THE AUTOMOTIVE AND CONSTRUCTION EQUIPMENT INDUSTRY ITALY Fact Pack

1
THE AUTOMOTIVE AND CONSTRUCTION EQUIPMENT
INDUSTRY ITALYFact Pack

• Swedish Trade Council in Italy
• 2006

2
CONTENT

• Overview Italian Manufacturing Industry
• Italian Automotive Industry
• Italian Construction Equipment Industry
• Recommendations
• References

3
THE ITALIAN MANUFACTURING INDUSTRY PRODUCES FOR A
VALUE OF SEK 7 600 BILLION

• The total turnover of the Italian manufacturing
  industry is SEK 7 615 billion
• the Swedish manufacturing industrys turnover is
  SEK 1 357 billion
• The most important sectors within the
  manufacturing industry are construction of
  machinery and food related production
• There are approximately 540 000 companies active
  within the manufacturing industry in Italy
• 4.9 million employees
• The Italian industrial structure is dominated by
  small companies. 83 of the manufacturing
  companies employs less than 9 employees.
• The average labour cost for an industry worker in
  Italy is SEK 198 per hour

Machinery construction and food production stand
for 20 of the total Italian manufacturing
industry
Source ISTAT, Eurostat
4
CONTENT

• Overview Italian Manufacturing Industry
• Italian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Italian Construction Equipment Industry
• Recommendations
• References

5
THE ITALIAN PRODUCTION OF CARS AND COMMERCIAL
VEHICLES TOTALS SEK 407 BILLION- the latest
statistics indicates an upswing in value of
production
Production of cars and commercial vehicles
industry in Italy
billion SEK
Trailers and containersSEK 14 billion
Vehicles and enginesSEK 132 billion
Components and accessories SEK 260 billion
Growth mainly due to increasing exports of
Italian automotive suppliers
Source ISTAT
6
MORE THAN 1 MILLION VEHICLES ARE PRODUCED IN
ITALY- Italy stands for about 5 of the
worldwide vehicle production
VEHICLE MANUFACTURERS
COMMERCIAL VEHICLES (314 000 vehicles)
LIGHT TRUCKS (270 000 vehicles)
BUSSES (4 000 vehicles)
HEAVY TRUCKS (40 000 vehicles)
PASSENGER CARS (723 000 vehicles)

• 3 manufacturers
• Iveco (part of Fiat Group) 183 000
• Sevel (Joint Venture between Fiat Auto and PSA)
  81 000
• Piaggio 6 000

• 3 manufacturers
• Irisbus (part of Iveco) 3 200
• Carozzeria Barbi
• (Volvo) 400
• Breda Menarini Bus 400

• 1 manufacturer
• Iveco (part of Fiat Group)
• Trailer manufacturers
• Rolfo
• Merker (Margaritelli)
• Acerbi Viberti
• Officine Cardi
• Menci C.
• Pezzaioli Carozzeria

• 4 manufacturers
• Fiat Group (Fiat, Lancia, Alfa Romeo, Maserati
  and Ferarri) 700 000
• Volkswagen Group (Lamborghini) 1 500
• Pininfarina (Mitsubishi, Alfa Romeo and Ford) 14
  000
• Bertone (Opel) 7 500

Source Automobile Produktion
7
CONTENT

• Overview Italian Manufacturing Industry
• Italian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Italian Construction Equipment Industry
• Recommendations
• References

8
THE ITALIAN PRODUCTION OF PASSENGER CARS HAS
PERFORMED POORLY BUT IS SHOWING SIGNS OF RECOVERY
Development the last 5 years
Passenger Car Production in Italy

• The Italian quote of the worldwide vehicle
  production has decreased from 8,2 in 1999 to
  4,7 in 2004.
• In terms of volume this means a decrease of about
  40 . Compared with 2004 the production in 2005
  decreased with about 13 .
• The problems can in part be explained by
  Investment in lower-cost production abroad.
• Another reason for the decrease is the sluggish
  development and problems of Fiat Auto which have
  four major explanations
• Product range Limited and underdeveloped.
  Insufficient investments in RD and product
  development
• International presence Significant presence on
  to few foreign markets. Inability to take
  advantage of motorization in developing
  countries.
• Sales and After Sales network Underdeveloped in
  terms of service quality and customer
  satisfaction.
• C-segment Wrong market positioning of the Fiat
  Stilo has jeopardized the presence in a segment
  with very high volumes.
• Fiat is now however showing signs of a strong
  recovery and future prospects looks brighter.

