This thesis is about the FIAT Auto industry. It should analyse the reasons why FIAT has been facing difficulties lately. Please use Porter's theories, as well as any others academic theories that may apply. Also is important to mention and reference economic journals, newspapers, and magazines. The following thesis will seek to examine the relatively poor performance of the FIAT group in recent years. All possible explanations shall be explored, whether academic or practical, whether through FIAT’s failings or the better performance of its competitors. The group made losses of 4.2 billion Euros during 2002 and despite measures to reduce its losses it still lost 1.5 billion Euros in 2004 (FIAT Annual Report 2004 p. 10).
The FIAT group’s performance will be compared to other motor manufacturers, Japanese and Korean ones in particular, to examine if there are any common factors in their performances and what makes other companies more or less successful than FIAT. Other factors that have made it harder or potentially harder for FIAT to make strong profits instead of losses, such as the availability of government subsidies and trade barriers will be examined as well.
Manufactures and businesses such as FIAT can be prone to trends outside of their control like the price of steel, oil, and other raw materials they need to produce their goods. Theories relating to economic, strategic and management factors will be used as the theoretical framework for examining the FIAT group’s recent poor performance and suggesting ways that such performances could be improved upon. FIAT is the largest industrial enterprise in Italy, although its success began with motor manufacturing it diversified into many different activities and many different countries, some 61 countries by 2001 (FIAT, Annual Report 2001 p. 42).
Theoretical frameworks used will include the BCG (Boston Consulting Group) Matrix and SWOT (Strengths, Weaknesses, Opportunities, and Threats) or PEST analysis of all the internal and external factors that can make all the difference between success and failure. Porter’s theories relating to the comparative competitiveness of nations, regions, and businesses will also be explained and provide a framework for the analysis of FIAT’s recent poor performance. FIAT began in 1899, based in city of Turin, and for much of the period since has been that city’s largest employer.
FIAT had collaborated extensively with the fascist regime in Italy before and during the Second World War. Building tanks, trucks and planes for the war effort had been a profitable enterprise. Giovanni Agnelli was the dominant figure in the group’s successes until his death in 1945. The rest of the Agnelli family was briefly banned from running the group due to that collaboration. FIAT helped to bring greater prosperity to Italy after the Second World War (Ginsborg, 1990 p. 17).
For much its history the motor section of the group was profitable and funded the expansion into different areas and the acquisition of other motor companies such as Ferrari, Lancia, and Alfa Romeo. It was Giovanni Agnelli’s grandson Gianni who went to be chairman for the group’s greatest successes but whose control of the group was merely nominal by the time it started making losses (Wikipedia). As well as luxury and sports cars, the companies owned by the FIAT group also produces family cars, vans, trucks, and buses (Datamonitor, May 2005 p.
18). FIAT managed to make profits despite occasionally strained relations with the Italian trade unions and some of its cars being regarded as not always being mechanically reliable. From the 1970s militant trade union activity diminished and FIAT’s management was able to modernise its plants (Ginsborg, 1990 p. 411). Whatever the mechanical failings of it car models, the designs of the cars themselves seemed to be popular both in Italy and abroad. The building of plants in other countries, taking over foreign manufacturers helped FIAT’s sales, or having their models built under license arrangements in countries such as Brazil, Poland, and Yugoslavia.
Such arrangements had the advantages of overcoming import restrictions and opening new markets. It has not all been doom and gloom for FIAT in recent years, for instance FIAT is now the single most successful motor company in Brazil, holding a quarter of the market (FIAT group).