premium models and with downsized luxury cars. (Appendix 4 gives further insight into the European Car Market.) One of the segments of the market that has been very successful is the one that reflects the trend towards retro-replica cars. Appendix 5, The Future is the Past, describes this trend and the main
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successes have been the Volkswagen Beetle, the Mini and the Fiat 500. This trend is likely to continue for some time and of the three it is thought that the Fiat 500 is the most successful. Demand for cars depends to a large extent on general social, political and economic conditions in a given market, together with the introduction of new vehicles and technologies. In certain key markets governments have intervened in order to give a short term boost to the car market. A recent example was the scrappage incentive schemes that operated in 2009 in many countries, notably Japan, Germany, France, UK and the United States. Scrappage programmes A scrappage programme is a government-initiated scheme to promote the replacement of old vehicles with modern ones. Scrappage programs generally have the dual aim of stimulating the automobile industry and removing inefficient, high emissions vehicles from the road. Many European countries have introduced large-scale scrappage programmes as an economic stimulus to increase market demand in the industrial sector during the global recession that began in 2008. Others countries such as China introduced schemes on environmental grounds. Also, in the 1990s, many countries introduced tax rebate programs for new cars that met modern emission standards but, with the Kyoto Protocol, some countries made the public offer dependent on the scrappage of old cars. Arguments against scrappage schemes There are a number of arguments against car scrappage schemes:

 The schemes may only boost car sales temporarily by bringing forward future demand. When the scheme is wound up new car sales could fall, even if the economy is recovering. The Economist noted that: In France, which offered a scrapping bonus in the mid-1990s, sales of new cars fell by 20% in the year after it expired. The schemes may divert consumer spending from other sectors of the economy to new cars, as the subsidy will only cover a portion of the cost of a new car.  The motor industry should not be singled out for specific support. Many believe the global car industry needs to reduce capacity and that scrappage schemes merely delay consolidation in the industry.  Most new cars that are bought in the UK are made abroad. Thus, a large portion of the money spent on the scheme may support carmakers based outside the UK.

