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Discussion Starter #1 (Edited)
I wanted to share an article we published last week: CAN FIAT BE SAVED?

As y'all know FIAT USA sales are in a nose dive. Our recommendation is nothing exotic; you guys have seen it in some shape or form on these pages. They can be activated relatively quickly if there is the will, but FCA needs to take action. The article draws from publicly available data and years of experience in consumer research and insights.

It’s tough reading but I shared it with some contacts I have at FCA.

For those who do not have a LinkedIn account, below is the text of the article.


Photo: FCA

CAN FIAT BE SAVED?

I recently bought a Fiat 124 Spider. Although Chrysler and FIAT formed FCA, and I owned many Chrysler, Dodge and Jeep vehicles, I never saw myself owning a FIAT.

It was not an easy choice. The internet is full of negative stories of FIAT’s declining sales, and reports of poor quality and customer satisfaction. And then there are the never-ending Fix It Again Tony jokes.

Before buying I had to do my homework; to my surprise Spider’s reviews are overwhelmingly positive. I also discovered a rich FIAT heritage of small, agile, fuel efficient cars that are fun to drive; and a small but vibrant community of enthusiasts. I test drove both the Fiat Spider and the Mazda MX-5, with which the Spider shares much of its underpinnings. I loved the FIAT. The fact that Spider is built by Mazda in Japan gave me the quality reassurance I needed to pull the trigger.


Two months later I can say this is possibly one of the best cars I ever bought: it is relatively affordable; looks and feels well built, is attractively styled inside and out; is surprisingly comfortable –once you get inside that is; is a hoot to drive and pretty fuel efficient. The eager little 1.4 turbo engine roars like one those Italian cars you see racing through the screen on vintage movies. Still, things look grim for FIAT USA.

SALES ARE PLUMMETING

The chart below shows FIAT USA’s unit sales by model, from its comeback in 2012 through what we estimate them to be by end of 2019. Several things jump out from this chart:


1. FIAT hinged its comeback to North America on 500

Implications

  • Consumer data consistently shows that a brand’s best-selling vehicle in that market becomes its defining model. Common belief says that FIAT vehicles are too small for North American tastes. However, it is not just about size but practicality – practicality is a requirement for building sustainable demand. A 2-door vehicle like 500 lacks the practicality to sustain demand beyond the initial excitement.
  • A brand defined by a niche model is bound to become a niche brand. In so many words, because FIAT built a brand around a niche model, it communicated that FIAT is a niche brand and, thus, of little relevance.
As cute and lovable as 500 is, a 2-door vehicle with limited practicality offers limited ability to sustain and, more importantly, support demand for an entire brand
2. FIAT USA sales peaked at around 45,000 units and failed to grow beyond that despite adding more practical 4-door variants

Implications
  • The fact that the addition of 500L and 500X failed to grow FIAT sales beyond the ceiling of 45,000 units is evidence of cannibalization. At best, the 4-door variants were too closely associated with 500 to generate additional demand. At worse, the FIAT brand lacked the relevance needed to attract additional buyers

FIAT’s initial requirement to have separate dealerships from Chrysler’s wide network didn’t help, either.

In brief, the decline in FIAT USA sales is the result of (a) the collapse of 500 sales, itself a niche vehicle without the practicality needed to sustain demand, and (b) the failure of additional models to expand brand sales beyond the original ceiling.

So, why did 500 fail to sustain sales when, as many point out, FIAT was simply following MINI’s relatively successful strategy of launching with a small 2-door car?

FIX IT AGAIN TONY


Research data shows that vehicle reliability and dependability are consumers’ two most sought-after characteristics. DQR, short for Dependability, Quality and Reliability consistently comes on top as the dimension with the greatest influence shaping consumers’ opinion of brands and models, earning their trust, and their likelihood to purchase. But who hasn’t heard the old Fix It Again Tony joke: in North America, FIAT stood for the opposite of DQR. Let’s face it, FIAT had an uphill battle returning to North America. This fact seemed obvious to anyone on this side of the Atlantic.

For reasons known only to FCA, instead of grabbing the bull by the horns, FIAT chose to ignore the DQR issue and hinge its return on 500’s cute looks and its Italian origins. Predictably, this message resonated with a small group of consumers who had been awaiting FIAT’s return, but failed to speak to anyone else. Worse, in the intervening years, FIAT has been languishing at the bottom of the independent quality and customer satisfaction rankings, as if confirming that its quality remains as poor today as it did 30+ years ago.

The most recent JD Power Vehicle Dependability Study (VDS), which measures the number of problems owners experience with their vehicle after three years of ownership, ranks FIAT dead last, and by what looks like a significant margin –see below.

Similarly, the most recent JD Power Customer Satisfaction Study (CSI), which measures owners’ experience with their dealer, shows FIAT dead last as well, again with what looks like a significant gap –see below.



CAN FIAT BE SAVED?


