Driving through change

February 14, 2010

By Guy Dinmore

Published: February 14 2010
Production may be more streamlined and efficient, just like the cars they build, but for the world’s carmakers the weak link in the chain remains the last one – catching the consumer.

Italy’s Fiat is not alone among car manufacturers in depending on a network of dealerships – 5,000 across Europe – but owning only 1.5 per cent of the total. In the absence of direct control over sales, Fiat is exploring ways to help its dealers, many of them old-style, family-run enterprises, make a big leap into the future.

In a tie-up with MIP, the Politecnico di Milano School of Management, and Roland Berger, a consultancy, Fiat has launched intensive training courses in Italy for its network of distributors and is expanding sessions to Germany in May and the UK in June.

“The most room for recovering margins is in the dealerships,” says Gianluca Spina, director of MIP and professor of management. “Manufacturers have gone through most of the streamlining they can. ”

The management courses are spread over eight, two-day sessions over eight months and also target Fiat managers who work with the dealers. The first course began in November and a second started last week.

Three basic areas are covered: managerial and entrepreneurial skills in developing innovation and leadership and organisational abilities. MIP tutors focus in the morning on theory and fundamentals of management, while Roland Berger consultants follow up with corporate case studies and practical application. Classes are held in MIP’s new home, the Bovisa suburb that has been transformed from an industrial wasteland into a new campus for all Milan Politecnico’s faculties.

Prof Spina says dealers are good at selling cars but not at managing and controlling their enterprises. Fiat manages well, but is weaker in developing ideas and services centred round the purchase of new or second-hand cars.

“We are teaching managers to be more like entrepreneurs and entrepreneurs to be more like managers, and all this in a time of crisis and flux.”

Marco Zurru, a partner in Roland Berger, says that 30 per cent of the cost of a car is marketing, sales and distribution. “A whole culture needs to change,” says Mr Zurro.

“No single manufacturer has solved the distribution issue. They are all struggling to resolve the distribution system because they don’t own it,” he adds. One challenge is the growth, especially in the US and UK, of multi-brand dealers whose loyalty is not to just one provider.

Feedback so far from dealers – who are hardly used to returning to the classroom yet share the cost of the courses with Fiat – is positive, demonstrating how the younger generation is committed to improving the family business.

Elena Sacerdote, “Unetversity” manager running all Fiat Group training, says that more than 25 Fiat managers were involved in designing the programme, plus some dealers, while Roland Berger and MIP “both had a fundamental role, not only in the specific contents but even in the global concept proposal”.

“The profitability of dealerships is crucial,” she says. “These are tough times with increased competition. We need the most professional people to manage these businesses. It has been a weak link.”

Although Sergio Marchionne, chief executive, has turned Fiat round and masterminded its takeover of Chrysler, the economic crisis is taking its toll. Fiat plans to close all its Italian plants for two weeks later this month, laying off nearly 30,000 workers. And in a further blow, the Italian government has said it will not extend the cash-for-clunkers scrappage scheme that helped Fiat sustain sales last year.

Fiat’s relationship with MIP goes back to 1979 when the carmaker became a founding member of a consortium of Italian companies and multinationals with input in the business school.

The school’s turnover is €28m ($38m, £24m) including research activities and fund transfer from the central administration of the university, with sales from executive education (corporate and open programmes) at about €14m.

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