The Financial Times, in an editorial about the US scrappage scheme, was critical of such initiatives, saying that there was no sound economic reason to sustain the capacity to produce cars that consumers are unwilling to pay for in full. The Economist also noted that despite the short-term boost to demand that scrappage schemes have provided, there are concerns over future demand. One worry was the effect of withdrawing scrappage incentives as they had propped up demand, especially in Germany where they drove sales volumes to record levels. Optimists say that at least 70% of the scrappage purchases were incremental sales that were made to people who would not normally have bought a new car. However, car manufacturers were worried that sales volumes in Europe would decline in the following years unless normal new car buyers - well-off people and companies - return to the market. New Technologies and Energy Saving Alternative Fuelled Cars With both the dramatic increases in petroleum products and the prospects of oil reserves being exhausted in the next 40 years, there has been increasing interest in alternative power systems.
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In the short term, as with most new technologies, the high cost and the perceived relatively weak performance of alternatively powered cars such as the Toyota Prius (a so-called hybrid powered by a petrol engine and batteries) has meant that adoption has been slow. In the light of these problems, many car manufacturers have instead chosen to refine and improve the performance of existing car engines. The Fiat TwinAir has been widely accepted and acclaimed as a major breakthrough in both economy of performance and low emissions. Successfully exploited, this unique selling proposition can provide increased market share for Fiat. Other car makers such as Volkswagen are making similar engines. Fiat started development of electric vehicles in the mid-1970s, with the concept car, the Fiat X1/23 which was shown at the 1972 Turin Motor Show. In 2008, Fiat showed the Phylla concept, and the Fiat Bugster concept in Brazil. Some Fiat vehicles, such as the Dobl van and the Fiat 500, have been converted to all-electric by Micro-Vett but the performance is below current consumer expectations. In Brazil, Fiat has also been involved with electricity power companies, Cemig and Itaipu, to develop new electric vehicles based on the Palio. Tests started in 2008. Although the cars performed well in an urban environment, consumer acceptance was low. The Fiat TwinAir engine used in the Fiat 500 has only two cylinders with just 0.9-litre capacity and yet produces power similar to some 1.4 litre engines, using much less fuel and producing just 95 grams of CO2 per kilometre. The TwinAirs secret is the way it manages air intake into the combustion chamber via the engine valves, or valvetrain. Instead of using a standard camshaft it has electro-hydraulic controls which manage the airflow more precisely, thereby improving combustion efficiency. According to a Fiat spokesman - All global car makers are now focusing on urban passenger vehicles which mean smaller vehicles... ideal targets for 1.0-litre and sub1.0-litre engines... which we expect to account for about 3.5 to 4.5 million units annually by 2020, about five percent of the total market. The Ford Motor Company launched its 1.0-litre, three cylinder EcoBoost engine in its Focus model in May 2012. It is the smallest engine the company has built since the 1930s and it is 30 percent lighter than the 1.6-litre model it is replacing. According to Ford, it achieves a 15-20 percent improvement in fuel economy but without any loss of performance. The EcoBoost engine uses both direct fuel injection and turbocharger technology. Volkswagen introduced its 1.0-litre, three cylinder engine at the Frankfurt motor show in September 2011. It powers the up! car, designed specifically for urban motoring. In city driving Volkswagen claims that the up! averages between 5.0 and 5.9 litres per 100km (48 to 56 mpg) depending on the model. Volkswagens latest 1.4 litre engine can make itself more efficient by deactivating its second and fourth cylinders when not required. Cylinder deactivation isnt a new thing. For some time, weve seen large capacity engines with 6 or more cylinders use deactivation technology to improve economy when power demands are low. It is widely accepted by the industry that these developments in engine downsizing will be the most effective way for the industry to cut carbon emissions from vehicles in the next ten years because internal combustion engines will continue to dominate the auto market in the absence of an acceptable alternative power solution. Climate impacts: gasoline v diesel v electric Diesel engines have become increasingly popular recently because of their better fuel economy and lower CO2 emissions. However, gasoline (petrol) engines have an advantage over their diesel counterparts. Compared to diesel engines, gasoline engines dont emit nearly as much nitrogen oxide (another greenhouse gas) or soot (particulate emissions) - a major contributor to poor air
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quality. In June 2012, the World Health Organisation declared for the first time that diesel fumes are carcinogenic. A key driver for downsizing is the introduction by governments of taxes and incentives that gradually increase or reduce based on a vehicles level of CO2 emissions, thereby nudging consumers towards less-polluting cars. In Germany, for example, vehicles with CO2 emissions below 110 grams per kilometre are exempt from road tax. In the UK, the exemption starts below 100 grams per kilometre and owners dont have to pay Londons congestion charge. Meanwhile in Spain registration tax is waived if a car emits less than 120 grams per kilometre and in the United States new emission standards require carmakers to achieve a fleet average fuel economy level of 34.1 miles per gallon (8.3 litres per 100km) by 2016 and 54.6mpg by 2025. By 2020 European incentives will have turned into regulations. The European Commission plans to set CO2 emissions to 95 grams per kilometre by 2020. So far EU regulations have aimed at a CO2 limit of 130 grams by 2015. With regard to electric cars, there have been some questions raised concerning their overall impact on the environment. The production of electric cars can have up to twice as much global warming potential as that of conventional cars and in addition the production of batteries and electric motors involves a lot of toxic materials such as nickel, copper and aluminium. There is also the question of how electricity is produced to charge the batteries. In many leading countries such as China coal is used in the production of electricity and this is a major contributor to greenhouse gas emissions. The real cost to the environment of conventional cars is not as high as first thought.

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APPENDIX 1 - Fiat and Chrysler List of Fiat Group assembly sites Including joint ventures, licensed production and outsourced production. Country Italy Owner Fabbrica Italia Mirafiori S.p.A. (100% Fiat S.p.A.) Fiat Group Automobiles S.p.A. (100% Fiat S.p.A.) Fabbrica Italia Pomigliano S.p.A. (100% Fiat S.p.A.) Societ Automobilistica Tecnologie Avanzate S.p.A. (100% Fiat S.p.A.) Maserati S.p.A. (100% Fiat S.p.A.) Ferrari S.p.A. (90% Fiat S.p.A.) Fiat Automveis s.a. (100% Fiat S.p.A.) Location Turin Current products Alfa Romeo MiTo Lancia Musa Bravo Lancia Delta Alfa Romeo Giulietta Panda, Van, 4x4

