Free market and anachronisms

Sergio Marchionne, FIAT and Chrysler managing director, has shaken major business columnists with his interview on International Herald Tribune last week. He blamed Volkswagen price policies with a drastic definition of “bloodbath” cause by price reductions, promotions and retail discounts.

He also asked EU Commission to adopt general measures for the automotive industry with the aim to reduce production capability especially for French and German companies, who didn’t afford any industrial downsizing or reorganization as FIAT or other brands.

Volkswagen didn’t appreciate Marchionne’s declarations. Stephan Gruehsem, head of Volkswagen PR and communication department, interviewed by Wall Street Journal, expressed his deep disdain. He said mr. Marchionne position as President of European Automotive Companies Association “is no more appropriate”, asking to resign. He also supposed Volkswagen could quit the Association.

It’s a good idea to look at the context without losing the right perspective because of ideological attitudes or local debates clichés (Marchionne reorganization plans deeply changed Italian industrial relations, involving thousand of enthusiastic supporters as well as though detractors). For example a simple analysis of the latest “Marchionne affair” should focus on last marketing and sales performance records of his competitors.

The web provides free transcriptions of Volkswagen top management stressing last high level results, above the average low level of the other competitors:

In the first 6 months of 2012, the Volkswagen Group delivered 4.6 million vehicles to customers across our car and truck division, an increase of over 10% showing the strength of our brands and our globalization strategy. The volume increase, including the consolidation of MAN [ph] drove sales revenue up to EUR 95.4 billion and operating profit to EUR 6.5 billion. Profit before tax increased to more than EUR 10 billion for the first 6 months, benefiting from a higher financial result in particular from strong earnings at our equity account and investments, in particular in China, as well as from a further positive EUR 2.6 billion improvement in the measurement of the put/call rights we hold in Porsche.

Others stress the Volkswagen Group strategy in China, where sales performance is extremely good (as well as in the United States). Mr. Heizmann, a board member of Volkswagen Group in charge of China investments supervision, has just concluded operative meeting with local partners and government authorities for the new industrial plant in Yihzeng, Eastern China, that will produce over 300.000 vehicles per year on a total industrial surface of 1,3 mln square meters.

Maybe it’s time to quit old “crony capitalism” mindset, an unsuccessful, deeply local attitude, that omes from the huge public funds allocations decided by recent Italian governments supporting FIAT group. It’s a blind strategy to claim market ties or bonds, while blaming marketing choices of direct competitors, even when acting on sensitive triggers like pricing policies and discounts.

It’s time to implement long lasting brand globalization strategies, like Volkswagen last moves, that open a hard way to great results. A good alternative is also daring innovation: just like new green products of other competitors mentioned by Marchionne (for example Renault Twizzy).

A winning strategy cannot be generated by blind attacks to present positive case histories, and should not recover anachronistic mindsets.

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