Home Away from Home Fiat targets Argentina with a new plant and products

BUENOS AIRES - It may be an ocean away, but Argentina is like home for Fiat SpA.

The Italian company has turned the South American country into a little Italy, replicating everything from its most successful car plant to its dominance in car sales.

The centerpiece in all this is the new, state-of-the-art facility at Cordoba, a key component of Fiat's world-car strategy, plus two strong brands - each with a full stable of automobiles.

"Step-by-step Fiat became a very powerful company," says Vincenzo Barello, president of Fiat Argentina, which set up its first car plant for production of the Fiat 600 back in 1959.

Much like Brazil, Argentina has seen car sales boom with more growth expected in the future. In 1990, the Argentine market totaled 90,485 vehicles, with Fiat selling 25,031 cars. Just four years later, Fiat sales hit a record 133,299 in a total market of 490,081 cars and trucks. But 1995's increase in interest rates, reduction in purchasing power and 20% unemployment pushed car sales down to a dismal 319,255.

At the time, Fiat was looking to expand outside of Europe with its World Car (178) project. Already hugely successful in neighboring Brazil, the automaker decided to make Argentina a core country for the 178.

Expansion centered around Cordoba - the Detroit of Argentina - with Chrysler Corp., General Motors Corp. and Renault SA located nearby. Only 18 months after starting construction, Fiat opened its new plant and began making the Palio hatchback and Siena sedan. The plant was modeled after Fiat's state-of-the-art Melfi, Italy, plant. The automaker hoped to recreate its flagship plant in the similar conditions of Argentina. Like southern Italy, this South American country has low salary levels and a relatively new workforce.

The plant's 3,493 assembly workers run on two shifts Monday through Saturday, except for one Saturday a month. Average pay for an assembly line worker is $650 to $700 per month. About 25% of the plant is automated and includes 280 robots.

The Argentina plant has capacity to build up to 560 cars a day but now only makes 320 with about 100 exported to Brazil. Plant capacity is 100,000 vehicles annually.

"The final assembly line is built to be able to build any member of the 178 family," says Massimo Risi, industrial director. "This factory can run the whole family."

The Cordoba plant's flexibility also includes cutting production if needed. The crisis in Asia and subsequent problems in Brazil have prompted Fiat to cut its planned exports to Brazil to around 2,000 to 2,500 vehicles per month. That's still the highest number of exports from the plant, but only half what they should be, says Mr. Bartello.

"I am confident Brazil will recover, probably in the second half of the year," he says.

The crisis felt throughout much of the region didn't hurt Fiat in Argentina, he says. During the first 20 to 30 days there were problems, but the economy has leveled out once again. No further slowdown is expected.

"We were confident, and we still are confident," Mr. Barello says.

That confidence has pushed Fiat to launch three new cars, and another is on the way. The automaker recently introduced its popular Marea sedan and station wagon in Argentina. Alfa Romeo also recently launched its newest sports sedan - the 156. The automaker expects to sell about 750 of the vehicles this year. It will be sold along with the 145, 146, 164 and next year the 166, which replaces the 164. The Alfa brand - a favorite in Argentina - has been marketed so that it does not overlap with Fiat products. Alfa is considered more upscale in Brazil, rivaling BMW.

"We are working hard, very, very hard, to position Alfa Romeo very high in the market," says Claudio Javier San Pedro, Fiat Auto commercial director in Argentina.