With losses running as high as €2 billion and 8,100 workers laid off, the future looks bleak for the flagship of Italian industry, writes Paddy Agnew from Rome
Outside the now closed Fiat factory at Termini Imerese in Sicily stands a sorry-looking Christmas tree. On its branches, rather than the usual Christmas decorations, are redundancy letters received by some of the 1,800 workers laid off last week by Italy's ailing car maker.
Throughout Italy, Fiat workers created havoc this week as they demonstrated against a company "restructuring" plan that has cost 8,100 jobs. In Milan, hundreds of protesting workers from the nearby Arese plant (famous as the home of Alfa Romeo) were received in the cathedral by Milan Cardinal, Dionigi Tettamanzi. Similar protests took place in Termini Imerese, Cassino, Naples, Rome and, last but not least, in the company's home town of Turin.
Not for the first time, Fiat has dominated headlines during a week when the company's long drawn-out crisis spilled over into a bitter boardroom battle. This is a battle in which the protagonists include Fiat's ailing patriarch, Gianni Agnelli, his brother Umberto, the secretive Milan merchant bank Mediobanca, Fiat chairman Paolo Fresco and Prime Minister Silvio Berlusconi.
So far, this is the story. Fiat Auto, the world's 11th-biggest car company and the unit which generates 45 per cent of Fiat group revenue, has already lost €1.2 billion this year and is expected to post a full-year loss as high as €2 billion. Fiat Auto's current share of its key domestic market is now 28.7 per cent, less than half its share of 15 years ago, while figures released on Thursday by the European Automobile Manufacturers' Association confirmed that the company's western European car sales had fallen 22 per cent in November 2002. On top of that, the group company has a net debt of €6.6 billion.
Just exactly how Fiat's fortunes have plummeted so dramatically may remain a matter of debate and recrimination, but what is clear is that the marketplace, especially the Italian marketplace, has spoken loud and clear. Many Italians (and other Europeans) simply prefer other car brands.
Were Fiat just another company, this would be seriously bad news but hardly a national tragedy. Yet, Fiat is no ordinary company and not just because it remains Italy's largest private sector conglomerate, still accounting for almost 4 per cent of national GDP.
No, Fiat is more. Throughout almost the entire post-war era, Fiat has been nothing less than the flagship of Italian industry. No company better epitomises the initial difficulties and subsequent triumphs of Italy's post-war economic miracle. As Italians recovered from the shambles and destruction of the second World War, it was the low-cost Fiat car which literally (and to a certain extent, metaphorically) put them back on the road. It is hardly surprising then that, until recently, Italian public opinion tended to identify the successes and failures of Fiat with the economic well-being of Italy as a whole.
Throughout the 1950s and 1960s, Fiat worked closely with a succession of Christian Democrat governments in the planning of the Italian economy. The pay-off came by way of heavy state investment in an extensive Autostrada system, limited investment in public transport, low petrol prices and a protected domestic car market.
The upside of such policies was that, by the late 1980s, Fiat had established a monopoly on car production in Italy. (Fiat today controls, directly or indirectly, Alfa Romeo, Lancia, Ferrari and Maserati.) The downside, analysts would argue, is that such a dominant position starved the company of the lifeblood of competition, stagnated research and development and eventually left it with an outdated range of non-competitive cars.
Even the company's most recent, much-fanfared creation, the Stilo, has failed to meet sales expectations, proving only the seventh bestseller in its segment, 20 per cent below Fiat's own predictions.
Last spring, there appeared to be some bright light at the end of the Fiat tunnel when it was announced that four banks - Intesa BCI, San Paolo IMI, Unicredito and Capitalitalia - had made available €3 billion worth of credit for Fiat's 8,100 job loss restructuring plan, on a three-year credit scheme.
In theory, this would tide the company over into the promised land, namely selling off Fiat Auto to US giant General Motors, which already has a 20 per cent stake in the company as well as a "put" option on the remaining 80 per cent for 2004. At least that way, the Fiat brand name as well as (some) jobs would be saved.
Fiat's woes in recent years have not been helped by the fact that company's charismatic patriarch, Gianni Agnelli, has been battling hard against prostate cancer. This week, his brother Umberto appeared to unveil "Plan B" when he forced the resignation of chief executive Gabriele Galateri, and attempted to sack chairman, Paolo Fresco, the man most largely responsible for the General Motors deal.
Umberto's Plan B reportedly involves Mediobanca in setting up a new group comprising Fiat's luxury car divisions, Alfa Romeo, Maserati, Lancia and Ferrari. Some 49 per cent of this group would then be put on the market, with Germany's Volkswagen, allegedly, being given first refusal.
Prime Minister Berlusconi comes into the picture at this point because only a week ago he was outspokenly critical of the poor Fiat management, adding: "We should wipe out the name Fiat but not that of Ferrari or Alfa Romeo. Do away with names like Stilo and let's call the cars Ferrari Woman or Young Ferrari".
Similarities between Plan B and the prime minister's improvised remarks (made at a book launch) have led conspiracy theorists to conclude that the prime minister may have had a hand in hatching Plan B. Nor did the fact that Umberto Agnelli dropped in to see the prime minister at government house in mid-week ease the concerns of the conspiracy theorists. Were Plan B to be implemented, they argue, then Fiat Auto would effectively be carved up, putting the entire Fiat group at risk and making it possible that some of its prized assets such as the daily newspapers La Stampa and Corriere Della Sera would come on the market and maybe even under the control of factions favourable to Berlusconi.
The prime minister has rejected such an analysis, although his government could yet shape Fiat's future in another direction with a series of "incentives" in the as-yet unapproved 2003 budget.
Whatever about Plan B, however, the Fiat crisis would nonetheless appear to mark a rite of passage. Namely, the shift from an "old rich" Italy dominated by the Agnelli family to a "new rich" Italy dominated by someone on whom the semi-aristocratic Agnellis have long looked askance - Silvio Berlusconi.