The revolving door to Fiat's boardroom turned once more yesterday, with the Agnelli family installing a new chairman and chief executive to stabilise the company ahead of a rescue plan for its struggling car unit.
The arrival in the chairman's seat of Mr Umberto Agnelli, head of the family since the death of his brother Gianni in January, comes with the fourth chief executive in eight months.
As the Agnelli family tightens its grip on the troubled Italian industrial group, Fiat will also see the exit of Mr Jack Welch, the legendary former chairman of General Electric, who resigned as a non-executive at the same time as Mr Paolo Fresco, his former deputy and long-standing chairman of Fiat.
But Mr Agnelli's shake-up could usher in a much-needed period of stability. Shares in the group rose 0.3 per cent on Thursday after the Agnelli holding companies said Mr Giuseppe Morchio would be proposed as the new chief executive.
The new executives are seen as likely to keep their positions longer than their predecessors because they have the blessing of the Agnellis. That will allow them to concentrate on their two main jobs: raising cash and dealing with Fiat Auto.
Mr Morchio, a former Pirelli tyre executive, will join as the board is asked to approve losses for last year expected to reach €2 billion, mainly due to red ink at Fiat Auto. To fund the losses, the company will today consider bids for Toro, its insurer, and Fiat Avio, its aerospace division.
It will also decide whether to go ahead with a €2 billion-plus rights issue. The family meets on Monday to approve an injection of €250 million into its holding companies, IFI and IFIL, in order to take part in the capital raising.
Finally, the board will be updated on the status of talks with General Motors, the US carmaker which owns 20 per cent of Fiat Auto. The Italian company hopes to squeeze extra cash out of GM, although the Americans have proved reluctant. Bankers for both sides have been exploring possible deals such as selling GM the successful Fiat Brazilian operations or delaying the right to force GM to buy the rest of the division in exchange for GM taking part in a recapitalisation. But nothing is thought to have been agreed so far.
The money is needed urgently by Fiat Auto, which is doing worse than expected. Mr Giancarlo Boschetti, installed as chief executive of the division last year, hoped to break even in the final three months of last year at an operating level. But the company indicated that even before the cost of laying off a fifth of the workforce the division would lose close to €200 million.
However, Mr Boschetti bit the bullet last summer and laid out plans to cut sharply sales of cars to rental companies and fleets in order to strengthen the brand.
"Fiat set out a reasonable restructuring programme," said Mr Stephen Reitman, vehicles analyst at Merrill Lynch. "It does raise questions of whether the cure is going to kill the patient. But was it the right thing to do? Yes it was."
- (Financial Times Service)