Vehicles
Source STC, interviews, ANFIA, Il Sole 24 Ore
9
FIATS PURCHASE DECISIONS FOR THE ITALIAN
PRODUCTION IS CENTRALISED TO HEADQUARTER IN TURIN
Passenger Cars
Source Kompass, interviews
10
THERE ARE A TOTAL OF 13 CAR MANUFACTURING PLANTS
IN ITALY- Most of them are operated by Fiat Auto
Fiat GroupChivasso
PininfarinaBairo Canavese
Fiat Group(Ferrari)Maranello
PininfarinaSan Giorgio Canavese
Fiat Group(Maserati)Modena
PininfarinaGrugliasco
Wolkswagen Group (Lamborghini)Sant Agata
Bolognese
Fiat GroupMirafiori
BertoneGrugliasco
Fiat GroupCassino
Fiat GroupMelfi
Fiat GroupPomigliano
Fiat GroupTermini Imerese
Source Automobile Produktion, interviews
11
FIAT IS SHOWING SIGNS OF AN IMPRESSING TURN
AROUND AFTER YEARS OF POOR PERFORMANCE
Trends within the Italian passenger car industry

• After many years of losing market shares and
  reporting huge losses, Fiats car business is
  showing signs of an impressing turn around. After
  the divorce with GM in 2005, and after showing
  losses of EUR 2 bln in 2004, Fiat Auto is now
  reporting a 70 fall in losses compared with a
  year earlier.

Fiat is picking up speed

• Increased competition and continuous price
  reductions is moving Fiats production abroad and
  switching its loyalty with its Italian suppliers
  towards a higher dependence on suppliers from
  countries with lower costs.

Globalization

• Fiats new chief executive Sergio Marchionne has
  ended the companys traditional strategy of
  pinning its hope to the next new car. Fiat will
  now try to compete in more market segments by
  creating a larger range of models.
• This fragmentation of market leads to the need of
  using common platforms for various models in
  order to create flexibility. Suppliers will thus
  have to be able to deliver whole modules to car
  factories.

Fragmentation of market
Source STC, Interviews
12
CONTENT

• Overview Italian Manufacturing Industry
• Italian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Italian Construction Equipment Industry
• Recommendations
• References

13
ITALIAN PRODUCTION OF COMMERCIAL VEHICLES WHICH
IS HEAVILY DOMINATED BY LIGHT TRUCKS IS
INCREASING
Development the last 5 years
Commercial Vehicle Production in Italy

• After an exceptional, and statistically
  distorting, beginning of the 21st century because
  of fiscal stimulations the Italian production of
  commercial vehicles has since the slight downturn
  in 2003 been steadily increasing for more natural
  reasons
• Overall the increase in production from 2003
  reached 6 (CAGR 2 ).
• The increase is driven by strong performance of
  light trucks whose production boomed in 2004
  growing with 4,6 .
• The increase is in part explained by the strong
  performance of Fiat and Iveco depending on
  successful releases of new models (especially by
  penetrating more segments of the LCV market) and
  a very aggressive marketing policy.
• The increase has also been driven by domestic
  demand because of Italian companies need to renew
  obsolete car fleets.

