Q-1: Mr. Rattazzi, would you please describe briefly the history of FIAT Auto Argentina?
A-1: The final owner of Fiat Auto Argentina S.A. is Fiat Auto S.p.A Italy. Fiat Auto S.p.A Italy is 20% owned by General Motors and 80% by Fiat S.p.A. The company had left Argentina in 1982 but came back in 1996. When Fiat Auto decided to return to Argentina, the company built a new and modern plant in Cordoba. In 1997 this plant started production aiming at 550 cars per day. All was going very well until the Brazilian crisis started in October 1997. The industry was expecting sales of more than 3 million cars for the Mercosur and we found out that sales decreased to about half that amount. Fiat Auto Argentina had been organizing the company for this broad market. We have never recovered from that crisis. We were the market leaders in 1997 and 1998. When the Argentinean crisis started in August 1998 and throughout 1999 and 2000 our production dropped to less then one third of capacity. At this moment, our production is around 170 cars/day.
Q-2: The Argentinean car industry is being exposed to its worst crisis in the last 10 years. Maybe, as a result international Fiat representatives did a very negative comment about the Argentinean economy by the end of last year, which caused strong worldwide repercussions. How did you react afterwards?
A-2: There is a misunderstanding. You have to bear in mind that competitive devaluation with little inflation has been advantageous for Italy. Some people thought that a devaluation might be positive for Argentina. This would not be the case because inflation would immediately neutralize the effects of the devaluation due to the dollarization level of this economy. The problem of this country is public spending. Some people think that the problem low fiscal income but I do not agree with them. The fiscal income is reasonably high. There is a law of fiscal responsibility that promotes a surplus in two years time but we now have a big deficit instead. I do not think that an increase in taxes would be the right way to control the crisis. On the contrary, public spending should be reduced.
Q-3: Fiat decided to transfer the Palio and Uno production to Brazil, to stop producing the Duna and continue only to produce the Siena.
A-3: The Duna model was 20 years old. The Siena or the Palio are produced on the same production line. The computers can build both of them. By concentrating on the Siena, we try to reduce costs to a minimum. The Fiat Uno is still being built in Brazil because the market demands this kind of car. The costs of the suppliers and raw materials are very high in Argentina, so producing in Argentina is more costly than in Brazil.
Q-4: The market share of Fiat Auto Argentina decreased from 20,4% to 13,9% last year. What do you expect for the current year?
A-4: I believe that we will do better this year. In 2001 we have had an increase in our market share, since the launch of the new Palio and Siena. These are widely accepted in Argentina and also in Brazil. We are to exporting the Siena to Brazil, but we are limited by regulations between the governments. The car industry has six top players in Argentina: General Motors, Ford, Peugeot, Renault, Volkswagen and Fiat. Each of us has a market share between 10 to 20% . | Q-5: What are the new markets or segments that FIAT Auto Argentina would like to conquer?
A-5: Fiat is very strong in the A, B and C1 segments. The Palio, the Siena and the Uno represent the ABC1. We are now exploring the C2 with the Brava and the D with the Marea. There will be a new model in Europe in the C2 category which is called the Stilo. Fiat is very proud of its new model. I do not know when this model will come to Argentina. In the D and E segments we have the Alfa Romeo which is very successful in Argentina.
Q-6: Very successful, although the Argentinean economy is still in the midst of a deep recession?
A-6: We have been suffering a deep recession. I think that in three months’ time, the country will improve; well, I hope so, but nobody really knows when the economy will fully recover from the recession. It depends on psychological matters; people are not consuming because they do not rely on the future of the economy. There is a lot of money in the banks. I am optimistic. I am convinced that Mr. Cavallo is a good minister and will solve these issues. He knows the car industry very well, that is why we trust him.
Q-7: What exactly do you expect from him?
A-7: We have analyzed this situation. We think that an increase in GDP will definitely increase our sales. If the country grows at 7 or 8%, we will sell more cars. We also need a cost reduction. That is why the government has to get rid of unnecessary taxes. There are taxes on cars that really do not make sense.
Q-8: How relevant are the export markets for FIAT Auto Argentina?
A-8: The export markets are very important for us but we need a cost reduction in production in order to be competitive. That is why Cavallo is talking about competitiveness. We need to be closer to our suppliers.
Q-9: Why continue producing in Cordoba, if Brazil offers a bigger market?
A-9: We produce 1.900 cars a day in Brazil. We still need our plant in Cordoba because the Brazilian market increases 3 or 4% per year. So there is no reason to close the plant. This is a difficult moment for everyone.
Q-10: As you know, all our readers are top executives and businessmen. What is your final message to them?
A-10: Argentina will recover from this crisis. It has the best agricultural soil of the world as well as oil. De la Rúa say s that he will reduce the cost politics. If all this comes true, Argentina will start growing again soon, because it has all that a country needs to be successful.
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FIAT AUTO ARGENTINA 