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You are here: Home > Rethinking Organizations > Reinventing a company town - Turin, Italy and FIAT / FCA

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Published on 2018-12-07 | Updated on 2019-04-03 19:16:27 | words: 2896

Yesterday evening (2018-12-06) I attended a webinar from IEEE on smart cities.

Beside a framework on "kick-starting transforming into a smart city" with examples from the continental USA, there were of course bits of information concerning the transformation of the automotive industry.

Background: our mobility model since the early XX century was mainly focused on transportation between locations, and, also if generally across Europe public transport played a role, the individual mobility element was, following the USA model, a main point of reference.

Public or collective transport? Second fiddle in the mobility orchestra.

The current and expected increased urbanization will alter that framework of reference, shifting from different industries toward a cross-industry segmentation.

Future mobility vehicles will be quite different from what we are used to call "cars" or "autobus" or "taxi".

It is not just about electrification, it is a paradigm shift in terms of roles and use of vehicles, as well as in terms of ownership and interaction between vehicles, or between vehicles, those using them, and the environment.

You probably read some of my past articles on either business changes or trends and observations on Italy and, specifically, Turin.

Or some of the thousands of pages that I posted since 2008 (and are currently offline), usually blending experience, data analysis, news review, and (attempts to) trends-spotting.

In this post I will focus on the transformation of automotive into mobility, linking up to the local dimension, as Turin recently announced that it is trying to convert itself from the automotive company town that it was, the "European Detroit", as some called it, to a competence centre on what's next.

To avoid repeating too much and to keep this post as short as possible, will make reference to few posts that published online between August and November 2018 (except the first one in Italian, all the others in English).

A small detail that I heard yesterday was the recent announce that General Motors decided to shift away from some models, toward minivans and the like (including SUVs).

Shifting to the local element here in Turin, Italy, while attending a conference recently in Turin, we were told that only 1/5 of Italian Millennials are considering car ownership- a marked difference vs. the past, even just one generation ago, when I was in high school (early 1980s).

Few months ago I wrote that one of the options was an increased americanization and "unbundling" of the former FIAT group (now FCA), which used to be the main employer in Turin, and its gradual "detachment" from Italy and Turin.

Well, nothing that happened recently altered the scenario- so, it ended up being a self-fulfilling prophecy.

There are various reasons, but yesterday was announced a restructuring of the management team that will inject more non-automotive management at the top, including from Amazon.

Months ago one of the reason for the appointment of the successor of Sergio Marchionne was the success on the Jeep- a brand that actually already served well, after WWII, few companies (https://en.wikipedia.org/wiki/Jeep)- from Kaiser Motors, to American Motors, to Chrysler, to FCA.

As expected (not just by myself), the new additions mark a further shift away from "traditional" automotive and an increased USA element.

But it is a shared trend.

Just to stay in Europe, over the last few years more than once I heard (in Italian, English, German) that automotive companies in Germany and elsewhere consider "digitalization"-related services as a potential major source of revenue in the future.

Talking about Germany, a couple of books can give more details on the trends, Silicon Germany and Der letzte Fuehrerscheinneuling.

We are apparently far, far away from the 1990 Womack's The Machine that Changed the World- albeit "Lean manufacturing" is more important now than before, if you consider the share of each vehicle that is actually not produced by the "brand company" itself.

If our vehicles have to turn into "platforms" not necessarily owned by those using them, using a car will become similar to visiting a website- except that it will be one that you will move around with.

More about this later.

Adding another element, shifting from "automotive" to "mobility" and to "city design", more elements were presented by another MIT study, the Reinventing the Automobile - Personal Urban Mobility for the 21st Century, published in 2010.

If you browse the book, and read side-by-side e.g. material from the Smart Cities IEEE community, you can see what often is missing in most of the conferences and discussions on smart cities, and was instead discussed yesterday.

It is not a matter of technology- it is a matter of political drive.

Back to FCA and Turin.

As I said to colleagues locally, "extracting value for the shareholders" has been a mantra for a while- but what has to be considered is that, in any paradigm shift, you can to assess the elements required to make such a shift a successful one.

