Abstract
Romiti’s timing had been exceptional. During the darkest moment (the end of the 1990s) he had called me to corso Marconi where he gave me carte blanche. When the corrective measures were in an advanced phase but there had not yet been time to record the improvement in results (September 1993), he had arranged an increase in capital of which there would have been no need if he had waited a little longer. Thanks to this, to put it as Gianni Agnelli was to relate to me some months afterwards, he had decided “to take the Company in hand once more”, just in time to enjoy the fruits of success.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Despite everything, the consolidated annual report of the Fiat Group had shown a loss for only one year (1993); in the first six months of 1994 it already recorded a profit of 727 billion lire. I had stated to the “Financial Times”: “We are obviously satisfied with the results achieved, both for the speed of recovery and because it was better than our long term forecast”. In the course of 1995 the good results became known to all. “Italy’s Fiat Posts a Stunning Turnaround” was the headline of the “Wall Street Journal” of 3 February 1995, showing lots of diagrams. On the same day, the “Financial Times” headline read: “Fiat on course for $1.08 bn profit”.
- 2.
The data that follow are taken from a series of meetings I held in the course of 1995, including the meeting with the institutional investors in London on 3 October, the Advisory Board in Venice (also in October), the presentation made to the IFI shareholders of 30 November and the Institutional Meeting of 11 December. In 1995 gross margins reached 16.8 % of Fiat Auto’s turnover, 23/24 % for Iveco and New Holland. Good progress after the collapse at the beginning of the decade, when cars gave a margin of 15.6 % (in 1993), lorries 18.5 % (in 1992) and tractors 19.1 % (in 1992). Despite this, we were still a long way off the historic peaks of the Eighties, with 26 % for Fiat Auto under Ghidella, 30 % for Iveco under my direction and 25 % for tractors under Vezzalini. Times had certainly changed, but I was optimistic about the trend, in the sense that the programmed initiatives were working as they should. The turnaround appreciated by the international press came about above all because of savings on overheads. Fiat Auto was now spending 11.8 % after growing to an incredible 19.1 % in 1991. Iveco, which had almost reached 22 % on turnover in 1993, had gone back down to 14.8 %. New Holland, which in the days of Fiat Geotech had reached 18.3 %, was now stable with overheads at 11.9 %. Consequently, Fiat Auto’s operating results, which had been negative at 6.6 % in 1993, were back in the black at 3.6 % (647 billion lire earned in six months). Iveco touched 7.8 % (344 billion in six months), far from the minimum of 1993, 5 % in the red. New Holland beat them all, with 458 billion earned, equal to 10.1 % of turnover.
- 3.
The results were even more remarkable if seen in proportion to the invested capital: my missionary zeal with regard to “return on investments” began to bear fruit. At the Advisory Board meeting of October 1995, in Venice, I presented the ROI forecast for the whole of 1995: 10 % for Fiat Auto, 20 % for Iveco, 140 % for New Holland and 9 % for the other industrial Sectors. To the IFI shareholders and at the meeting in the Lingotto of December 1995, where I presented results and strategies only a few moments before being shown the door, I said that the consolidated ROI for 1995 would have been 13 %, not a sensational figure but an extraordinary one for the Fiat tradition of recent years. The diagram can be seen in the photographic insert.
- 4.
They included the sale of Rinascente and Cogefar-Impresit, the total of disinvested turnover rose to 10,000 billion lire.
- 5.
Something of the kind happened in Mercedes, in Rome. Its chief of production, Niefert, when he was drunk, loved to drive. In that condition, driving a minibus, he crushed a tourist (a German, as it happened) against a wall as she was passing by. The company machine immediately orchestrated a cover up, substituting the driver before the arrival of the police and instantly sending the guilty party back home on a plane, but “Der Spiegel” found out what had happened and came out with the news, probably thanks to a tip-off from the inside. I pondered the furore that would have followed if a Fiat man had done something similar in Germany, and so I thought to have the episode picked up by the Italian press in order to give the opposition a little healthy denigration, but Mercedes had some good arguments to employ with the press, and almost nothing came out.