Vehicles
Source STC, Interviews, ANFIA, UNRAE
14
THE ITALIAN PRODUCERS FIAT AND IVECO BOTH MAKES
PURCHASE DECISIONS AT HEADQUARTERS IN TURIN
Commercial vehicles
Source Anfia,Kompass,interviews
15
THE ITALIAN COMMERCIAL VEHICLE INDUSTRY IS
DOMINATED BY FIAT AND FIAT CONTROLLED IVECO
Source Automobile Produktion, interviews
16
THE POSITIVE TREND WITH A RISING PRODUCTION OF
COMMERCIAL VEHICLES SHOWS NO SIGNS OF STAGNATING
Trends within the Italian commercial vehicle
industry

• The Italian producers of commercial vehicles are
  performing strongly
• The production and sales of Italian commercial
  vehicles has been functioning as a role model for
  the production of passenger cars. The production
  has been rising thanks to intelligent product
  releases and the positive trend shows no signs of
  bringing to a halt.

Increasing production volumes

• In order to achieve economies of scale and to
  share fixed costs the industry has been
  consolidating
• The most significant example is that Irisbus,
  formerly a joint venture between Iveco and
  Renault, is now a wholly owned subsidiary of
  Iveco (Fiat Group).

Consolidation of market

• Today not only the large companies are looking
  for flexible, individualized solutions even
  medium sized businesses are increasingly looking
  for customized financing deals, particularly when
  it comes to leasing solutions.

Customized services
Source STC, Interviews
17
CONTENT

• Overview Italian Manufacturing Industry
• Italian Automotive Industry
• Passenger Cars
• Commercial Vehicles
• Suppliers
• Italian Construction Equipment Industry
• Recommendations
• References

18
THERE ARE ABOUT 1 700 AUTOMOTIVE SUPPLIERS IN
ITALY- But the medium size of companies is
rather small
Geographical concentration of automotive
suppliers
Italian automotive suppliers

• Totally there are about 1 700 suppliers to the
  automotive industry active on the Italian market.
• The suppliers are located in the northern parts
  of Italy, close to the HQ of Fiat Auto and the
  most important car plants
• Close to a third of all suppliers are based in
  the region of Piedmont where Turin and the HQ of
  Fiat is located.
• The Italian suppliers are generally small or
  medium sized companies
• The average number of employees for an Italian
  supplier is about 70
• The largest Italian suppliers to the automotive
  industry are Pirelli, Sogefi, Brembo and
  Magnetti Marelli.
• Traditionally Italian suppliers are especially
  strong in engineering and design.

Source STC, interviews, ANFIA
19
EVEN DUE TO A CONSOLIDATION OF MARKET THE NUMBER
OF ITALIAN AUTOMOTIVE SUPPLIERS IS STILL HIGH
T1 SUPPLIERS(examples of the largest ones)
Electrical systems
Interior equipment
Propulsion
Body
Running gear

• Cables, bus systems, embedded systems
• Magneti Marelli Sistemi Elettronici
• Delphi Italia Automotive Systems
• Valeo

• Power train, exhaust systems, engines
• Magneti Marelli Powertrain
• Delphi Italia Automotive Systems
• Dayco Europe
• Fiamm Automotive Batteries

• Cockpit, seats, dash-board, air conditioning
• Lear Corporation
• Delphi Italia Automotive Systems
• Valeo
• Intier
• T.R.W Automotive Italia S.p.A
• Johnson Controls Italia

• Body, roof, glass, doors, lighting etc.
• Automotive Lighting Rear Lamps Italia (Magneti
  Marelli)
• Lear Corporation
• Valeo

• Suspension, brakes, axles, steering, tires
• Magneti Marelli Sistemi Sospensioni
• Sogefi
• Pirelli Tyre
• Carraro
• Brembo
• Delphi Italia Automotive Systems
• T.R.W Automotive Italia
• Bosch -Tecnologie Diesel e Sistemi Frenanti

