WHICH DIRECTION FOR ITALY'S AUTOMOTIVE SUPPLY CHAIN?
The ANFIA public assembly discussed the light and shade of the global vehicle market and Italian production
Emphasis was then placed on the many critical aspects of the current situation and the reasons that heighten Italy's problems, such as voracious tax authorities, a weak national economic system, the slowness of logistics, the lack of infrastructures, and family purchasing power that is unable to recover and slows down consumption. There is the risk that the recent increase in VAT, which will be passed on to the final consumer, will depress the market even more, thereby thwarting most of the effects of the increase because of the consequent downturn in inland revenues.
When talking about markets Europe must now be considered a replacement market and our industries should be looking at emerging countries for new outlets. Their internal demand for goods and services is high, they have many raw materials and very high capital inflows and inflation, therefore they are the opposite of western states where there is low consumption, high levels of unemployment, ageing populations and, in some countries, considerable public indebtedness. And we must also respond to new consumers: they are younger, more connected, live in new markets and face the ecological-regulatory challenges of accelerated urbanization that is also sustainable. Profound changes have also taken place in product distribution; between 2000 and 2010 production volumes were substantially similar, but the weight of emerging countries passed from 18% to 45%, Europe dropped from 35% to 27%, Japan from 17% to 12%, and the USA from 30% to 16%. A not inconsiderable challenge also comes from complying with future regulations, with the Energy Taxation reform a sword of Damocles that could nullify the promotion of alternative sources because it penalizes diesel, methane and LPG as they will be taxed at the same rate as petrol. As a result, the price of petrol will remain the same, but diesel will increase by 18%, LPG by 46% and methane by 82%.
One of ANFIA's suggestions for raising Italy up again is to revise the sector's taxation system by bringing it into line with the European average and reinvesting part of the revenue in the sector itself. There is also a need for interventions like "green public procurement" to guarantee the ecology and driving force behind the market for environmentally friendly products. In closing, Razelli announced that he will be leaving the presidency of ANFIA as he is also the president of Magneti Marelli, a company in the Fiat group.
The talk by Sergio Marchionne was eagerly awaited and in fact he made some very important statements, starting with "the current business model will not survive and the market will have only 5 or 6 players; neither Fiat nor Chrysler could have done it on their own", which had a certain effect, as did the quote from a song by Springsteen, when he said that the car industry is recovering but still "just a mile out of hell". "Fiat-Chrysler will sell 4.7 million cars in 2011 and 5.4 million in 2014, figures that make the group the fourth-largest manufacturer in the world. The union of the two brands will lead to many models with shared platforms and a mix of sales throughout the world. Already in 2011" - Marchionne continued - "47% of sales were in the USA and 32% in Europe; Chrysler's production is now twice that of Fiat".
The challenge is to reduce dependency on petrol, even if it is still not economically feasible: for every electric Fiat 500 on sale from 2012 there will be a loss of 10,000 dollars. It is a project based on future prospects given that the current gaps in technology and the market will continue: even by 2020, the market share will not be more than 5%. According to Marchionne, regulatory intervention is not required for pushing electric vehicles; valid alternatives are all that consumers would need. Marchionne then criticized the new taxes on cars and a government that is a millstone around the sector's neck.
"Because Fiat cannot permit itself to operate in Italy in a context of uncertainty and in conditions that are too different from those in other countries, the need to be competitive at all costs forced it to leave Confindustria and now also ANFIA, but this does not mean that it is disengaging itself from Italy but rather that it is looking for freedom of action that will be handled in observance of the laws and with a sense of responsibility, the essential requisites for being a main player in the industrial development of Italy".
The Fiat and Chrysler number one then described the important investment plans for Pomigliano, Grugliasco and Mirafiori (the other sites are already competitive); in fact, the new Panda will be made at Pomigliano and not in Poland, where the current model is made.
He rejected Italy's accusations of making Fiat an American industry and claims from overseas that Chrysler was being made Italian: the process must be global and maintain and enhance both personalities. The basic idea is that of a mosaic in which every stone keeps its own identity but contributes to a whole that will not be the same as the sum of its parts. Marchionne concluded by saying that there are three types of people: those who wait, those who do something and those who ask themselves what happened. Those who complain but do nothing are in the third group. This is a difficult era, but it offers us a second chance to do something good and hold our destiny in our own hands.
