Fiat, the Italian automotive and industrial group, is planning a $1bn investment programme in Latin America in an effort to increase its share of the car business in the region.
Cledorvino Belini, the Fiat executive who heads its south American operations, said the company planned to invest $1bn in the three years to the end of 2008 on its operations in South America and Mexico – double the amount in the 2003-2005 period.
Most of the cash is due to be spent on new designs and improved production processes at its large site in Belo Horizonte, Brazil, which is responsible for virtually all Fiat’s car output in the region.
As a result, Fiat, which reports its third-quarter numbers on Thursday, hopes to increase its share of the Latin American car market, which now numbers 4m vehicles a year, from 12 per cent to 15 per cent, in the process overtaking Ford of the US as the third-biggest force in the automotive business in the region. This is behind the two market leaders, General Motors of the US and Germany’s Volkswagen.
Mr Belini said he thought it was “realistic” to try to attain this new target by 2010.
By setting this goal, Fiat is attempting to broaden its marketing efforts in South and central America to try to replicate some of the success in other countries that it has seen in Brazil – where it claims 25 per cent of the market for new cars. Brazil is South America’s biggest market for such vehicles, accounting for sales of about 1.7m cars a year.
“I’d like to see us eventually gain a 25 per cent market share across the whole of Latin America but, in the next few years, would settle for a lower figure,” said Mr Belini in an interview with the Financial Times.
Fiat is particularly keen to increase its market share in Mexico. “About 1.1m new cars a year are sold in Mexico – which means it is Latin America’s second largest car market – but at the moment Fiat is barely present in this country,” said Mr Belini.
He said his plans would mean the company selling in Latin America at least 120,000 vehicles a year on top of the 500,000 it sells now.
While reaching this target might mean importing some extra cars from Fiat’s production bases in Europe, most of the higher number of vehicles that he wants to sell in the region would be locally produced, benefiting from further extensions of Fiat’s South America-based development activities.
“We now have [in Belo Horizonte] a team of development engineers who can do 90 per cent of the job of developing a new car platform [a new basic family of vehicle] and we want to build on this by designing types of car that are likely to appeal to consumers in specific parts of the region,” said Mr Belini.
Fiat has a team of 300 development engineers in the Brazilian city, which adds up to the company’s largest concentration of product development expertise outside its main design base at its headquarters in Turin, Italy.
In recent years, this group has worked on new designs for cars that provide a “sporty” look to vehicles whose main designs have been worked out by Fiat’s engineers in Turin.
An example is a series of cars such as the Palio Adventure – an adaptation of Fiat’s basic Palio small-car model – which Fiat says has sold well particularly in Brazil.
The style of the Palio Adventure is designed to make the vehicle look rather like a “sports utility vehicle” of the type sold in Europe although with the cost kept a lot lower to link in with the limited budgets of most South American consumers compared with those in western Europe.
Other efforts by the Belo Horizonte engineers involve working on adaptations to car engines so that particular types of vehicle can be designed to suit the different types of petrol available in individual south American countries, where the characteristics of this fuel vary from place to place.
Assuming Fiat came close to reaching its new sales targets, it would probably make most of the new vehicles through stepping up output in Belo Horizonte.
It could also consider reopening a “mothballed” car production site in Cordoba, which stopped making vehicles in 2001 but could be started up again at short notice, Mr Belini said.