Fiat Auto has often said that it doesn't need a partner. Now that you have merged your foundry arm with Renault's, has this view changed?
No. We currently have an installed capacity of around 3 million units. That will rise to about 3.5 million by around 2005. We have the volume and the financial resources to continue on our own.
From 1998 to 2002, we will invest L20 trillion ($12.8 billion) launching 19 new models and increasing our global presence.
After 4 1/2 years in the black, Fiat Auto reported a loss of L63 billion in the third quarter. What is the forecast for the entire year?
This year Fiat Auto suffered from a combination of factors which clearly affected our profitability.
The crisis in Brazil, our second largest market, was longer and heavier than anyone predicted. Argentina and Poland were also down - and we are market leader in those countries.
But even though we had a setback in Italy, we were able to outperform the market across Europe.
The European market grew 7.7 percent in the first 10 months, but Fiat, Alfa and Lancia sales were 13.7 up percent.
Why have you suffered in Italy?
We expected a market of 2.1 million units in Italy this year. Instead, it will reach 2.3 million. This unexpected strength made all our competitors concentrate on attacking the market. As the market leader, we were at the center of these attacks.
In our core mini and supermini segments, the South Koreans were extremely aggressive.
The Japanese were equally aggressive in the lower medium segment. In 1999 we plan to return to over 40 percent of the market.
Unfortunately, car demand in Italy next year will probably fall to around 1.8 million units.
What will your overall sales be this year?
We think we will sell around 2.5 million units - roughly 950,000 in Italy, 800,000 in the rest of Europe and 750,000 outside Europe.
What about 1999?
We plan a very similar volume, despite the changeover of our mainstream model, the Punto, next summer. We are aiming for at least 100,000 extra sales from new products such as the Alfa 166 and Fiat Multipla, and from expansion in new territories with our 178 world car.
You expected to build 690,000 Palios worldwide in 1998 and 840,000 in 1999. How did the problems in emerging markets affect these figures?
It's rare for different countries in different continents to suffer the same problems at the same time. But it happened this year, and it affected the growth of our world car program.
This year we will make 500,000 Palios, and 550,000 in 1999. The biggest slump was in Brazil. We were predicting a passenger car market of 1.7 million for 1998. Now we think it won't be more than 1.2 million. Out of this 500,000-unit
decline, Fiat's share is 150,000. But our long term strategy is the same. In the early 2000s, we will be making 1 million Palios a year.
What about the Palio in Russia and India?
In Russia, if all the red tape is cleared in time, we will begin assembly of complete-knock-down kits late this year. We will produce 10,000 to 20,000 units for 1999.
We will make around 10,000 cars a year in India starting next spring. We will eventually make 70,000 Palios a year in Russia and 85,000 in India.
Alfa Romeo was the fastest-growing brand in Europe through the end of September - up 41.8 percent. You said the relaunch of Lancia is your next priority. When will this start?
Next summer we will launch project 839, to replace the Dedra. The Kappa replacement will follow by the end of 2000. The new Zeta minivan will arrive in 2001.
It will be followed by the Ypsilon replacement a year later. We are confident that this new model range will re-establish the Lancia marque.
Will there be niche derivatives of the new Lancias?
Absolutely. We will have station wagon versions of the Dedra and Kappa replacements. We will also have a coupe based on the Kappa.
But we could do more. The new spaceframe technology we are experimenting with on the Fiat Multipla makes production levels of 80,000 to 90,000 units a year extremely competitive.
This perfectly suits niche models - not only for Lancia, but also for Fiat and Alfa Romeo.
Is it true that the new Kappa is a direct development of the Multipla spaceframe concept?
Not exactly. This car will be the first to feature a new type of platform. It is a combination of a traditional stamped steel floorpan, together with a steel spaceframe carrying the skin.
It is neither a traditional platform, nor a pure spaceframe. Its main advantage is to offer greater flexibility - not only on the length of the vehicle, but particularly on its width.
That was almost impossible with traditional platforms.
Will this new type of spaceframe platform be suitable to both front- and rear-wheel drive?
Yes, this is one of its biggest advantages. We will use this new structure not only for a flagship model such as the new Kappa, but progressively on our entire range - high volume models included.
There are rumors of a baby Alfa, smaller than the 145, and a coupe, bigger than the GTV.
There are no plans to make an Alfa smaller than the 145. When we replace the GTV coupe, we could make something different from the current car.
It would not necessarily be bigger or smaller, but it would certainly be sportier. This is what the Alfa customer wants from us.
With regard to the Fiat brand, there are rumors of a Croma replacement and a sport-utility.
We never stop thinking about a car bigger than the Marea. Maybe the idea of calling it the Croma replacement is wrong. The final decision on this project will come next summer. If approved, it could be on the market around 2002.
As to a sport-utility, no decisions have been made yet. Production could not start before 2001.
The Lancia Ypsilon was brought to market in 26 months. Project 188, next summer's Punto replacement, was planned to take just 24 months. Will you achieve this?
Yes. We froze the styling in July 1997, and we plan to begin production in June of next year.
Alfa has started to offer two levels of dealer margin on the 156 and 166. The margin is a little more than 10 percent if there is no used car to be traded-in. But it rises to about 15 percent if a trade-in is involved. What is the aim of this policy?
We wanted to reduce the level of customer discounts offered by some of our dealers.
If there is a used car, we give an extra margin to the dealer so he can offer a more appealing trade-in evaluation. We are very satisfied with the results of this policy.
Although it began with those two Alfas on a pan-European basis, in the near future we want to extend it to the entire range of Fiat and Lancia cars.
Do you think block exemption will be renewed?
I honestly don't know. The issue is to have an ambitious dealer network which works in very close partnership with the carmaker. Any new type of distribution law should act as a frame in which this partnership cooperation has to operate.
Car superstores are not the aim of carmakers, nor of car dealers. Car distribution will dramatically change in the coming years.
Roberto Testore was interviewed by Automotive News Europe Staff Reporter Luca Ciferri in Mirafiori, Italy.For the first time this century, Fiat will end the year with less than 40 percent of the Italian market. According to Roberto Testore, chairman of Fiat Auto since February 1996, everything that could go wrong this year did. But the outlook for 1999 is brighter - both in Europe and around the world.