Analysis – Fiat’s Grande Punto is out to make a big point

Fiat is gearing up for what is perhaps the most important launch in its 106-year history. The new Punto will be formally unveiled next week and many experts say it is the car on which Fiat’s survival may rest.

The Grande Punto, as its name suggests, is longer and wider than the current model, with a sporty front end. Fiat hopes it will regain leadership of the highly competitive and equally lucrative compact hatchback or “supermini” market.

Fiat’s third Punto will be available in most European markets by the end of the month, but will not go on sale in the UK until February. The troubled Italian company is banking on the new model to give its sales figures a much-needed boost following a dismal performance so far this year.

Fiat sold just 20,487 cars in the UK in the first seven months of this year, according to the Society of Motor Manufacturers and Traders, compared with 43,998 in the same period in 2004. The current Punto’s UK sales figures are also on the wane, with a paltry 10,000 units sold so far this year, compared with 43,421 last year and 50,920 in 2003.

But hopes are high for the new model because the Punto has been an unmitigated success for Fiat in the past. First launched in 1994, it was soon racking up 600,000 sales a year and was on the way to becoming the biggest-selling car in Europe in 1997.

A source close to the company says: “Fiat has made some bad design decisions in the past five years, but the company seems to have got it right with this one. When your company is in trouble, you need to focus on your strengths and for Fiat, the Punto is a real strength.”

Fiat’s problems have stemmed largely from its sizeable debts – the company ran at an operating loss of E800m (&£546m) last year – which in turn have contributed to a lack of investment. Critics say that it has lost many of its younger buyers because the cars have become basic and boring.

The new Punto is a concerted effort to attract those young drivers back. Fiat recently reverted to its historic logo and lettering. A spokesman says: “The Punto has been built to be a new benchmark in styling terms. This is a very important launch for us because it’s a big segment of the market.”

Sergio Marchionne, who was appointed chief executive of Fiat in May 2004, has begun to address the financial difficulties facing the company. He has restructured Fiat’s debts and has allayed fears about its short-term survival, for the time being at least.

In the long term, Fiat needs to sell more cars. In 1989, it had 14.9 per cent of the European market and 52.8 per cent in Italy, compared with 6.3 per cent and 26.6 per cent today. In a bid to reverse that decline, Fiat UK has just introduced a zero per cent finance for three years offer.

A succession of senior management changes, both in Italy and the UK, has led to claims that Fiat is a rudderless ship. Despite Marchionne’s best efforts to stabilise the company, Fiat Auto UK appointed its third managing director in as many months earlier this year (MW April 28).

Failure is not an option for Fiat but a successful new Punto will buy the company time to galvanize the rest of its range. The car looks like a return to the Italian styling that has been lacking in recent years, but whether it can save a company famous for its myopic culture is another matter.