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FCA boss gets tough on pricing

Giu diligence: FCA Australia’s new head has set about stripping costs out of models including the Alfa Giulietta without dumping kit.

Newly appointed CEO wastes no time getting to work on FCA appeal-boosting strategy

14 Oct 2016

FIAT Chrysler Automobiles (FCA) Australia’s new president and CEO Steve Zanlunghi has hit the ground running, implementing aggressive strategies to reduce the asking prices of both Abarth 124 Spider and Alfa Romeo Giulietta in only the first weeks on the job.

The New York native Australian citizen has been in the FCA top spot for less than two months but has already homed in on various opportunities to boost the appeal of some models, starting with the eagerly anticipated Abarth 124 Spider.

Pricing for the performance-focused convertible was just days away from being announced but Mr Zanlunghi put the brakes on confirmation of the official figure to allow time for a detailed cost analysis, resulting in a reduced figure of $43,500 driveaway.

Speaking at the launch of the 124 Spider, Mr Zanlunghi explained that his experience working with FCA in the UK highlighted the possibility of sharpening the halo model’s asking price and appeal Down Under.

“It wasn’t on the cards but I landed here, I knew fairly intimately about the Abarth 124 because we were getting ready to launch in the UK as well, and when I looked at the price point we were going to market it was very different,” he said. “I had an opportunity to jump in and understand what the cost basis was … It was a lot more expensive here.

“I said ‘let’s take a closer look and let’s see if we can get this thing a little more competitive’.” While cost reduction for different global markets most commonly involves stripping specification from variants, Mr Zanlunghi said the sharper price was not as a result of removing equipment.

“We didn’t take any spec out. We just looked at what was going into our costs and where the cost centres were.” Instead, Mr Zanlunghi investigated the various costs embedded in the final retail price and discovered a significant line item for export to the Abarth tuning shop in Turin, Italy.

The Fiat 124 and hotter Abarth share a significant mechanical underpinning with the Mazda MX-5 with both models emerging from the same factory in Hiroshima, Japan. Under the original agreement, Abarth models destined for Australia would be shipped to Italy before making a second costly trip Down Under.

“The Abarth was supposed to go from Japan to Turin to be outfitted but we were able to look at the certification to do it in Australia. Right there, you’re taking a couple of thousand out of the transportation cost.” Under the new plan, FCA Australia was authorised to carry out the Abarth modifications locally allowing vehicles to be sent directly from Japan resulting in a significant saving that could be passed on to customers.

The FCA boss did not detail other cost-reducing areas but said “there’s other things we looked at too.” With his connections to European parts distribution networks, Mr Zanlunghi was also able to secure 100 examples of a special Launch Edition vehicle, that add a number of styling enhancements to set the first 124s apart from the standard Abarth offering.

“We were able to come up with a Launch Edition where we were able to pull some specific parts out that we were launching in Europe and get the kits down here to come out with the Launch Edition.” After the 124 Spider, Mr Zanlunghi turned his attention to an imminent Alfa Romeo Giulietta update and was also able to make a reduction for the small hatchback before official pricing announcement.

“Giulietta was another one,” he said. “That car was going to be a little more expensive. Again, because of the contacts I had in Turin I was able to work down the costs and get it to a much more competitive position.” Mr Zanlunghi did not reveal which models are next in line for the full-cost analysis works but said the method would be applied to other vehicles in the various FCA brands as the opportunities arose.

A strategy to sharpen the focus on each brand and more clearly identify the various attributes that each brand brings is also a key initiative for the FCA team.

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