Restructuring / Turnaround Strategies Case Study

The Fiat Group: Rebuilding its Car Business

Abstract:
Fiat Auto, the auto division of the Italian conglomerate Fiat Group, had gained huge success during the 1980s and 1990s. But with increasing competition the company's as well as the group's fortune started declining and for three years - 2001, 2002 and 2003, the group reported negative profits. To turn the fortunes around, Sergio Marchionne (Marchionne) was appointed the CEO in 2004. Marchionne brought changes in the management structure and introduced new car models. In August 2005 he introduced a new three-year industrial plan to re-launch the entire Fiat Group and bring recovery to the auto division of the group. The success of the plan was seen at the end of 2005, when the financial results of the group showed profits. But critics were doubtful whether this success would continue in the coming years in the face of competition from other car manufacturers.

Pedagogical Objectives:

• To understand the problems being faced by Fiat Group, especially its auto division
• To discuss the underlying reasons behind such problems
• To discuss the appropriateness or otherwise of CEO Sergio Marchionne's strategies to turn the fortunes of the auto division and the group around
• To debate what is the likely future of the group, especially the auto division
• To debate what are those practices that must be institutionalised independent of the CEO.

Keywords : Fiat Group; Fiat Auto; Business diversification; Sergio Marchionne; General Motors; Put-out option; Industrial plan; Customer preferences; Joint ventures; Foreign competition; Government protection schemes; Restructuring programme; Restructuring / Turnaround Strategies Case Study; Organisational change; Capacity utilisation