July 14, 2006

Fiat looks to Cinquecento to keep sales growing

By Mathias Wildt

MILAN (Reuters) - The Tedescos of Milan have a passion: they love the Fiat Cinquecento -- the small, rounded car that became a symbol of Italy's post-war economic boom and mass motorization.

Ciro Tedesco, 60, has one. His son, Matteo, 35, owns two. Ciro's youngest daughter, Alessia, 22, just bought a 1971 model. And the men who married Ciro's other two daughters both own Cinquecentos.

"They had to drive Cinquecentos to marry into the family," Ciro Tedesco said with a smile that suggested he was only half-joking.

Fiat aims to tap into that passion and keep its sales growing by launching a new version of the Cinquecento, which means 500 in Italian, in 2007, the 50th anniversary of the model's launch.

Fiat sold 3.7 million Cinquecentos between 1957 and 1975, when it stopped production.

For a generation of Italians, it was their first car, and more.

"Many of us kissed our first girl in a Cinquecento," former Italian Prime Minister Silvio Berlusconi once said.


For a decade, Italy's Agnelli family, who control Fiat with a 30 percent stake, focused on diversifying the company, neglecting the car business which churned out models like the Stilo compact car and the Multipla minivan that did not meet sales expectations.

As a result, Fiat lost 7.9 billion euros ($10.12 billion) in four years through 2004. The company went from being Europe's largest automaker in the 1980s to rank only seventh.

Last year, Chief Executive Sergio Marchionne temporarily laid off 20,000 workers and brought forward the launch of top-selling model Grande Punto to return the automobile unit to profit.

Thanks in part to the Grande Punto -- which sold 305,000 units in nine months, beating forecasts so far -- Fiat's European market share rose to 7.9 percent in May from 5.7 percent in September last year.

To keep the momentum going, Fiat needs its new models to be profitable. It aims to sell 120,000 new Cinquecentos a year. To keep costs down it will build them in Poland and share development costs with Ford Motor.

"Fiat couldn't have done better than that industrially," said Rasbank analyst Gabriele Gambarova. "This model will have a low initial investment so it should be very cost effective.

"It could be a Mini of the small car segment, a car with distinctive characteristics," he said.

"The Mini is a good reference benchmark," Giovanni Accongiagioco, a Fiat marketing manager, said recently.

Several automakers have cashed in on nostalgia with retro-style models, such as Volkswagen's latest Beetle and DaimlerChrysler's PT Cruiser. Yet none have been as successful as BMW's Mini Cooper.

The original Mini became a motoring icon of the 1960s, with The Beatles and film actor Peter Sellers seen behind the wheel of the diminutive car. BMW launched the new, more muscular Mini in 2001, selling 812,588 units through May of this year.


Fiat is drumming up expectations for the Cinquecento with a Web site (www.fiat500.com), where users can propose design ideas for the interior of the car, such as colors and gadgets.

Of the site's 3 million visitors, 65,000 people have designed their Cinquecento, Accongiagioco said.

"We are using these inputs. We started the Web site 500 days before the launch to have the time to incorporate the clients' suggestions," Accongiagioco said.

"I can't wait for the new one to come out," said Marco Sassi, a 25-year-old computer technician from Milan who owns a red Cinquecento. "Just like the rich have Ferraris, we have Cinquecentos."

People of modest means are not the only ones who cherish the smallest Fiat still on the road. Formula One champion Michael Schumacher owns one -- Ferrari red, of course.

And at the Turin wedding reception of John Elkann, Fiat vice chairman and heir to the Agnelli family empire, the centerpiece was a 16-foot-long chocolate cake depicting dozens of chocolate Cinquecentos driving down a ramp.

Although at first glance, it will look like its predecessor, the new Cinquecento will be bigger and more powerful.

Fiat is likely to succeed in meeting its sales targets if it wins over aficionados like Gino Spiteri, 59, a tire shop owner and leader of the Via MacMahon Cinquecento fan club in Milan.

Spiteri owns a bright yellow Cinquecento, the fifth he's had in his four decades of driving. Regardless of the new model, Spiteri said his best memories will always be of his first Cinquecento, bought in 1968 when he was 21.

"You never forget your first love," he said.