Recession-proof production at Fiat

Fiat’s Polish plant bucks the trend to post record production levels in the recession. Can they perform another miracle and resurrect Lancia?

Just back from a fantastic Economics & Business Studies trip to Krakow, Poland. One thing that struck me as an interesting area for discussion cropped when visiting the Fiat car plant in Tychy, where they make the Fiat 500, Panda – and through a joint venture with Ford - the Ka too.

Despite the battering the car industry took during the recession, with widespread mothballing of production in many high-profile cases, Fiat saw a 20% increase in orders during 2009 leading to the plant producing a record number of cars for the year.

This, of course, begs the question – are Fiats an inferior good? It is also worth exploring other possible reasons for their unexpected success during the recession, such as heavy discounting, 0% finance offers and the huge popularity of the 500.

If you want an idea of what you can see on a school visit like this, or want to use a video to put this discussion in context, check out this youtube clip

Business students might also be interested to discuss the external pressures faced by Fiat Auto Poland. In particular, political pressure has fallen upon Fiat to bring jobs home to Italy. Despite the Polish plant securing multiple awards for quality and even winning the coveted European Car of the Year award in 2004 (Panda) and 2008 (500), Fiat are moving production of the Panda back to Italy.
In its place, the Poles are rather sceptical to be producing a new Lancia model, which will not be sold in anything like the same volume. Are the Polish managers right to feel fobbed off with such a low-rent brand to satisfy Italian politicians? Or is it a smart move by Fiat – will the Polish plant’s reputation for quality rub off on Lancia, a brand so associated with unreliability and poor build quality that they withdrew from the UK market in 1994?