Italy

Piedmonte San Germano Pomigliano dArco, Naples Melfi

Italy

Italy

Punto 2013 Abarth Punto

Italy Italy

Modena Maranello

Maserati Gran Turismo, GranCabrio Ferrari F12 Berlinetta Ferrari California Ferrari 458 Italia, 458 Spider Palio, Siena, Palio Weekend Strada Pick Up Grande Punto Linea, Idea, Dobl, Uno Mille, Fiorino Siena FLP Palio Fiat 500, 500C, Abarth 500, 500C Fiat 500, 500C (US-spec) Chrysler/Dodge models Lancia Thema Chrysler/Dodge models Lancia Voyager Chrysler/Dodge models Lancia Flavia Chrysler/Dodge models New Ducato Fiat and PSA versions New Scudo Fiat and PSA versions

Brazil

Minas Gerais

Argentina Poland Mexico Canada Canada U.S.A. Italy France

Fiat Auto Argentina s.a. (100% Fiat S.p.A.) Fiat Auto Poland s.a. (100% Fiat S.p.A.) Chrysler Group LLC (58.5% Fiat S.p.A.) Chrysler Group LLC (58.5% Fiat S.p.A.) Chrysler Group LLC (58.5% Fiat S.p.A.) Chrysler Group LLC (58.5% Fiat S.p.A.) Sevel S.p.A. 50-50 JV with PSA Sevelnord S.A. 50-50 JV with PSA

Cordoba Tychy Toluca Brampton, Ontario Windsor, Ontario Sterling Heights, Michigan Val di Sangro, Atessa Hordain near Valenciennes

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Turkey

Trk Otomobil Fabrikasi A.S 38-38 JV with the Ko Group

Bursa

Dobl, Dobl cargo Palio, Van Albea Linea Fiorino and PSA versions Qubo Palio Linea Grande Punto Punto Classic 500L

India

Fiat India Automobiles Limited 50-50 JV with Tata Motors Fiat Automobiles Serbia Joint Venture Government of Serbia GAC Fiat Auto Co Ltd 50-50 Joint Venture with Guangzhou Automobile Group

Ranjangaon (Pune)

Serbia

Kragujevac

China

Changsha

Viaggio

Fiat Licence production Country Russia Russia Plant ZMA Sollers Elabuga Owner Sollers JSC Sollers JSC Location Naberezhnye Chelny Elabuga Current products Albea, Linea Dobl Van Ducato Van

Other assembly plants Country Hungary Brazil Plant Magyar Suzuki plant Sete Lagoas, Minas Gerais Owner Magyar Suzuki Corporation IVECO Latin America Location Esztergom Sete Lagoas Current products Sedici Other Suzuki models Fiat Ducato and PSA versions Iveco vehicles (Daily, Stralis and Cavallino)

(Source: Adapted from http://en.wikipedia.org/wiki/List_of_Fiat_Group_assembly_sites)

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Joint Ventures:
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 rab American Vehicles Company - Assembles Jeep Cherokee (Liberty) for the Egyptian A market and Jeep Wrangler Military (TJ-L) for the Egyptian Army (Cairo, Egypt)  eijing Benz - Daimler/Chrysler Automotive Ltd. - Produces 300C and Jeep Cherokee for the B Chinese market (Beijing)  hina Motor Corporation - Produces Chrysler Town & Country for the Taiwanese market C (Yang Mei, Taiwan)  lobal Engine Manufacturing Alliance LLC - A joint venture with Hyundai and Mitsubishi G Motors to manufacture 1.8-, 2.0- and 2.4-litre engines (Dundee, Mich.)  ritec Motors Ltd. - Produces 1.4- and 1.6-litre gasoline engines for Chrysler and BMW (Mini) T vehicles (Curitiba, Brazil)

(Source: http://www.chrysler.com.cn/en/chrysler/index.html)