As an owner new to the brand I have come to appreciate the things FIAT has to offer: affordability, fuel efficiency, fun-to-drive, and attractive design. Nevertheless, the stakes are high: FIAT owes it to customers and dealers to support the brand they have invested in. And a failed comeback would be extremely embarrassing, particularly for a brand that appears prominently on the corporation’s name. So what can FIAT do?

Admittedly, we are consumer research experts, not manufacturing experts. If there is anything I have learned in 25 years doing this, is that quality is never a 100% objective measure. Consumers’ perception always plays an important part. For instance, what is a comfortable seat to one consumer can be a torture device to another; a quiet and refined cabin can have excessive wind noise to another. Further, loyal customers tend to be more forgiving of quality issues than those new to a brand, which ends up helping brands with strong loyalty like Toyota, Honda and Subaru, and punishing brands that rely heavily on conquests, like FIAT.

So, from this perspective, there are several steps FIAT can take to stabilize and regrow its North America business:
 

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Discussion Starter #2 (Edited)
continuation

1. Re-launch the brand focusing on 500X

  • 500X is a well-designed 4-door vehicle, giving the model greater practicality and, in doing so, greater opportunity to generate sustainable demand for FIAT. Also, the Mini SUV segment, where 500X competes, has seen dynamic growth in recent years
  • Consumer research shows that conquest buyers, particularly young and first-time buyers, tend to respond well to three criteria:
  1. Affordability and low cost of operation –in terms of cost of acquisition, maintenance and fuel economy
  2. Attractive designs and brand image
  3. Smart, efficient packaging –this is normally their only vehicle and, as such, is required to serve multiple roles
500X is arguable FIAT’s best-positioned offering to fill these requirements

2. Communicate messages that are relevant to consumers

  • As we saw, DQR resonates with the vast majority of consumers: DQR has the ability to generate demand better than any other message. FIAT needs to reverse widely held perceptions that FIAT is the producer of vehicles of subpar quality
  • It is extremely important that FIAT finds a way to communicate DQR in a credible and believable manner. For instance, over the past 10 years Subaru has produced some of the most effective ads in the industry. It created a collection of mini-stories that (a) focused on the people, keeping the Subaru in the background as the enabler, and (b) communicated durability in an indirect yet credible manner. The combination of these two elements helped consumers internalize these messages better than any other automaker has been able to do.
FIAT needs to use its own communication style, but the message consumers want to hear is not negotiable.

Will these alone guarantee FIAT’s success? No, underlying DQR and customer treatment issues still need to be addressed. Nevertheless, these steps will maximize communications impact to hopefully help FIAT pull out of its nose dive.

The principle of the brand-defining model says that once demand for 500X stabilizes and sales start to rebound, we should see sales of the entire FIAT brand start to recover.
 

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I think that ship has left the harbor.
Even MINI is struggling in the US.

It goes under the banner of everybody that wanted one, done bought one.
I think the 500X should be reskinned as a Chrysler and the 124 Spyder as a Dodge and the cord be pulled on the FIAT brand in the U.S.
 

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Discussion Starter #4 (Edited)
Perhaps. But as long as dealers continue to have a vested interest in their FIAT franchise, people continue to buy FIATs, and until there’s an official announcement, FCA has an obligation to make FIAT work.
 

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I think that ship has left the harbor.
Even MINI is struggling in the US.

It goes under the banner of everybody that wanted one, done bought one.
I think the 500X should be reskinned as a Chrysler and the 124 Spyder as a Dodge and the cord be pulled on the FIAT brand in the U.S.
Agreed, this is what they should have done in the first place. FIAT while interesting and unique in many ways has no brand equity in the US, I am old enough to remember when they were sold here and as an Italian-American to me they were an embarrassment. Bad as Japanese cars USED TO BE, but then the Japanese mounted an obvious campaign to improve quality between 1980 and 1985 or so and the results paid off, both at the low end (Corolla, Civic, Sentra) and the high end (Lexus, Acura and Infiniti). FIAT did nothing but alienate customers. It does not seem that much has changed to me. Unless they are ready to make a quality investment that is the over-riding priority, as we have seen in recent years from Hyundai/Kia, they should pull the plug, redesign the 500X as a small Dodge and move on.
 

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Discussion Starter #7
Isn’t Olivier François head of Fiat at the moment?

I am still baffled by how oblivious Marchionne was to the lack of equity Fiat had in North America. As a Canadian, he should have known better.

The whole point of taking these steps is precisely to build brand equity. Of course this should have been started in 2012...not 2019 or 2020.
 

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Exactly...The FIATS I recall, the 124 sedans, the 128s with front drive and the X/19 mid engine were all great driving cars, likable, rated well when tested when new....but could not stand the test of time. Now at the time (early-mid 70s) Japanese cars were not much better. However, about 35 years ago that all started to change. Remember when the German makes scoffed at Acura, Lexus and Infiniti? Well their quality forced M/B, BMW and Audi to throw in free maintenance on their leases. People knew that the German cars start to cost a lot just for normal repairs. The South Koreans did the same thing as the Japanese about 10 years ago. FIAT still seems to have the same attitude as they had in the '70s, buy what we build, isn't it good enough? Well it aint! The world has not stood still.
 

