Machines Italia

Italian automotive suppliers to Fiat S.p.A. could look to set up shop in metro Detroit following the formation of Chrysler Group L.L.C.,the Chrysler-Fiat alliance spawned from Chrysler’s bankruptcy.

Massimo Denipoti, president of the Detroit-based Italian AmericanAlliance for Business and Technology, says he is aware of twoItaly-based powertrain component suppliers that are in “advancedstages” of setting up shop in metro Detroit.He declined to name the firms, citing confidentiality agreements, butthe suppliers could opt to establish standalone operations locally andbring substantial investment, or partner with existing firms in theregion.

These two options are the main paths being considered by a numberof companies eyeing to win supply contracts for the five new Fiatvehicle platforms to be built in the U.S. by 2012. The IAABT andVenture USA, a Chicago-based consulting firm specializing inattracting Italy-based companies to the U.S. and of which Denipoti isa partner, is getting inquiries from a handful of companies every week considering a move to the U.S.

“They’re obviously very attentive of what’s going on and trying to position themselves for potential business with Fiat,” Denipoti said. “It’s unlikely that any supplier in the states can tool-up that fast to satisfy that demand.”At least two local firms are likely in position to grab new contracts when Chrysler Group begins to make Fiat-basedvehicles in North America.Southfield-based assembly equipment maker Comau Inc. and the Farmington Hills-based operations of parts maker Magnetti Marelli S.p.A. are part-owned by Fiat and have a presence in North America.

Comau acquired Progresssive Tool & Industries Co. in 1999. Progressive, also known as PICO, was one of thelargest automotive tool & die manufacturers in the industry. The company could be a front-runner to re-tool Chryslermanufacturing plants to build Fiat-based vehicles.“We’re cautiously optimistic that it should be good news for us,” said Claude Mencotti, human resources director atComau in Southfield.Such an influx of Italy-based auto suppliers to the region would mirror the trend seen following the formation ofDaimlerChrysler AG.

After Chrysler’s merger with Daimler-Benz AG in the spring of 1998, a number of Germany-based automotivesuppliers and other support firms either launched or expanded operations locally.Crain’s reported in May 1999 that at least eight German-owned companies started new operations in Oakland Countyalone during the previous six months.Dave Andrea, vice president of industry analysis and economics at the Troy-based Original Equipment SuppliersAssociation, said a move of Fiat suppliers to North America would be similar to that following the DaimlerChryslermerger, but would be different as well.“I think we’ll see that influx more quickly and significantly because of the localization of (Fiat) platforms, Andrea said.“That wasn’t an element we saw in (DaimlerChrysler).”

German suppliers saw new or expanded operations in the U.S. as a chance to both increase sales with traditionalcustomers, like Mercedes Benz production operations launched in the South, and win new supply contracts with theDetroit 3 and Japanese automakers when the market was booming, Andrea said.The fact that Fiat will build its own vehicle platforms and powertrain systems in the U.S. will drive its current supplybase to locate close to those operations.“I believe there will be a higher probability of seeing more Italian suppliers here than we did initially with Germansuppliers (following the DaimlerChrysler merger) because of the initial plans of integrating the Fiat programs into the Chrysler manufacturing platforms here,” he said.

The influx of German suppliers came at a time when car and truck sales were riding a wave of nearly constant annualgrowth beginning in 1995 before peaking in 2000 at 17.4 million vehicles, making a new or expanded footprint in theU.S. an attractive proposition.Compare that to the current market, where 2009 car and truck sales are expected to fall short of 2008’s 13.2 millionvehicle total.To capitalize on opportunity while limiting risk, shared ventures between Italian suppliers and companies alreadyestablished in the area is a possible solution.“That seems to be, for sure, one of the first things they try to explore because it makes sense oftentimes — it doesn’trequire full (ownership) investment that may duplicate some existing structures and capabilities, where by partneringwith existing companies may offer most of the advantages, and minimizing the risk at the same time,” Denipoti said.

Italian companies have interest in pursuing ventures that would mirror the Chrysler deal itself, bringing new technologyand products to a U.S. partner in lieu of cash or other equity, Denipoti said.However, other economic development groups have yet to see much contact from Italian firms.The Michigan Economic Development Corp. hasn’t had many similar inquiries, but the state’s biggest economicdevelopment agency “expects to do so” soon, Bridget Beckman, public information officer at the MEDC, said in ane-mail.Dean Johnson, head of global business development at the Detroit Regional Chamber, echoed Beckman.“If anything happens like this, it’s going to take some time to get to the level where they’re going to manufacture carshere and then use some of their supplier network and bring some of their network here,” Johnson said.Officials from the chamber are scheduled to visit its counterpart organization in Turin, Italy, to gather information, butthere have been no formal strategic efforts to date, Johnson said.“I think people are trying to figure out what it means.”