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APPENDIX 2 Global car production by the top 20 countries in 2011: Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Country China Japan Germany South Korea India U.S.A. Brazil France Spain Russia Mexico Iran U.K. Czech Republic Canada Poland Slovakia Turkey Argentina Indonesia Cars produced 14,485,326 7,158,525 5,871,918 4,221,617 3,038,332 2,966,133 2,534,534 1,931,030 1,819,453 1,738,163 1,657,080 1,413,276 1,343,810 1,191,968 990,483 722,285 639,763 639,734 577,233 561,863 % of total world production 24.1% 11.9% 9.7% 7.0% 5.0% 4.9% 4.2% 3.2% 3.0% 2.9% 2.8% 2.3% 2.2% 2.0% 1.6% 1.2% 1.1% 1.1% 1.0% 0.9%

(Source: www.worldometers.info/cars)

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APPENDIX 3 The Critical, Future Role of the Car Industry in India India needs a big manufacturing base. No major country has grown rich without one and nothing else is likely to absorb the labour of the 250 million young people set to reach working age in the next 15 years. In July 2012 power cuts plunged an area with a population of over 600 million into darkness, reminding investors that Indias infrastructure is not wholly reliable. Workers tempers boiled over at a car factory run by Maruti Suzuki in Manesar Almost 100 people were injured and the plant was torched. This episode is extreme. Good examples exist. For example, Pune in West India, is a booming industrial hub that has won the steely hearts of Germanys car firms. Inside a $700m Volkswagen plant on the citys outskirts, laser-wielding robots test car frames dimensions and a giant conveyor belt slips by, with sprung-wood surfaces to protect workers knees. It is probably the cheapest factory we have worldwide, says John Chacko, VWs boss in India. In time it could become an export hub. Nearby is a plant owned by Mercedes-Benz. Both German firms were attracted by (fairly) reliable power and access to land but also Punes engineering colleges and tradition of manufacturing. It is a hub for auto-suppliers, says Peter Honegg, Mercedes boss. Smaller firms are arriving too. Zubin Kabraji, of the Indo-German chamber of commerce, says Pune hosts 262 German companies, up from 130-odd in 2008. The foreign influx is not limited to Germans; local suppliers benefit regardless. Three-quarters of VWs parts are bought locally. Some foreigners are not really manufacturing but rather assembling imported parts to get around Indian customs duties. Still, they use some Indian suppliers too - 30-40% of Mercedes components are local. Indian car makers are also prospering. Tata, a conglomerate, has been in Pune for decades and has a new plant assembling Land Rover cars. Bharat Forge, with $1.3 billion of sales, is a maker of car parts, with 70% of its production being exported. Marutis Manesar plants have the capacity to produce half a million cars a year. The abrupt closure of the plant following the violence has already resulted in production losses of around 27,000 cars in 19 working days so far. Maruti, which is Indias largest carmaker and accounts for almost 40% of all cars sold in the country, has been losing out to its rivals as its popular cars, the Swift and the Dzire, are both out of production due to the closure of the Manesar plants. (Source: Adapted from The Economist, 11th August 2012)

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APPENDIX 4 Carmakers in Europe Hands off the wheel - Europes politicians should resist meddling and let its carmakers make drastic, and increasingly inevitable, cuts After the 2008 financial crisis many governments did a sort of automotive easing, subsidising motorists to trade their old bangers for new motors, to stop the car industry from seizing up. But as these scrappage schemes have expired, car sales have whiplashed. In France they are now about a fifth lower than when its scheme was running. In the European Union as a whole, sales have dropped for four years in a row despite the scrappage schemes, and will fall further this year. A price war has broken out, with discounts of up to 30%, as carmakers desperately try to shift units. The slump in sales, and growing competition from Asian makers like South Koreas Kia and Hyundai, have intensified Europes overcapacity in volume car making. The makers of the top range and expensive models - BMW, Audi, Mercedes, Land Rover and Jaguar - are at full throttle, fulfilling the desires of the emerging worlds new rich for fancy wheels. But most volume carmakers are in crisis: on 15 February Peugeot-Citron said its car making operations lost 92m ($121m) last year (2011), Fiats European car making operations lost 500m and GMs European division, Opel-Vauxhall, is said to have lost $14 billion since 1999. GM sources have recently hinted at closing factories in Germany and Britain to stem OpelVauxhalls losses. Renaults Flins factory north-west of Paris looks vulnerable, as does Peugeots Aulnay plant, north-east of Paris. Mitsubishi plans to cease production in the Netherlands and Saab of Sweden has gone out of business. But all this capacity and more may have to be cut to restore the industry to health. In Americas controversial bailout of GM and Chrysler, government aid was provided on the condition that the carmakers made drastic cuts in factories and jobs. Now, relieved of inefficient plants (and of other liabilities as a result of their bankruptcies), the two firms are bouncing back, as is Ford, which also made bold cuts but declined handouts. Britain has mostly been relaxed about its domestic carmakers being closed or sold, and has made foreign firms welcome. Indian-owned Jaguar Land Rover is adding capacity. This week Honda said it would boost output at its British plant. Yet too often, European politicians stand in the way when industry needs to restructure. Even Britains government says it will leave no stone unturned to keep GMs British plants open. President Nicolas Sarkozy harrumphs about Renaults dlocalisation of plants from France and, when Peugeot-Citron said it needed to cut 6,000 European jobs, he summoned its boss to the Elyse Palace. Both companies want to keep much of their high-value design work, and the manufacture of expensive parts like engines and gearboxes, at home. But if they are to be profitable and survive in the long run, Mr Sarkozy must shake off his obsession with keeping uncompetitive assembly plants open as a supposed symbol of national might. (Renault says assembly adds only 15% of the value of a car.) (Source: The Economist, 18th February 2012)

