On Air Now

Tune in to Listen

93.9 FM Hibbing, MN

Weather

Current Conditions(Hibbing,MN 55746)

More Weather »
69° Feels Like: 69°
Wind: SW 10 mph Past 24 hrs - Precip: 0”
Current Radar for Zip

Today

Sunny 70°

Tonight

Clear 43°

Tomorrow

Sunny 73°

Alerts

  • 0 Severe Weather Alerts
  • 0 Cancellations

Fiat's Italian suppliers grab Chrysler lifeline

A Chrysler badge is pictured on a new car at a dealership in Vienna, Virginia April 26, 2012. REUTERS/Kevin Lamarque
A Chrysler badge is pictured on a new car at a dealership in Vienna, Virginia April 26, 2012. REUTERS/Kevin Lamarque

By Jennifer Clark

TURIN (Reuters) - In 2010 Italian carmaker Fiat made Dario Rinero a tempting offer: would the creator of exclusive handcrafted leather sofas make seats for the new Chrysler 300 sedan in the United States?

Fiat was fresh from its surprise swoop on Chrysler in 2009 and Rinero, the CEO of Poltrona Frau, immediately grasped that he had a unique chance to expand his car furnishings business from such luxury niches as Maserati and Ferrari into the U.S. mass market.

The hitch: Fiat needed the seats immediately. So Rinero scrambled, found a U.S. partner who could handle the fine leathers and parachuted in expert craftsmen from Italy.

Rinero says that experience led to the purchase of the U.S. company, Acord Holdings, bringing yet more opportunities. "We are now in talks with new clients to expand our growing business," he says.

The Poltrona Frau story highlights how Chrysler provides a potential lifeline for Italian automotive suppliers hit by a downturn that has sent Italy's annual car production tumbling to 400,000 from 1.12 million over the past 10 years.

The general decline is worrying enough for the 872 suppliers based in and around Turin. But with Fiat contributing 46.4 percent of their 17.9 billion euros ($23.4 billion) in annual revenue, they cannot afford to ignore developments at Fiat-Chrysler.

DEEP INTEGRATION

Though not without risk - as Daimler's ill-fated 1998 merger with Chrysler testifies - Fiat Chief Executive Sergio Marchionne is pushing ahead with deep integration with the U.S. carmaker to cut costs by sharing suppliers, manufacturing processes and the platforms on which different vehicles are built.

Just as Fiat depends on its skill in tapping growth in foreign markets to compensate for a moribund Europe, its suppliers face a similarly Darwinian challenge if they are to avoid being left behind.

Around the same time Rinero was meeting Fiat's head of purchasing at its Mirafiori factory, another supplier 700km away in a small town near Naples was also casting a hungry eye over Fiat-Chrysler.

Family-owned Adler Group, which had been sound-proofing Fiat interiors since 1993, bought German competitor HP Pelzer for its U.S. operations. That $30 million deal in 2009 means that Adler can now make the same interiors for Chrysler.

Neither Poltrona Frau nor Adler Group would divulge the size of their Chrysler orders, but the potential is obvious when you consider that Chrysler built 2.4 million cars worldwide last year, against Fiat's global total of 1.9 million vehicles.

"If Italian companies want to maintain their appeal, they must position themselves for growth outside our difficult home market," says Adler Group chief Paolo Scuderi.

His company is also benefiting from Fiat's plans to relaunch Alfa Romeo in the United States, 18 years after pulling out of that market.

Scuderi opened a factory near Naples this year to make super-light carbon-fiber bodies for the Alfa Romeo 4C sports car. The new model is due to go on sale in Europe and the United States before the end of the year. Fiat says it plans to triple Alfa Romeo production to 300,000 vehicles, but it remains tightlipped on timeframes.

BROADER HORIZONS

Poltrona Frau did not say how much Chrysler contributed its transportation division's 15 percent sales increase last year, to 70 million euros. But its commitment to spending $700,000 on Acord Holdings outside Detroit in early 2012 has also led to talks with other carmakers - including GM-owned Cadillac - keen on the 101-year-old furniture company's classic designs.

"A carmaker saw one of our double-stitched Chester sofas and said, 'I want an interior like this'," says Piero Valentini, head of the company's automotive division. "We did it. In China, with the Rolls-Royce Phantom."

Vincenzo Ilotte, head of family-owned aluminum foundry 2a, is another hoping to reap the benefits of broadening his company's horizons. The company based near Turin makes structural parts for Maserati but is now looking at a U.S. investment, Ilotte says.

Bigger suppliers can tap financing from Italy's cautious banks on the prospect of future guaranteed orders from Fiat. But with the carmaker's loss-making Italian factories running at about half their capacity, many more suppliers are hurting.

Between 200 and 300 have gone bust across Italy since the start of the financial crisis in 2009, the national automotive manufacturers' association Anfia estimates.

For those remaining, anyone not part of the integrated Fiat-Chrysler food chain risks going hungry. ($1 = 0.7637 euros)

(Editing by David Goodman)

Comments