Selling a controlling stake of a company implies not just transferring control, as many here in Turin think, but also ensuring two stakeholders roles, both covered from those retaining a chunk of the company.

A first role is a kind of "insurance policy" for those purchasing it- as, in Italy, since the 1980s, there were way too many transfers to foreign companies of businesses whose turnover shrinked after the purchase.

And a second role is, again, linked to "extracting value".

Ask yourself:

Then, "extracting value" implies releasing control, while staying on board to benefit from the "deferred" extraction of value.

So, what the locals call "spezzatino" (and was part of the title of my post in August), is probably more a side-effect of those questions, also if, as usual, the locals think only about the monetary value exchanged, and its usefulness to allow the implementation of FCA's investment plan.

A short-sighted perspective, as there are more elements within the mix.

I shared in late August a review of a book on trade unions' evolution in Italy and potential trends during 4.0 times: we still have a disconnect between the current times, the interconnection of elements affecting our (do we have one?) "national industrial policy", trade unions Weltanschauung, and... reality.

It is more common hearing of various forms of proposed nationalization and protection, as if we were still in the 1960s and Italy had "national champions".

I wonder how many proposing those romantic approaches bothered to ask all the legions of bureaucrats to do something really simple: build a timeline from design to procurement to manufacturing, and down to the whole lifecycle, for just one car model.

Had they bothered to do so, marking not just "who", but also the ownership and procurement patterns of those involved, would have seen that "national" does not make that much sense anymore.

If it ever made sense: how much coffee is produced in Italy? Nonetheless, "espresso" is associated with Italy.

Since the 1980s, not just within the automotive industry, Italy applied, more than other countries, a kind of "unbundling" across industries, mainly focused on reducing costs and externalizing supply chains.

Sometimes (or often- depends on the industry), this really resulted in "delocalization" presented as if it were externalization or outsourcing.

Turin was no exception: the knowledge content of local jobs did not increase.

Actually, we have the paradox that our "excellence in culture" is really represented by a lowering in investment in knowledge content of most of the jobs created since FIAT isn't anymore the main local employer.

So, "excellence in culture" actually produced more jobs that require a shorter knowledge development and transmission cycle, e.g. increasing lower-cost services (or, as many younger people working in the domain that I met since the preparation of the 2006 Olympic Games, even unpaid).

As reminded also the Governor of Piedmont at the presentation of a report on the local service industry, losing "command centres" for multinationals, shifted elsewhere in Italy and abroad, results e.g. in less local demand for highly paid management consultants, who have now to provide their services to companies formerly based in Turin, and now in the USA, Luxembourg, or even Milan.

I shared my considerations on that reduction on the "resilience", ability to adapt, etc. exactly one month ago, while in Frankfurt- so, you can read there details.

Personally, I consider yesterday's announces from FCA, as well as the ownership transfer of Magneti Marelli while retaining a share both positive signs.

Albeit, on Magneti Marelli, I think that shifting from "vehicles" to "mobility" implies having more need to work from parts to vehicles as a joint design team.

There is an interesting element that I hear about smartcities in almost all the webinars, conferences, articles, etc. that I have access to and are not based in Italy, an element that is almost always missing in discussions in Italy.

If you think through pictures, "foreigners" describe a smartcity almost as an atom, a cell of a larger entity, a self-contained ecosystem that has to cope with the interaction with other closed systems.

And what does it mean having a self-contained ecosystem? That it has to produce (and recycle) what it consumes.

This is a political approach, not just a collection of engineering elements, as this approach requires a dramatic redesign of social and economic relationships.

In Italy, most discussions about smartcities seem to be focused on technology, interconnection, broadband- as if we were focused on an encore of the mechanistic approach that delivered public housing from the Bauhaus and its contemporaries: containers, not content.

Now, as Turin is trying to reposition itself as a competence centre on smartcities, that is a self-defeating proposition, as it implies, as I wrote before, that locals will keep investing on training human capital that, to allow "extracting value" will have to be injected into teams elsewhere that have a more comprehensive approach.