- 6.
Translator’s note: Fabbrica Italiana Automobili Torino.
- 7.
A table I presented at the Institutional Meeting at the Lingotto on 11 December 1995 showed the actual figures: in 1991 the models of Fiat Auto’s three marques in the four main segments (from B to E) had an average age of 5.8 years; in 1996/97 the age of the 13 cars available in those segments would have been 2.7 years. Apart from these, 8 niche models (for sport or leisure) had been added. Too many, but at least they were modern. I struggled to the bitter end in my attempt to tackle the problem of Fiat Auto’s range. On 8 November 1995 my stay in Fiat was a matter of days, yet I did not give up: “Long discussion with Cantarella and his people on product costs. Cantarella does not initiate or even permit internal dialogue, and I have to do so from outside. Today I believe I influenced matters sufficiently: between gross margin on the one hand and overheads on the other in Fiat Auto there was a no man’s land amounting to one thousand billion of unsaturation that can never be saturated by accounting definition. Even more serious was the fact that the gross margin of the medium Alfas (with Lancia even worse) is much lower than that of the [Fiat] Bravo/Brava (2 million against 3), even lower than that of the [Fiat] Punto, in absolute value: when someone buys a car of one of our prestige marques, he spites us. But the accounts are even worse, because the unsaturation effect – mentioned here above – affects the other cars, but not the Punto at Melfi and the Bravo/a at Cassino”. The concept of saturation was a pettifogging one but nonetheless of the greatest importance; it was a matter of an accountancy ploy actuated by Fiat Auto to make things incomprehensible, which I could explain roughly like this: estimated standard costs of low-selling products were budgeted as if they were mass products; in this way costs seemed low and hence you justified the development of the model; then, at actual evidence, when effectively the cars sold in quantities far below the estimate, the loss of margin that followed was recorded as being due to the saturation of the factories, that’s to say not the fault of the model but of the market. Regarding the second concept, that of the poor margins of many cars, I have already talked at length.
- 8.
Translator’s note: an ironic reference to Giambattista Vico’s recurrence theory of history.
- 9.
From my notes: “In the morning […] I approve definitively and without any possibility of reversal the merger between Magneti Marelli and Gilardini. From the stock exchange standpoint it’s a good operation – Paolo Mattioli, who knows about such matters, also recognizes this – but for me it has a far broader significance, like a marriage between two old friends, because I had devoted my time, commitment and concern more than once to both companies. This is a crossroads in my life as well as a piece of Italian industrial history, both of which deserve a paragraph entirely for themselves”. The two merged companies turned over 5,000 billion lire, with 23,000 employees and 50 factories worldwide. Product lines included instrument panels (3.9 million vehicles, 1st place in Europe); petrol injection systems (1.23 million, 2nd place after Bosch, a great satisfaction for my Autronica, whose establishment in 1979 I related in Chap. 3); headlights (3.8 million, 2nd place); rear view mirrors (2.5 million, 2nd place); alternators (2.39 million, 3rd place); starter motors (2.05 million, 3rd place); silencers (1.08 million, 4th place). Then there were other lines still to be rationalized, but Alessandro Barberis and, later, Domenico Bordone were to see to this. For the first time in 1994 Magneti Marelli began to supply Volkswagen with electronic injection apparatus, with a contract for 450,000 systems per annum. A lot of water had gone under the bridge since the hard times in which Giovanni Germano and I had been so committed to its rescue.
- 10.
