NF500 / wage increases

Fiat SpA CEO Sergio Marchionne has announced that orders for the new Fiat 500 had exceeded 57,000, a mere 20 days after it’s official launch even on 4th July.

During a broad ranging conference call held after Fiat reported that second-quarter net profit more than doubled, Marchionne said Fiat has an official target of selling up to 60,000 of the new 500 model in the calendar year 2007, and sounded buoyed by the early demand for Fiat’s new baby;

We’ve had an incredible response to the 500, both in Italy and elsewhere.

Marchionne also said the Polish plant where Fiat is making the 500 currently has capacity to produce 120,000 vehicles a year, but reiterated earlier statements from inside Fiat by saying that;

I hope that some recent efforts we’ve made to cut out bottlenecks can help raise output to about 140,000 a year.

The Fiat boss stated he was confident that operating margins for the car wouldn’t be negatively affected by ongoing wage negotiations with a labour union at the Polish plant where the baby Fiat is produced.

Acknowledging the plant’s central role in Fiat’s plans, the NSZZ Solidarnosc union is seeking a 100% increase in the basic monthly starting salary at the plant, and has threatened to organize strike action for September to press home its claim if negotiations fail to produce progress.

I’m not going to comment on wage increases. We will respond to the unions. We think we have ways to mitigate any extra costs that might arise. It shouldn’t impact profitability.

Said Marchionne.

Making the car in Poland’s low labour-cost economy allows Fiat to make more profit on the car than would be possible if it were produced Western Europe. During early negotiations with the Polish union held last week, Fiat agreed to pay workers new bonuses equalling close to €1m as it seeks to head off the risk of disruption.

It will certainly be interesting to see how Fiat manage both the wage negotiations and production capacity in the coming months.  Production in particular is an interesting dilemma, we already know Fiat plan to produce soft top and Abarth versions of the new Fiat 500, with talks of a Station Wagon and/or SUV being considered too.  These extra vehicles will surely generate more demand and interest, further testing Fiat’s ability to juggle supply and demand for a premium “tailored to suit” vehicle.