It is the difference between a dream and reality.

Also, if you deliver only the "knowledge Lego(tm) bricks" but do not build the mindset to connect the dots if when how needed, a local competence centre is delivering too many too much specialized and nobody able to connect them.

And this result in a local inability to develop services and products that could actually be useful where a comprehensive, "systemic" approach is followed.

Again: you are assuming the costs (as each engineer in training is a cost for Italian taxpayers) to deliver hands trained in Italy using Italian knowledge to be "connected" by foreign brains abroad.

So, our education and research system turns into a charity for more advanced economies- wonderful choice.

In its quest for a post-company town future over the last few decades Turin had something more than its sibling Detroit, as I reminded few times in part articles, considering that both local authorities and banking foundations provided resources to convert, transform, and reposition former industrial sites all around Turin, from the OGR (Officine Grandi Riparazioni, formerly a workshop for trains), to Lingotto (a factory that was one of the first large industrial buildings in Europe using new technologies in the early XX century).

It is anyway a matter of going beyond a mere change- look at how Italy, that proudly claimed to be the 7th (or even the 5th) industrial country, squandered so much its knowledge capital that now is just 25th within the EU on the Digital Economy and Society Index.

Automotive "savoir faire" still lingers in Turin, but for how long?

The smartcity technological elements are available, and while few years ago at an IEEE IoT workshop in Milan most of those present were from the engineering side, today I would expect also at least system integrators and providers of services to consumers, ranging from telcos, to utilities, to banks, to insurance companies, and even Amazon and Alibaba.

So, the point is creating what start-ups call "customer journey": literally, and integrating all the suppliers, known and unknown, that make sense in each individual journey for each individual.

More than "smart contracts", instantaneous auctions between multiple potential partners- on the move.

If the Critical National Infrastructure becomes a shared common, and providers deliver services and products on top of that, then you need to be able to be "interoperable" not just with known partners, but with any "virtual provider" that maybe delivers a service matching the "individual customer journey instance" (i.e. the single journey of a single individual, as a person or team) just in that moment in that place.

And the "mobility providers" (for individuals who want to own a car, down to those that want to own a virtual car, i.e. a shared car configured automatically for them) will have probably an increased chunk of their turnover derived from a slice of these "commodity services", long before it makes sense to actually sit down and negotiate with a business partner, as it would have been done in the late XX century.

In the end, each travel by car/mobility vehicles would be a macro transaction composed by micro-payments.

The "American" FCA and "Japanese" Magneti Marelli are probably a much needed reality call.

Now, also if the few remaining Italian plants were to remain in activity after 2022, there is local potential to support a much wider "corporate audience" with the local "knowledge supply chain".

Decades ago, I was told in London that for some consumer electronics Italians and Japanese were the best early adopters.

Later on, I was told that for some FMCGs (fast moving consumer goods), American companies used Brussels as a test market.

Now, turning Turin into a competence centre for smartcities and the associated social and cultural changes requires more than academia.

It requires a closed ecosystem able to produce, consume, and, yes, test new products, services, concepts.

A closed ecosystem that actually lives as a smartcity, and whose inhabitants are used to be de facto everyday testers of new ideas, approaches, products, services.

If that is done, then it might also make sense to retain in Turin not just some manufacturing jobs, but also innovation centres that are attracive for companies that need to churn out new products and services at a rate more compatible with FMCGs than traditional manufacturing, as they will be able to then interact locally and "tune" products and services before deployment elsewhere, reducing the cost of the trial-and-error of product/service launches.

For the time being, it would be enough to get a little bit out of the technology box, and think about technology within the cultural and social environment.

But, in Italy, it would require both the local authorities and all economic and social parties to be first and foremost made "aware" of the potential of technology, as the first reaction from the locals is that, with the disposal of "formally negotiated" agreements, they would have a loss of control.

P.S. Disclaimer: I worked as a consultant for various FIAT group units since 1986 on various projects, but the concepts discussed in this articles are my own opinions/ideas and are not related to any activities I carried out any of those entities.

You can see more details about my experience in automotive and other industries in my CV