Ceac, an international group of battery producers, was palmed off—obtorto collo—to Romiti by Pierre Suard of Alcatel, via swaps with Telettra shares when Fiat sold that company to the French in 1990. I refused to stick Ceac into Magneti Marelli, where it would have been lost, and opted instead to force through the opposite operation, whereby Marelli sold Ceac its battery sector. In exchange, Marelli got more money and less complexity. This was met with grumbling in corso Marconi, for having shifted the headquarters to Paris and promoting French and German managers (Jacques Leclerc even became Sector Head), but no one dared say anything to me directly: in those days Romiti let me do whatever I wished. Thus was born a new Sector in the Group, visible, European, pre-eminent, and profitable. These qualities were good enough to merit an offer from the boss of Exide, Mr Hawkin, an aggressive and picturesque character who bought Ceac for a high price.
- 11.
I made this note on 31 May 1995: “I assemble Boschetti and Ruggeri (with co-workers Stefano] Decio, [Andrea] Simoncelli and [Claude] Arragon around the table, and for me the moment is one of those fundamental occasions, in which decisions are made whose effects were to make themselves felt ten years later. With time, the memory of these events will be lost, but their consequences will be indelible and will be taken for granted by future generations, as if ineluctable […]. Whereas there had been someone who had thought about them and wanted them. I love these moments. I consider them the sublime instant in the realization of the managerial profession. I let them describe to me their respective programmes for engines, which follow different paths. Iveco is flirting with Cummins to persuade the latter to grant a licence to produce their B engine in Turin as a joint venture, as [Iveco] does not have the volumes sufficient to replace the old and glorious Iveco 8,000 with something new. In this way Cummins would crown its twenty-year dream of breaking into Europe, and Iveco, the leader in the medium segment with a third of all the lorries sold in the Old Continent, would be their Trojan horse. New Holland doesn’t give a damn, because for the time being it has no need to replace the [Ford] Genesis, old as it is, […] produced in Basildon with archaic means, even though (for now) still economical. So, one day it will suddenly find itself without suitable engines and – not having any design capacity – will fall prey to either Cummins or Perkins. I tell them I will never accept this abomination. Did we spend thousands of billions [of lire] to build up Iveco and New Holland only to lose independence with regard to the central know-how [of engines]? Shall we retreat without a fight from the exclusive league we have managed to remain in – or to enter – exclusive company, with only John Deere on the one hand and Mercedes, Scania, Volvo and a few more on the other only to fall in with the clients of mercenary engine manufacturers? I’d rather sell New Holland now – while it is profitable and competitive – before it finds itself at the mercy of suppliers. Or better, I have them understand, I shall impose a solution over their heads, as I did with Weber and Marelli at the time of electronic injection, in 1979 [Chap. 3] – and it was too bad for those who didn’t agree. They are very shaken. […] I take them to the dinner table and in the end I conclude: some form of partnership between Iveco and New Holland will be created in order to develop the new engine, objective 2001. If it wants to, Cummins can also take part, as long as it doesn’t insist on covenants on the total industrial property of the new project on the part of all the partners, in an independent manner and on a worldwide level. […]. They will have to take the necessary measures. We will allocate the necessary means. The programme must be ready by June”. The matter was followed up shortly afterwards: “Iveco and New Holland are coming in, and what I elaborated on 31 May is moving towards a grandiose project. They have chosen Arbon as the central locus of the joint development, from where the applications will then branch off on the dual track Turin-Basildon. I really like the chosen solution. It will cost 400 billion in development and the same figure in investment, but it’s worth the effort, because the future of a good chunk of Fiat depends on it”.
- 12.
In Brazil, as I said in Chap. 2, Fiat had invested a lot of money during the Seventies. Overall, the capital injected in Fiasa amounted to 757 million dollars, corresponding roughly to 2,500 million dollars in 1995 value. Despite this heap of cash, Fiasa lost money from 1977 to 1983, it more or less broke even between 1984 and 1989, and lost again in 1990 and 1991. Fifteen years after the start, Fiasa exploded: a profit of 138 million dollars in 1992, 337 million in 1993 and 800 million (!!) in 1994. In that year the Brazilian operation also had a positive influence on the Italian business, though the exchange of products. Fiasa found itself in a privileged position thanks to the passing of the law on the “automobile popular”, which provided tax advantages for cars with less than 1,000 cc of engine capacity, a model of which Fiat was the sole producer for a long time. This fortunate condition was, in my opinion, proof of the farsightedness and efficient lobbying of the Fiat dirigenti in the field but, in deference to the Fiat style of preventing the names of any internal managers from earning fame in Italy, men such as Silvano Valentino and Eugenio Alzati, the originators of this success, never became known outside the local milieu.