Source Anfia,interviews
20
TIER ONE SUPPLIERS DETAILED INFORMATION (1/2)
T1 Suppliers
Source Kompass, interviews
21
TIER ONE SUPPLIERS DETAILED INFORMATION (2/2)
T1 Suppliers
Source Kompass, interviews
22
FOR STRATEGIC REASONS THE T1 SUPPLIERS ARE MOSTLY
FOUND NEAR THE HQs AND PLANTS OF THE OEMs
Source STC
23
MANY T2 SUPPLIERS ARE SMALL, LOW VALUE ADDING
FIRMS THAT FACE HARD COMPETITION FROM LOW-COST
COUNTRIES
T2 SUPPLIERS (examples of the largest ones)
Electrical systems
Interior equipment
Propulsion
Body
Running gear

• Cables, bus systems, embedded systems
• ITT Industries Friction Products
• ASK Industries

• Power train, exhaust systems, engines
• Fonderie Mario Mazzucconi
• SKF Industrie
• Metelli
• Ufi Filters

• Cockpit, seats, dash-board, air conditioning
• Gammastamp
• Conceria Pasubio

• Body, roof, glass, doors, lighting etc.
• Automotive Lightning Italia Rear Lamps (Magneti
  Marelli)
• Olsa
• Federal Mogul Operations Italy

• Suspension, brakes, axles, steering, tires
• Gruppo Sogefi
• Metelli
• Federal Mogul Operations Italy
• Sila Holding Industriale

Source Anfia, Automobil Cluster
24
TIER TWO SUPPLIERS DETAILED INFORMATION (1/2)
T2 Suppliers
Source Anfia, Automobil Cluster, Kompass
25
TIER TWO SUPPLIERS DETAILED INFORMATION (2/2)
T2 Suppliers
Source Anfia, Automobil Cluster
26
ITALIAN SUPPLIERS HAVE DIVERSIFIED THEIR CUSTOMER
BASE, AND SPECIALISED THEIR PRODUCT PORTFOLIOS
Trends within the Italian automotive supplier
industry
Customer portfolio diversification

• Many Italian automotive suppliers have
  traditionally had Fiat Group as their single
  client. There is now a clear tendency for
  suppliers to diversify their customer portfolio
  with non-Italian customers.
• Italian suppliers are now performing very well
  because of increasing exports and less dependence
  on Fiat Group.

Product portfolio specialization

• Italian automotive suppliers are slowly becoming
  more specialized (i.e. creating product
  portfolios with focus on core products,
  technologies and competences).
• With these more specialized product portfolios
  suppliers are at the same entering similar
  non-automotive industrial sectors.

Strategic cost reduction actions

• Delocalization of Italian automotive suppliers
• Production facilities established in low-cost
  countries (mainly for labor intensive operations)
  
• Increase of sourcing volumes from low-cost
  countries
• Production capacity and workforce down-sizing

Source STC, interviews
27
CONTENT

• Overview Italian Manufacturing Industry
• Italian Automotive Industry
• Italian Construction Equipment Industry
• Manufacturers
• Suppliers
• Recommendations
• References

28
THE ITALIAN PRODUCTION OF CONSTRUCTION EQUIPMENT
TOTALS ABOUT SEK 43 BILLION- the industry grew
with more than 8 in 2005
Production machine and construction vehicles in
Italy
billion SEK
Road Equipment SEK 3 billion
Concrete Equipment SEK 6 billion
Tower Cranes SEK 3 billion
Crushing, Washing, Sizing Equipment SEK 2
billion
Earthmoving Equipment SEK 29 billion
Growth mainly a result of increases in exported
volumes
Source Committee for European Construction
Equipment
29
TOTALLY THERE ARE ABOUT 300 COMPANIES ACTIVE
WITHIN THE CONSTRUCTION EQUIPMENT INDUSTRY IN
ITALY- But many companies are small and only
active locally
CONSTRUCTION EQUIPMENT(examples of the largest
companies in the industry)
ROAD
MINING
EARTH MOVING
LIFTING
Graders, asphalt pavers, asphalt mixers
Wheel loaders, drills, haulers
Excavators, wheel loaders, backhoe loaders, Skid
steer loaders, haulers
Mobile cranes, forklifts

