Many consultants continue to make the observation that it was in times of acute economic crisis, such as the previous Great Depression, when in the aftermath new industries or global competitors emerged from the fray.  These players anticipated demand or supply side structural changes that were brought on as a result of the economic crisis.  As a supply chain professionals, we have the opportunity to observe opportunistic companies that may emerge from the current global recession with a far different industry model that leverages structural supply chain change.  In the automotive industry, my lens is focused toward Fiat Group and its chairmen, Sergio Marchionne.

If you want an insightful perspective of Fiat’s evolving strategy, I recommend a reading of a recent article in The Economist, The Italian Solution While Fiat is not one of the larger global players in the industry, the strategy now being played out on the world stage demonstrates a vision of what tomorrow’s global automotive players will need in order to sustain both a competitive and truly efficient global value-chain.  Mr. Machionne has a vision of an end state, where the surviving global automotive OEM’s will need to have sufficient volumes of production in each of the major world markets, about one million for each platform, to drive global production cost efficiency and sustained profitability.

We have all taken in the previous headlines and media stories related to the crisis that engulfed the U.S. automotive OEM’s and Fiat’s bold white knight approach to rescue U.S. automaker Chrysler.  Fiat in essence offered Chrysler what it did not have, a small car technology platform and a high volume value-chain capability in small engines and fuel efficient vehicles.  Fiat shrewdly gets additional volume scalability in its platforms, a deeper leverage of suppliers, and immediate access to a U.S. distribution network for Fiat Group’s other products. In addition to a 35% equity ownership in Chrysler, and responsibility for managing all operations, Fiat also leveraged the U.S. government to run interference with Chrysler’s stock and bond holders, as well as unions, to gain additional financial concessions.

No sooner had the ink dried in the U.S.deal, Fiat moved to seize an opportunity brought on by the crisis of General Motors, and its needs to find a buyer for German based Opel brand in Europe, along with some other European brands.  Similar to the U.S. scenario, if Fiat turns out to be successful in its negotiations with the federal government of Germany, it could add more volume and distribution capability for Europe.

The latest chapter in this unfolding story comes this week from China, where it was reported that the company is in talks with China’s Guangzhou Automotive Group Ltd. to setup a joint venture to manufacture up to 1.3 million vehicles in China by 2010.  According to media sources, Fiat earlier courted China’s Chery Automobile Company Ltd., but that plan was delayed due to local market conditions. Fiat is obviously on a mission, and chose not to wait.

There will certainly continue to be debates on whether Fiat can ultimately manage all of these acquisitions and corporate cultural changes simultaneously. Supply Chain Matters readers are always welcomed to add their own commentary.  Fiat’s ability to foster continued product innovation in battery and other fuel efficient technologies are certainly an open question. But whether Fiat is, or is not totally successful, we have the opportunity to observe a visionary company that truly understands the overall importance of a leveraged global value-chain.

 Bob Ferrari