Fiat Shares Tumble with Consumer Confidence and High Value of the Lira

10/16/96

Reuters has reported that the value of Fiat shares sank to what was nearly a three year low because of a lack of consumer confidence in the carmaker's domestic market and fears that the high value of Italian currency will take its toll on on exports.

Fiat's market, along with the rest of the European auto markets, bottomed out in 1993. Since that time other European nations have seen car market recoveries, although the Italian carmaker has struggled. Currently it looks like Fiat's market could slip below the levels it saw three years ago.

Unstable consumer confidence in the Italian carmaker's prospect have been increased, now, by worries about a new Eurotax. The Eurotax is a component of Italy's 1997 financial budget package, which tries to push the country towards readiness to join with the single European currency. Italy's 1997 budget aims to cut the national deficit by 62.5 trillion lire ($41 billion), and includes tax increases--like the new Eurotax which, although its still unspecified, must raise 12 trillion lire and is expected to target middle income Italians.

Earlier in the week, Fiat shares slipped below 4,000 lire to close down at 3,964 lire--the lowest level seen since early December 1993. Many analysts had expected Italy's domestic car market to match 1995's level of 1.73 million units in 1996, but now predict that it will drop even below 1993's 1.69 million.

The situation isn't all bad, however, as Fiat is in a better position than it was in 1993 when it slipped to a record loss with the collapse of the European car market. Fiat, with the launch of its new medium-large Marea and the earlier introduction of the Punto and Bravo/Brava, now has a renewed car range. It is also doing well in Europe outside Italy and its trading outlook is improving the Brazilian market.

Paul Dever -- The Auto Channel