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APPENDIX 5 The Future is the Past Cars have now become so technologically advanced and packed with electronic features that they have lost their souls. They are an emotional purchase and customers are longing for the past when cars (and the world) were easy to understand. There is a simple element of nostalgia: people (especially men) in their 40s and 50s are longing for the cars they dreamt about and couldnt afford when they were growing up. But theres more to it than that. In the US one of the latest trends is teens buying grandpa cars like Chevrolets, Buicks, Oldsmobiles and Cadillacs from the 1970s and 1980s, partly because they are cheap, partly because they are so out theyre in, and also because they are simple to understand and easy to fix. There are no on-board computers or sealed boxes of electronics: mechanically minded owners can work on (and, crucially, customise) them themselves, but it is felt that the main reason is a combustible mixture of low cost, simplicity and nostalgia. There is even a magazine in the US dedicated to tricked-out old motors (Donk, Box & Bubble). Manufacturers like Ford are all too aware of this trend, but its very difficult for them to make something simple. It involves uninventing technologies, so the idea of recreating a perfect copy of a 1960s Mustang or Ford GT40 with remanufactured mechanicals will inevitably end up as a new twenty-first-century version packed with every gizmo and device under the sun. Another good example of the power of nostalgia and simplicity is a small chain of fix-it-yourself garages in France. O Garage is for people who own cars but dont have garages or tools. The garages are fully equipped professional workshops that can be rented for an hour, a day or a week; help is available on site if you dont know your wishbones from your brake discs. Given the boom in domestic outsourcing (that is, paying people to do things you are perfectly capable of doing yourself) this is a bit contrary, but it is most likely connected to a new need to get your hands dirty. As life becomes more and more technical and virtual, more of us will crave simple physical tasks. So perhaps automakers should throttle back a bit on the computer-enhanced enginemanagement systems and design cars that owners can fiddle with themselves. Some suspect that manufacturers are already on to this, in a sense. Weve had retro car design for years (not quite the same as what has been addressed here), but there is a new trend on the horizon. According to Car magazine, the next big thing is local design. Ever since car companies went global (a long time ago) and started using computers rather than pencils to design, cars have looked remarkably similar. Take the badge off a Hyundai and replace it with a Honda emblem and most people wouldnt notice the difference. Moreover, its virtually impossible to tell where the car has come from, as they all look like the product of a world design studio. This wasnt always the case. Once upon a time a British car could only have been made in the UK and the same was true with cars from France, Germany Italy and US. Global markets, CAD design and worldwide focus groups changed all that. But not so in the future. As with food and wine - and increasingly everything else - people want to know where what they buy has come from. Industrial provenance is important and localisation is becoming a strong countertrend to globalisation. Hence automakers are rediscovering their roots and in the future cars will once again look and feel like local products, even if they are made and sold internationally. (Source: Adapted from Richard Watson, Future Files - A brief history of the next 50 years, Nicholas Brealey Publishing, 2010. (ISBN 978-1-85788-534-7)

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