Multibranding……multo complicado?!

When the Fabricca Italiana Automobili Torino was founded in 1899, Giovanni Agnelli could have never thought that the brand would become so big and important. FIAT grew from a small garage-based factory in Corso Dante producing 24 cars a year, to one of the biggest concerns in the world. The automotive history, and especially the Italian automotive history has had some ups and downs and without any judgments made, you could definitely state that FIAT has had a roll in almost every one of them.

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Fiat was from the very beginning successful in racing. Vincenzo Lancia won the Sassi Superga in 1902 in a Fiat 24HP. The base was set for a tumultuous future.

During the WWI Fiat was main-supplier to the army. After the war a new factory was opened in Lingotto. It was one of the most modern buildings ever build, with five floors and a test track on the roof. The innovative creations did not stop at the factory-building, through the years, Fiat was able to continue research and development while producing a affordable car. After WWII, there was a huge demand for that last thing and models like the Ballila and Topolino would stay in production for over 20 years.

Fiat continued to be innovative, things like the double overhead camshaft, direct diesel injection and the futuristic Selespeed gearbox are all patented by the company.

Everything changed in 1979 when the car-department was separated and Fiat became the mother company to Lancia, Abarth, Autobianchi and Ferrari. Turned out that managing several different brands was not to compare with what Fiat was used to. This seems to be a turning point in history. We can all name examples of multibrand companies who succeed in everything they do. With Fiat, or now to be called FIAT S.p.A that is a little different, I think you can discuss if they were up for the challenge to establish a successful future for all their daughter companies.

After Fiat backed of, Lancia was able to produce some amazing rally-cars

Lancia was known for its futuristic technologies and sportiness. When Fiat took over the company in the late ‘70s , Lancia was excelling in the World Championship Rally with the magnificent Stratos. After winning 3 championships in this Ferrari powered rally-car Fiat started to interfere in the rally team. They thought there was much more market value in the 131 Abarth and wanted that to be the Italian rally-car. The Stratos never came back. After some time, a change of mind at Fiat resulted in the decision to label Lancia as the rally-brand and they met expectations with the beloved 037 and later the Delta.

In the early ‘80s, Alfa Romeo was added to the Fiat S.p.A. concern. After some big setbacks during the war (factory bombing caused a production stop), Alfa was very successful in the 50’s and 60’s. The racing department of Alfa was doing great and when Satta designed the 1900 and the Giulietta , Alfa Romeo seemed inseparable. The oil crisis and change of management caused an end to those glory days. Alfa Romeo was going through a rough time. They never lost sight on what they wanted to produce, but simply were not able to realize it any more. The cash injection related to the take-over by Fiat saved Alfa Romeo from going bankrupt. Fiat was the lifesaver and everybody was delighted. Interesting models like the Alfa Romeo 75, a very sporty rear-wheel-drive car helped Alfa through the ’80’s but Alfa never became really successful again.

I think the introduction of the 155, successor to the 75, was the first sign that Alfa Romeo would never be the same.

Fiat decided that Alfa Romeo had to reduce construction costs and introduced their first front-wheel-drive car. In many ways you could understand this change, Fiat itself had always been successful with producing low-cost, affordable cars. But Alfa was different; the brand was founded in 1910 purely to race! Sporty, rear wheel drive cars were the company’s backbone! You take away that, and the consequences are incalculable.

Take BMW for example. Just like Alfa Romeo the brand has been very successful in racing and the ability to create streetcars that would correspond with that. However you can not compare the success on track between BMW and Alfa Romeo, I do think it is a great example of what happens when a brand loses sight on what they originally stood for. BMW never quit producing rear-wheel-drive cars, that was just what the brand stood for and they never failed.

With this in mind, maybe you’ll understand why the introduction of the Alfa Romeo 4C is such a big deal. A lot of people see this car as Alfa’s resurrection. Since a long time there is an ‘affordable’, rear-wheel-drive sportscar, purely build for its driving experience. Wasn’t that the vision on which Alfa Romeo was founded?
Alfa Romeo 4C

These two examples show that Fiat has always been very busy with the strategy of every one of their daughter companies.

When they later told Lancia it should not produce any sporty cars anymore and just stick to luxury sedans to compete with the Germans, Lancia lost its core competence. The foundation of the company was gone.

With the limited budget of the Italian car-industry everybody could figure out that Lancia would have never been able to even come close to the quality that the Germans delivered in everyone of their cars. With failure after failure Lancia is only able to sell cars to the strong supporters of the brand in Italy. If you only remember what is once was…

So how is it possible that under Fiat’s supervision company after company seems to fail, while in Germany the VAG-groups is successfully leading over 11 brands without any problems? I think it is the difference in management. Were Fiat is controlling the strategy over every one of their brands, the VAG-groups lets all their brands fight for themselves. Of course, they can share technologies and help each other but when it comes down to it, it is every brand for themselves. Every brand has their own qualities, own ideas and I think that brings out the best in each brand.

The other big difference between German brands and the Fiat S.p.A. group is the quality of the products. When German cars started to invest in the quality of the cars they produced, Fiat seemed to be more interested in the beauty of theirs. In the late 80’s and early 90’s it was not uncommon that a brand new Fiat broke down after a couple of days. The customer chose quality above beauty and the German brand started to build up huge financial reserves. They used those reserves to innovate and this became a never ending successful cycle. People would buy the cars because of their technological advantage over others and the manufacturers invested the earned money to innovate. The Italians simply could not keep up. There was just not enough cash to be innovative.

Add to that, that the Italians are very proud people. Desperately, Fiat did everything it could to keep all their brands in Italian hands. When Alfa Romeo was suffering some hard times, Ford did multiple attempts to take over the company. After several more months of haggling, Ford made its final offer in 1986. The next day, Fiat — which had stated that it was not interested in Alfa Romeo — announced that it was joining the bidding. Fiat planned the same investment in Alfa Romeo as Ford — but Fiat would take 100 percent of the company from the outset instead of the 20 percent Ford wanted to buy, freeing the Italian government from contributions. In addition to taking on debts of more than 700 billion lire, Fiat offered more than 1 billion lire for Alfa’s assets.

What if Alfa Romeo would have been bought by Ford that day…

Conclusion? Well after some lousy CEO’s, Sergio Marchionne is the new sheriff in town since 2004. While there is unfortunately no life left in Lancia, Alfa Romeo seems to be back on track. The 4C could be a new beginning. The Fiat brand is doing what is has always been good at; making money on low-costs, affordable cars like the Panda and the 500.

The all-Italian vision is long gone because Fiat S.p.A is now Fiat-Chrysler. Strategically a very smart move; the brands under Chryslers wings are and will always be successful in The States.

But just when you think everything is back on track, it’s not. Mister Ferrari, Luca di Montezemelo has just handed in his notice because he clashed multiple times with Marchionne. Not supporting Marchionnes vision of turning Ferrari into a luxury brand to compete with VW’s Lamborghini, the man who brought Ferrari so much success is exit. Next year, an IPO is planned for Ferrari. The outcome of that will be that the power is slowly removed from the Ferrari family and from Italy. Marchionnes intention with this move it not clear, there are rumors saying that Marchionne is preparing for a quarrel with F1 boss Bernie Eclestone. Time will tell the outcome.

Buckle up.

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