• Bitelli (Catepillar Italia)
• Antec
• Marini
• CNH (Fiat Group)
• Fiori SpA

• Solimec
• Casagrande

• Komatsu Italia SpA
• CNH (Fiat Group)
• Astra Veicoli Industriali(Owned by IVECO and
  part of Fiat Group)
• Merlo
• SCAI SpA (Hitachi)
• Fiori SpA
• Macmoter SpA
• Euromach Srl

• Marchetti Autogru
• Raimondi
• Merlo
• Terexlift
• Amoc Veba Srl

Source UCoMESA , Anima
30
CONSTRUCTION EQIPMENT OEMs DETAILED INFORMATION
(1/2)
Source Kompass, UCoMESA, Anima,
31
CONSTRUCTION EQIPMENT OEMs DETAILED INFORMATION
(2/2)
Source Kompass, UCoMESA, Anima,
32
THE ITALIAN CONSTRUCTION EQUIPMENT INDUSTRY IS
CONCENTRATED TO THE REGION EMILIA ROMAGNA
VicenzaKomatsu
FontanafreddaCasagrande
BresciaEuromach
MilanAntecRaimondi
AlfonsineMarini
CervascaMerlo
MinerbioBitelli
PiacenzaMarchetti AutogruAstra Veicoli
Industriali
CesenaSoilmec
ModiglianaMacmoter
PoviglioAmoc Veba
UmbertideTerexlift
ModenaCNH Fiori
33
CONTENT

• Overview Italian Manufacturing Industry
• Italian Automotive Industry
• Italian Construction Equipment Industry
• Manufacturers
• Suppliers
• Recommendations
• References

34
MOST OF THE ITALIAN SUPPLIERS TO THE CONSTRUCTION
EQUIPMENT OEMs ARE SMALL AND MEDIUM SIZED
COMPANIES
SUPPLIERS (examples of the largest ones)
Electrical systems
Propulsion and running gear
Steel construction
Hydraulics
Accessories
Power train, engines, exhaust systems, axles
Cables, sensors, semi conductors, control units
Undercarriage and body
All kind of hydraulic cylinders

• All kind of accessories

• Siemens Vdo Trading
• Robert Bosch

• Bosch Rexroth
• C.A.M.I
• Hydrocontrol
• Homberger
• Safim SpA

• Italscania SpA
• Perlini International

• SKF Italia
• Cararro SpA
• Bosch Rexroth
• SAIM Europe Srl
• 
  
  

• Berco SpA
• Cobo
• Case del Sedile
• Isringhausen
• Webasto product Italy

SourceSTC, interviews
35
CONSTRUCTION EQUIPMENT SUPPLIERS DETAILED
INFORMATION (1/2)
Construction equipment suppliers
Source STC, Kompass, interviews
36
CONSTRUCTION EQUIPMENT SUPPLIERS DETAILED
INFORMATION (2/2)
Construction equipment suppliers
Source STC, Kompass, interviews
37
THE SUPPLIERS TO THE CONSTRUCTION EQUIPMENT OEMs
ARE CONCENTRATED AROUND MILAN IN THE REGION OF
LOMBARDY
BresciaCobo
VareseIsringhausen
TrentoItalscania
MilanSiemens Vdo Trading Robert Bosch Webasto
Product Italy Bosch RexrothSaim
PadovaC.A.M.I.Carraro
VeronaPerlini International
FerraraBerco
TurinSKF Itallia
ModenaCasa del sedileSafim
GenuaHomberger
BolognaHydrocontrol
Source STC, interviews
38
THE GROWTH OF THE ITALIAN PRODUCTION OF
CONSTRUCTION EQUIPMENT IS EXPECTED TO CONTINUE-
In large parts based on increasing foreign demand
Trends within the Italian Construction Equipment
industry

• In 2005 the Italian production of construction
  machinery increased with more than 7.5 . In the
  coming years a further growth is foreseen,
  relying on a steady demand both from the Italian
  market (thanks to the realization of large
  construction projects) and from foreign markets.
  