- 13.
As I said in Chap. 8, after the fall of the Berlin Wall the idea began to gain ground that we could intervene directly in Poland by purchasing a factory that years before had been granted a licence for the production of the super-compact Fiat 126. When I arrived in the Direzione Generale in 1991, the initiative, by then in an advanced phase of realization, struck me as interesting and positive for the long-term future, even though I thought it was a pity for all that financial commitment and the use of such a cheap workforce (in 1991 one man-hour of work in Poland cost the Company 17 % of the going rate in northern Italy) went into the production of a compact car that brought in absolutely no profit.
- 14.
Initiatives described in detail in Chap. 6.
- 15.
In years long gone by, at the end of the Fifties, Fiat had attacked Argentina, winning high market shares for cars, lorries, tractors and railway materials to the point that in that country Fiat wielded a power that was even greater than it had in Italy, but without managing to make better use of it. In Cordoba, Fiat’s status was not dissimilar to that which it enjoyed in Turin and, moreover, the entire region had been populated by Piedmontese immigrants at the beginning of the century (“They’re all Piedmontese over there”, Gianni Agnelli—who had heard the story from his grandfather—told me several times “even though those who emigrated from here to South America were the most easy-going ones”). The story of the rise and fall of Fiat’s Argentinean empire would deserve a book to itself. The collapse of the political-economical system of that country in the early Seventies destroyed all that had been constructed and the wave of industrial xenophobia left Fiat with no prospect of survival. Those were times of folly for the country, under the thrust of the most unrestrained demagoguery, which instead of controlling and regulating foreign companies, kicked them out. In this way it fell out of the “frying pan of the multinationals into the fire of the voracious local wheeler-dealers”. “Give us back the Piedmontesi” was the slogan that appeared years later on a banner at the Cordoba factory. The Fiat group had to sell at a loss to national entrepreneurs, who were hand in glove with the politicians, everything it had inherited from the company’s forebears. On the divestment front Cesare Romiti did a good job, just after he was hired by Gianni Agnelli in the mid Seventies. Fiat lost all its factories but managed to recoup a lot of money through operations that Fiat’s financial function conducted brilliantly, exploiting insane laws promulgated under the impetus of ignorance and speculation. (Similarly disastrous laws were promulgated later in Venezuela). A stratagem, known in jargon as “the bicycle”, worked in this way. Fiat (like any other entrepreneur able to operate internationally) brought fresh capital from abroad into Argentina and changed the dollars into pesos at the real rate of the day, favourable to the dollar. Immediately afterwards it changed the pesos back into dollars at a lower rate, imposed and financed by the government in a wholly artificial manner. The dollars were thus miraculously multiplied before being instantly re-exported (in the form of claimed previous credits recovered from the local subsidiary company, credits that a previous measure had sneakily blocked). The “bicycle”, a wholly legal instrument, had not been invented for Fiat but to favour goodness knows which interests of goodness knows which persons, and in my view it represented the extreme degeneration that occurs when rates of exchange are forced on the market by state control under the thrust of demagoguery and lobbies. In 1995, almost twenty years after abandoning Argentina, it seemed possible that Fiat might recover its independence in that country thanks to a fortuitous series of events in connection with talks with the Macri group, the licensee of Fiat and Peugeot, which had acquired so much power and wealth in Argentina as to even attempt a takeover bid for Fiat Brazil. Things in Argentina were still fluid when I left my operational responsibilities in the Group, at the end of 1995.
- 16.