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Discussion Starter #9 (Edited)
I always heard about FIAT’s know-how building small, fuel efficient cars that were fun to drive. But to me the eye opener was when I was able to see first hand how FIAT actually improved on the latest Mazda MX-5.

Everything that makes Spider better than Miata are all FIAT touches: the styling, the engine, the exhaust sound, the suspension tuning. Of course Mazda had to provide a well-developed quality platform for Spider to shine.

But that’s just it: FIAT wants to skip to desert without really showing that it can make a good salad and a main course.
 

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I guess their European customers are just more tolerant of the issues that do pop up, or the redeeming traits of the cars, out weigh them for that market. Here, people value reliability above all else. How else could the Japanese prosper with the most boring look alike line of CUVs on the planet and hardly any sports cars (thank goodness the Miata is still round...)
For example, Subaru makes the excellent BRZ (same car is sold as the Toyota '86', a reference to the last rear drive Corolla, the AE-86 model), yet they NEVER advertise it. All they have in their ads, is mushy, tree huggers...gushy....puppies....all that stuff. The great little BRZ is all forgotten. Poor marketing. You can have a Ying and you can have a Yang. It should not be.....all mush....same with Toyota...someone needs to tell Jan, that 4Runners and Rav 4s are not exciting...put that gal in an '86' and generate a little excitement. BORING...…..
 
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Discussion Starter #11
Based on research I’ve done across markets, consumers everywhere want surprisingly similar things in their new vehicles, namely DQR. What changes is the level of familiarity and trust consumers in different markets have have with various auto brands.

In other words, it is not that Europeans wants any less quality than North Americans do; it is that they trust Fiat to deliver quality more than we do.

At the end of the day, though, declining market share and profits in Europe shows that FIAT is not delivering the expected levels of quality there either.
 
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I guess their European customers are just more tolerant of the issues that do pop up, or the redeeming traits of the cars, out weigh them for that market. Here, people value reliability above all else. How else could the Japanese prosper with the most boring look alike line of CUVs on the planet and hardly any sports cars (thank goodness the Miata is still round...)
For example, Subaru makes the excellent BRZ (same car is sold as the Toyota '86', a reference to the last rear drive Corolla, the AE-86 model), yet they NEVER advertise it. All they have in their ads, is mushy, tree huggers...gushy....puppies....all that stuff. The great little BRZ is all forgotten. Poor marketing. You can have a Ying and you can have a Yang. It should not be.....all mush....same with Toyota...someone needs to tell Jan, that 4Runners and Rav 4s are not exciting...put that gal in an '86' and generate a little excitement. BORING...…..
These buyers don’t care. They want an appliance to get them around, excitement isn’t part of their consideration, or at least it’s a very low priority. Same for styling. Much as we look at a refrigerator, that’s how they look at cars.
 

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At the end of the day, though, declining market share and profits in Europe shows that FIAT is not delivering the expected levels of quality there either.
It shows nothing if the sort.

The opinions of the hundreds of thousands a year who trusted FIAT to make good B-segment cars is moot until FIAT actually offers them a product in that category again.
 

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Discussion Starter #14
Right....I forgot, it’s always that next product around the corner that is going to fix everything...
 

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I always heard about FIAT’s know-how building small, fuel efficient cars that were fun to drive. But to me the eye opener was when I was able to see first hand how FIAT actually improved on the latest Mazda MX-5.

Everything that makes Spider better than Miata are all FIAT touches: the styling, the engine, the exhaust sound, the suspension tuning. Of course Mazda had to provide a well-developed quality platform for Spider to shine.

But that’s just it: FIAT wants to skip to desert without really showing that it can make a good salad and a main course.
Not to mention the necessary and nourishing broccoli and cauliflower....and...of course...the very finest Italian coffee to go with that dessert that FCA is carelessly skipping to!:p:D
 

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Discussion Starter #18 (Edited)
In the cases of Chrysler and Lancia, that line is far far beyond old and worn out!
I wasn’t pointing fingers at FCA in particular, though.

Every automaker with a brand problem always says the same “just wait until we launch the new XYZ model; that will turn us around.”

When I was at Mitsubishi, the new Eclipse was going to fix everything. Then the new Raider. Then the new Lancer. Then the iMIEV. At Lincoln it was the LS, then the MKZ...

I guess in FIAT’s case is EVs now.
 

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Can Fiat be turned around in NA? Sure. Do I think it would be worth the time and investment? Nope, not when there are established NA brands that need investment. Does management show any inclination of wanting to “improve” Fiat sales? Don’t be silly, of course not.:oops:
 

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Discussion Starter #20
Can Fiat be turned around in NA? Sure. Do I think it would be worth the time and investment? Nope, not when there are established NA brands that need investment. Does management show any inclination of wanting to “improve” Fiat sales? Don’t be silly, of course not.:oops:
I draw a blank when it comes to guessing what management is thinking these days.

I cannot imagine that they want to pull the plug on FIAT. At the same time I see no evidence that they give a f*ck.

Who knows really? Most likely not even they do.
 
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