Paris raises in the comments section (Italian link) the recent strong performance from Fiat in the car sector:
Fiat SpA, Italy's best performing stock, increased its sales in Europe by 15 percent in September, the fastest growth among the major manufacturers, while the overall market fell by 2.6 percent.
Fiat sales, including the Lancia, Alfa Romeo, Ferrari and Maserati marques, rose to 94,540 cars in September from 82,462 a year earlier, thanks to the Fiat brand, whose sales jumped 19 percent, the Brussels-based Association of European Automobile Manufacturers said in an e-mailed statement today. Fiat group nine-month sales grew 18 percent to 893,240 cars, compared with a European average of 0.1 percent growth.
``Fiat is for sure doing very well under an industrial point of view. In this moment, it is the best carmaker in Europe for growth potential,'' said Gianpaolo Rivano, who manages about 200 million euros ($251 million) at Gesti-Re SGR SpA in Milan.
Indeed the rise in September sales (remember that confidence index) was particularly spectacular:
Fiat's September sales in Italy grew 5.9 percent, helped to growing demand for Grande Punto and Panda models, the two best- selling cars in the country, the Ministry of Transportation said on Oct. 2. Combined sales at Fiat brands advanced to 55,907 vehicles from 52,772 cars.
This progress is even more astonishing, since as Paola points out in comments, the European car market is in a very sorry state:
Renault SA and General Motors Corp., suffering from a lack of popular new models, led the fourth monthly decline in European car sales in September as fuel prices rose.
Sales decreased 2.6 percent from a year earlier to 1.41 million vehicles, the Brussels-based Association of European Automobile Manufacturers said in a statement today. Nine-month sales inched up 0.1 percent to 11.8 million vehicles......
``The big markets worldwide, which includes Europe of course, are saturated and largely stagnant,'' said Robert Heberger, an analyst at Merck Finck in Munich. ``Unemployment and higher fuel prices are playing a role as well as the fact that the French carmakers' products and GM's to some extent have aged.''
So the first thing to note is that Fiat have some good new models, and they are gaining, at least in the short term, market share. Questions however remain:
i) What kind of offers were Fiat making to get these results? This is a straight question, since I simply don't know, so can anyone fill this in. Obviously it is one thing to get sales, and another to get profitable sales, as we have seen with Ford and GM in the US in recent years (and we have also seen the monthly volatility which goes with the 'offers' season).
ii) Where are the components for these cars being made (indeed where is the assembly being done?). If all of this is still happening in Turin then the news isn't anything like as promising as it might be. Basically this thought relates to a point Sebastian Dullian is making on Eurozone watch blog about how, while unit labour costs in Italy are rising, they are not rising anything like as fast as they are in Spain.
Now as Paris often kindly points out I am not based in Italy, but in Catalonia, Spain. So I am in a position to make some sort of comparison here. Basically Catalonia was the industrial centre of Spain (together with the Basque Country) during the industrial age. But ongoing inflation and generally rising living standards mean that Spain is no longer at all competitive in many of the industrial sectors, and in particular the automotive one. Catalonia used to boast one of the largest concentrations of car component manufacture in Europe, but those days are now long gone. Most of the component companies were, like their Italian equivalents, small family type businesses, and these have now largely migrated to Eastern Europe, and even assembly itself is only hanging on by a thread since the Spanish government pays to keep it going (a luxury which may or may not be advisable, but which the Spanish government is in a much better position than the Italian one to permit itself since the budget is in surplus and the debt to GDP ratio is well within the EU guidlines).
So the question is, how effectively is Fiat leveraging outsourcing in Eastern Europe, and to what extent is this increase in output being achieved by retaining low paying employment in Italy?
Paola also raises two more interesting questions: the degree to which the recent increase in industrial production has been a Fiat story, and to what extent is this increase sustainable in the future (ie won't the competitors respond?). Thus Paola:
Paris is right; there has been an increase in Italian Industrial Output. I went to look closely at the statistical data for the period Aug 2005 - August 2006 and the comparisons between Period January-August 2006 and January-August 2005. My feeling is that the growth is largely due to one company's performance: FIAT, the largest company in Italy. Not surprisingly, given that their revenues and market share have grown steadily in the last year. In spite of some fluctuations, the change in output of other sectors average out to a minimal increase in total industrial output. If I am correct with this analysis, then the next questions to ask are: Why Fiat is performing so well, while the automobile industry is stagnant? And Is FIAT performance sustainable in the future? Lastly, will a superior performance in one industrial sector be enough to push the whole economy also in the future, in order to account for growth in macroeconomics models? I do not know the answer for any of these questions, but I will try to give my opinion about the first one. Fiat, in my eyes, has recently changed management, acquired a fresher look and launched some new models that have better quality than they used to have. The company has realized that Europeans would not buy low quality cars at average prices unless they do not have any other choice, that the Italian Government would not rush to save the company's finances any more (better start selling people what they want!), and that nowadays marketing is an important Department... All this while some competitors (such as the Peugot case reported by the Bloomberg article) are sleeping and have lost market share in Europe.
Update: Well to some extent I have answered my own question, since this article from Polish radio explains the strong performance being achieved in the Tychy plant:
Fiat, Poland’s traditional market leader has maintained its lead in the assembly of new cars. Fiat officials say that three shifts are working 6 days a week at their factory in Tychy in the South, to satisfy West European orders.
And of course the link Paris supplied shows workers at the Melfi plant in Southern Italy.
Also amid all the cheering lets not forget this:
"In Western Europe, new-car sales only increased in Germany, by 4.5 percent, as Europe's largest economy — and second-biggest car buyer — finally went shopping after years of little growth. Car sales dropped 13.3 percent in France, Europe's fourth-largest car market, and by 3.2 percent in Italy. Britain, the biggest purchaser of new cars, saw sales fall just 0.7 percent to 413,991. (September data)"
Now this is important since the extra sales in Germany undoubtedly have some relation to the forthcoming 3% VAT increase, which means that in any rigourous accounting exercise part of them should be counted against 2007, since purchases brought forward will mean less sales to come.
Italy's Fiat SpA saw sales surge 14.9 percent compared with a year ago. Its core Fiat and luxury Alfa Romeo cars proved more popular, although Lancia sales were down. The company ended 17 successive quarterly losses by reporting higher profits in the final quarter of last year.
Update 2: Paris has kindly found us a link in English on the Fiat turnaround.(Hat-tip FxTalks). The results are obviously impressive, and more impressive I admit than I initially appreciated. Fiat is obviously on the attack again after some very bad years, and seems to be leveraging some substantial productivity improvements, as well as having some obviously popular design ideas.
It would now be interesting to see this spreading across more sectors. However, unfortunately, we are far from out of the woods yet. If we look at the other 'elderly' economies, Japan and German, both have been able to introduce substantial reforms to make their most competitive companies even more competitive, so much so that they are obviously now far more efficient than all but the best US companies. This however does not solve their outsanding macro problem which is how to generate additional internal demand, increase their tax base, and be able to sustain their welfare services. Having globally succesful companies just isn't enough I'm afraid. This nut is a hard one to crack.
Italy Economy Real Time Data Charts
Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Italy related comment. He also maintains a collection of constantly updated Italy economy charts together with short text updates on a Storify dedicated page Italy - Lost in Stagnation?