Our company forefathers had left us an important inheritance in Turkey: Fiat was the leading producer of cars, lorries and tractors. But there was a major problem: everything passed through the licences and the minority shareholdings in the joint venture with the Koç group. Vehbi Koç (the eponymous founder, ninety-four at the time) and his sons Rahmi and Suna considered themselves in terms of fame and wealth to be the Agnellis of Turkey, a comparison that Gianni Agnelli did not appreciate, but which would have gone in their favour if measured in real profits. In my view, Fiat’s position was at risk because the globalization of markets and hence the opening of the country to trade with the European Union was leading us to a conflict of interests with our partner. I tried to acquire control of all the licensee companies (Tofas for cars, Otoyol for lorries, Turk Tractor and Mako, too, for Magneti Marelli components) with a view to integrating them in the international organization of the Sectors. If that were not possible, I intended to regain control of our freedom of action. I tackled the talks as best I could, with much personal commitment, but when I left Fiat matters were still unresolved.
- 17.
European Commissioner for industry and telecommunications.
- 18.
Gianni Agnelli was Chair of the CCMC, the precursor of ACEA, for three years, between 1972 and 1975, when he was replaced by Pierre Dreyfus of Renault; Umberto Agnelli also occupied that position for two years, between 1988 and 1990, before Raymond Levy of Renault, and was one of the plotters that sank the organism.
- 19.
From my notes: “Assigning the places at table is [for me] an exercise in high diplomacy [because of difficult interpersonal or intercompany relations]. To Dini’s left there is Romiti, who in this way feels in the fullness of power – in the absence of the Avvocato [Agnelli]; then, further left, M. and Mme. Calvet (last year Romiti had Schweitzer beside him; now it was necessary to change [because the contacts with Renault for Fiat Auto had come to nothing] but I could not choose anyone whose language was English [which Romiti spoke badly], and the Calvets struck me as a just punishment for him); then comes the area for the lorry men; to Dini’s right I put German power, that’s to say the Werner couple, and after them the Hughes of General Motors. I sit in front of Dini, together with Rosalba, and to my right the Piechs (sufficiently far from the detested Opels, soi disant fellow countrymen [Opel, of General Motors, had amazed Germany with a full-page newspaper advert in which they congratulated their ‘fellow countrymen’ of Volkswagen]) and the Schweitzers to the left (this was so they won’t be in front of the hated Peugeots, real fellow countrymen); further along, the minor car men, Porsche and Rolls-Royce. […]. Mrs Piech is an amusing companion: she must be [eccentric] like her husband, with whom she had her third child eleventh months ago – but her husband already had another ten children from other wives; ‘my house is a real mess’, she tells me with a merry laugh. It was on this occasion that I resolved the situation in ACEA in Calvet’s favour: “The next day at the Board meeting in the Grand Hotel […] I have a private talk with Werner: […] what a problem he had created for me in Frankfurt: both of us had promised the Chair to Calvet – he confirms – and I’m accustomed to keeping my word; now Calvet is backed by Chirac; isn’t this Piech not a bit heavy handed in saying that he wouldn’t believe Calvet even if the latter made a formal commitment? We risk a war between France and Germany and I, too, would be extremely embarrassed. Let’s think things over well first… I speak to Calvet in private: I have heard it said that people are worried about his written and verbal sallies, which might cost him the coveted Chair. Why doesn’t he keep quiet, good God, what’s the use of these rantings? He tells me I’m right, but that’s the way he is – thanks, however”. And in the end Calvet had his Chair.
- 20.
Translator’s note: news agencies in Italy.
- 21.