Continuous growth in produced volumes

• Italian companies have been losing market shares
  to Asian producers, who are pushing down general
  price levels.
• In order to meet the competition Italian
  companies are working on differentiating their
  product offering and increasing the quality of
  the after sales service.

Increasing competition from far east countries

• Italian production of construction equipment is
  heavily dependent on sales to foreign markets.
• Today close to 70 of production is sold abroad
  and the weight of exports continues to grow since
  exports increases more than domestic demand.

Weight of exports as part of total sales
increases
Source STC, interviews
39
CONTENT

• Overview Italian Manufacturing Industry
• Italian Automotive Industry
• Italian Construction Equipment Industry
• Recommendations
• References

40
WHEN DOING BUSINESS IN ITALY LOCAL PRESENCE CAN
MANY TIMES PROVE TO BE A GREAT ADVANTAGE
Country specific recommendations for doing
business in Italy
Local presence important

• Local presence is often a great advantage.
  Italian companies are used to working closely
  with their counterpart and local presence with an
  Italian speaking representative is often an
  important success factor.

Fragmented value chains

• The value chain in Italy is often fragmented.
  Many actors are involved in the distribution
  network and the use of local agents can often be
  an effective way to reach the end customer.

• Forming a company in Italy is a very bureaucratic
  process and assistance in this process is highly
  recommended.
• Deals with agents and distributors should be
  overseen by legal adviser since regulations
  differ a lot from Swedish practise.

Differing rules and regulations
Late payments

• Be prepared that time of payment is among the
  longest in Europe. Italian customers will be
  resistant to accepting a time of payment under 60
  days this should be considered when negotiating
  with the Italian counterpart.

Source STC, interviews
41
THE ITALIAN AUTOMOTIVE INDUSTRY IS LOOKING FOR
SUPPLIERS COMPETITIVE IN BOTH PRICE AND TERMS OF
DELIVERY
Industry specific recommendations for doing
business with the Italian automotive industry
Delivery

• Lead time and frequency of delivery are important
  selection criteria. Supply-mix flexibility and
  sequenced-in-line supply capabilities are also
  key success factors when competing for doing
  business with Italian automotive companies.

Price

• Price competitiveness is very important and it is
  generally viewed as an advantage if the
  prospective supplier has its own manufacturing
  facility in a low cost country.

Closeness to customer

• Local presence with manufacturing-, logistics-
  (e.g. warehouse) or commercial premises as close
  as possible to the customers manufacturing
  plants or purchase decision centres can be a key
  selection criterion when the Italian automotive
  company chooses supplier.

Source STC, interviews
42
CONTENT

• Overview Italian industry
• Italian Automotive industry
• Recommendations
• References

43
STC IN ITALY CAN SUPPORT SWEDISH COMPANIES IN ALL
ACTIVITIES FROM MARKET ANALYSIS TO BUSINESS
START-UP
Market analysis

• Evaluation of market characteristics and market
  potential.
• Identification and evaluation of business
  opportunities, customers and sales channels.
• Analysis of, and benchmark with, established
  competitors.
• Identification of possible trade laws and
  regulations affecting the specific product or
  service.

Partner search

• Identification and evaluation of potential
  distributors, agents and suppliers.
• Initiate and conduct discussions with potential
  partners.
• Arrangement and realization of business meetings.

Business support office

• Local sale- and Key Account support.
• Back-office support Economic administration,
  customer service, administration of personnel.

Business start-up

• Formation of Italian subsidiary.
• Recruitment / head hunting
• Property search
• Assistance in merger acquisition

Source STC
44
STC IN ITALY HAS A VAST EXPERIENCE OF HELPING
SWEDISH FIRMS DOING BUSINESS WITH THE ITALIAN
AUTOMOTIVE INDUSTRY
Examples of Swedish companies STC in Italy have
worked with on the Italian market
Source STC