The new chairman and managing director of Fiat India, Alberto Montanari, says that his company will push more volumes into the market in 2003 and is targeting 50,000 units for the year, despite a slump in sales in the last few months.
However, he has no solution yet on how to off-set the huge losses Fiat makes on every Palio sold in India. "I cannot raise prices. The Indian market is not only price sensitive, several new players are launching cars in the same price segment. Competition will only toughen," he adds.
The bigger enigma is that more volumes of the existing models will translate into more losses. A small, volume car slated for a European launch in the second half of the year, will be launched only later. The 'Small' will come fitted with smaller engines than the Palio.
Fiat sold 28,500 cars (Palio, Siena and Uno) in calendar 2002. But monthly sales have dipped alarmingly from the peak of 3,900 cars in April to around 900 cars in December.
Dealers say sales are going down because the company is pushing low volumes to keep losses at check. On the other hand, company executives blame the dealers for mismanaging their inventory.
Losses piled up by the manufacturing subsidiary since its inception, have largely been off-set by the $300 million voluntary grant, which the parent pumped in last year.
But the company has to stand on its own, with the parent, faced with a financial crisis, is undergoing a massive restructuring.
Montanari is putting a new marketing and personnel strategy at place. Fiat has roped in Anand Mohan Gupta from Honda Siel to head its marketing team. The new team will be working closely with a marketing strategy group based in Italy.
Fiat has developed this crack team to evolve synergies in its operations worldwide and specially put its subsidiaries in four priority markets outside Italy -- India, China, Turkey and Brazil -- on a fast track.
Among the first jobs that Montanari, who has come from South Africa to replace M P Bianchi, has undertaken is to restructure the workforce. "We have a lot of talent here. But we have to see they are utilised adequately. A few divisions need more people and we will ensure that there is a parallel movement across the company," he said.
But the company's problems are more financial, including the one back home, than personnel. Montanari agrees. But he assures that the Indian customer need not be worried. "We have made huge investments here and we are here to stay," he says.