For example, on 3 June 1994, I left with colleagues from finance and administration and with Paolo Cantarella. I noted: “A tour de force in London and Paris to meet financial analysts and brokers. I require a presentation on industrial (and not only financial) bases, very organic and [complete] with reference to strategic concepts and aspects. But I show my cards even with the accounts, with basic and expressive charts: those that show the past and future progress of the break-even point. I get the usual grumbling in the corridors; even the Avvocato [Agnelli] voices his opinion (not in my presence), to the effect that ‘you need to give numbers and not concepts’, he who had never made or received a presentation of this kind and thinks that we are all like him in paying attention to the exterior aspects of the show, and – especially – to the exterior aspects of the individual who makes it; they tell me that Romiti is afraid that people will get up and leave… Nobody dares say anything directly to me, also because if I [don’t go they wouldn’t know who to send in my place], (Mattioli is held up in Italy by the developments of his [legal] ‘problem’; I go my own way, and I do everything myself: the text, the [tables to be projected], briefing Cantarella about what he should say. The result was an excellent presentation. It was quite long, but compact and absorbing. It wasn’t difficult, given everything we really had to say. Nobody got up to leave. In London, at the Barbican and then in Pemrose Street, we clash with Daimler Benz, which had held a similar meeting just before us: and they didn’t say anything. We look good in comparison. I’m more worried about Paris, because the French are more convoluted. Instead, at the Hotel Bristol, with the Société Générale as my host, I find myself at my ease. […] The little green and blue booklet that inculcates the ‘Twelve Things We Would Like You to Know About Fiat’ has come out excellently: innovative formula, simple and essential beauty, [linearity] of presentation, rapidity of use. I wanted it and made it with my own hands, on the basis of the one I had made for my tour of England and Germany a year or two ago; even the graphic design has always been under my extremely fussy control. To the title, taken [from the earlier one], I added a blandly Shakespearian flavour. […] We round off the roadshow with Frankfurt and Zurich. […] For the first time, Paolo Mattioli, free of his commitments, also takes part but his contribution is minimal: he is not a great communicator at the best of times, never mind now. On 8 October 1994 we took the roadshow across the Atlantic: ‘Saturday, London; Sunday, Los Angeles; Monday, San Francisco; Tuesday, Boston; Wednesday and Thursday, New York; on Friday evening I should return home, but an engine of the [Alitalia] jet caught fire over the Atlantic and we have to go back to where we started […]. Sheer drudgery. Nineteen meetings, one hundred people in all, what with brokers and financial analysts. All get the same explanation, with variations that depend on their previous knowledge of us. One or two hours of presentation and questions and answers. Questions almost always pertinent, often aggressive. Sheer drudgery. Luckily our trend is so favourable and the things [we have] done so numerous and so well that the climate is good and hence it’s easier to resist mentally. In fact, the risk is the opposite one, that they expect too much from you; but I’ve been in this business too long not to know that the more I invoke caution the better I look. We look good in general and for Fiat this is as useful as it is tiring for me. Many of them understand Fiat for the first time, with its composition and its strategies for restructuring and development. Some presentations come off particularly well for me […]. Distrust of Italy as a country is great and widespread. Mattioli thinks that the Jewish lobby might have influenced things a little with respect to a pseudo-Fascist country. But, knowing the Americans, I see no need to invoke shadowy plots: it suffices to consider the statements and daily about-turns made in the light of day by our ruling classes. […] It’s strange, but in almost twenty years with Fiat, this is the first long trip I’ve made with Paolo Mattioli. I appreciate his extraordinary mildness. I realize how he could have ended up [crushed] between Di Pietro and Romiti, and he doesn’t hold a grudge against either one of them”.
- 22.
900 for Fiat Auto in Poland, 1,200 for Iveco in Spain, 1,600 for New Holland, 300 for the acquisition of Shiley by Sorin Biomedica.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2014 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Garuzzo, G. (2014). Good Outcomes from the Direzione Generale (1994–1995). In: Fiat. Springer, Cham. https://doi.org/10.1007/978-3-319-04783-6_11
Download citation
DOI: https://doi.org/10.1007/978-3-319-04783-6_11
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-04782-9
Online ISBN: 978-3-319-04783-6
eBook Packages: Business and EconomicsBusiness and Management (R0)