Palio: How Fiat drove out of Kurla plant blues with flying colours

Mumbai, January 20: | Updated: Jan 21 2002, 05:30am hrs
Circa 1998: Gloom descended on Fiat’s Kurla plant as production of its Uno model almost came to a halt. Fiat Auto was gasping for air as sagging sales and new entrants including Korean chaebols Hyundai, Daewoo and even desi truck maker Telco launched their Santros and Indicas, killing whatever market was left for the Uno. The company’s employees were already speculating on the next closure of the plant while the management did not have a clue on what to do next.

* January 2002: At its refurbished sprawling campus in Kurla, Italian car major, Fiat Auto is re-writing history. The company, which was written off just a year back as a non-serious player in the India, has got car buyers waiting in a long queue to buy its latest offerting -- the Palio. Sales are up 13 per cent in 2001 and the company targets to sell 50,000 Palios in 2002.

Fiat’s revival of fortunes in India makes an interesting textbook case on how a good product and right pricing can make or break a business in India. For years, the Kurla automobile plant was producing cars which no one wanted and it was writing its annual accounts in red ink. Militant labour unions were striking work almost every Diwali as the company’s then promoters, the Doshis, were clueless on how to take the company forward.

Fed up, the Turin-based multinational decided to take matters into its own hands. For one, it bought the Kurla plant from Premier Automobiles Ltd, makers of single model car for four long decades, for Rs 500 crore and retrenched over 40 per cent of staff through a generous VRS.

At the same time, from its headquarters, the company decided to launch its world car -- the Palio in India, along with its launch in Brazil, Europe and China.

Says Fiat Auto’s managing director, MP Bianchi, the main architect of Fiat’s revival plan: "We changed everything. Right from vendor’s to a dealer’s mentality. We restructured sales and marketing teams, energised our dealers and asked the customers what they wanted in a car. It helped us as the sales graphs are rising."

Besides Fiat, which hired Formula 1 car driver Michael Schumacher as its brand ambassador in Europe, roped in India’s biggest cricketer, Sachin Tendulkar to endorse the Palio. The advertising campaign generated so much hype that Indian consumers fell over each other to buy the car. The car, priced at Rs 3.5 lakh for the basic version, hooked many first time buyers.

The results are there for everyone to see. With 8,500 Palios sold and another 5,000 orders in hand, Fiat has acquired a 7 per cent market share from 1.5% in less than three months. In the B segment alone, Fiat has acquired 11 per cent. Its main competitor, Hyundai, which was occupying second place in Indian car market, has slipped to fourth place, as its sales plunged from 7,139 sold in November 2001 to 2,645 units.

Even competitors like Maruti have something good to say about Fiat’s strategy. "It was the right pricing, contemporary looks and good marketing campaign which worked in their favour," says at top Maruti official.