The last speaker was Giuseppe Tripoli, who recognized the huge contribution the supply chain makes to the Italian economy and jobs and testified to the attention the Ministry pays to the sector.
• Shortly before the start of the Assembly, we were able to interview Eugenio Razelli, president of ANFIA and CEO of Magneti Marelli, to find out what he thinks about the important (and specular) subject of ecological cars and those that are a lot less so.
Mr Razelli, what do you think about electric and hybrid cars?
Hybrid and electric cars are certainly interesting and will have an increasingly important role, but I think that in the short term there is still a lot to do to develop alternative solutions - natural gas for example. Let's not forget that there are various levels of ecological cars, starting with the simplest Start&Stop systems that save energy without the need for excessive investment. Hybrid technology will spread primarily among bigger cars, those for which it is more important to reduce consumption. But for a picture of the current situation regarding electric cars, you just have to look at the recommended retail prices in any specialist magazine: the models can be counted on one hand and they cost from 12,000 to 15,000 euros more than a traditional car. This does not imply that the margins are higher but reflects the very high cost of the batteries. Certain applications excepted, I believe that it is better to aim at methane (the price is moving in the opposite direction to that for other fuels and the supply chain for systems, power units and so on is very strong in Italy) and at refinements, such as the reduction in the engine power, turbo and direct petrol injection, not to mention diesel which still has margins for increasing efficiency. Germany and France are investing in the methane network: in Italy there are about 830 stations, but there should be at least 1000 for effective coverage. Going back to electric vehicles, cars were born electric but everything stopped for over 100 years because of the problems we know about: we have to make the right decisions that are not uneconomic. Incentives, for example: they have to be "correct" in order not to run the risk of wasting resources and damaging the development of consolidated technologies without getting new ones off the ground.
Even a simple Start&Stop means rethinking the engine (the crankshaft bearings, for example, are subjected to a lot of stress): is the network prepared for the new cars?
Various levels of fuel economy are possible: a certain percentage is achieved with a simple Start&Stop, but if it is combined with a semiautomatic transmission it can be as much as 8-10%. In any case, at Magneti Marelli we are very active on this front, also to simplify the work of the networks. Service centres are now mature enough for consolidated technologies and we are working on preparing them for the changes in the future: and many of them are very open to these changes. Remember that we had already produced the Toyota Prius repair manual two years ago! Another way of "softening" the transition to new cars is to create technologies that do not use the 300-400 volts of the current hybrids. Magneti Marelli is working on 48-volt "low voltage" systems, a solution that would considerably simplify the construction and maintenance of cars. At the present state of the technique, this technology could be applied to cars that are not very big, but we believe in it to the extent that we are making considerable investments in it; also because the entire system has to be worked on, starting from the electronics, to create "smart" components that are not commercially available at the moment with the required characteristics.
How will it be possible to manage the millions of Euro 0 and Euro 1 cars that are still circulating in Italy?
I don't want to add fuel to the fire (there are too many fires already), but there is one thing I must say: there is every likelihood that Italy will have to pay hefty fines because the air in the cities is too polluted. I don't know what point the procedure has reached, but the fines will certainly come and the amounts will be discussed for some time. Therefore it should be in the interests of the institutions to take action to safeguard public health and balance sheets. The vehicle supply chain can propose "entry" models that are clean, perform well and are reasonably priced, but help should be given to buy them so that the oldest cars are quickly replaced, something that could happen if the economy recovers and drivers are not bled dry by taxes and so on. Given the way our country is made, the car is irreplaceable and, besides, I am sure that many Euro 0s and 1s don't do many kilometres and therefore pollute in proportion. Having said that, it is still a considerable problem: there are 14.5 million Euro 0, 1 and 2 and the change to Euro 5 and 6 will be very complicated.
What role can the institutions play?
A very important one if we consider that public transport is also involved. Because Italy is in the clutches of a serious lack of funds, the average age of the vehicles is 10.5 years compared to the European average of around 6-7. The ecological, comfort and safety levels of such an old fleet are very low indeed. Undoubtedly, the government is wrestling with serious problems, but the emergency must be replaced by choices that are made and then pursued over the years with the rudder securely lashed: "patching" makes progress very difficult.