The story
Founded by Giovanni Agnelli on Jul 11, 1899, in Turin.1
History
Giovanni Agnelli, with several investors, founded the Fabbrica Italiana Automobili Torino (Italian Automobile Factory of Turin; FIAT) in 1899. Its acronymous name was changed to upper- and lower-case Fiat in 1906. Agnelli led the company until his death in 1945, while Vittorio Valletta administered the firm's daily activities. Its first car, the 3 ½ CV, of which only 24 copies were built, all bodied by Alessio of Turin, strongly resembled contemporary Benz, and had a 697 cc (42.5 cu in) boxer twin engine. In 1903, Fiat produced its first truck. In 1908, the first Fiat was exported to the US. That same year, the first Fiat aircraft engine was produced. Also around the same time, Fiat taxis became popular in Europe.
By 1910 Fiat was the largest automotive company in Italy – a position it has retained since. That same year, a new plant was built in Poughkeepsie, NY, by the newly founded American FIAT Automobile Company. Owning a Fiat at that time was a sign of distinction. The cost of a Fiat in the US was initially $4,000 and rose up to $6,400 in 1918, compared to $825 for a Ford Model T in 1908, and $525 in 1918, respectively. During World War I, Fiat had to devote all of its factories to supplying the Allies with aircraft, engines, machine guns, trucks, and ambulances. Upon the entry of the US into the war in 1917, the factory was shut down as US regulations became too burdensome. After the war, Fiat introduced its first tractor, the 702. By the early 1920s, Fiat had a market share in Italy of 80%.
In 1921 workers seized Fiat's plants and hoisted the red flag of communism over them, to which Agnelli responded by quitting the company. However, the Italian Socialist Party and its ally organization, the Italian General Confederation of Labour, in an effort to effect a compromise with the centrist parties ordered the occupation to end. In 1922, Fiat began to build the famous Lingotto car factory—then the largest in Europe—which opened in 1923. It was the first Fiat factory to use assembly lines; by 1925, Fiat controlled 87% of the Italian car market. In 1928, with the 509, Fiat included insurance in the purchase price.
Fiat made military machinery and vehicles during World War II for the Italian army and Regia Aeronautica, and later for the Germans. Fiat made fighter aircraft like the biplane CR.42 Falco, which was one of the most common Italian aircraft, along with Savoia-Marchettis, as well as light tanks, obsolete compared to their German and Soviet counterparts, and armoured vehicles. The best Fiat aircraft was the G.55 fighter, which arrived too late and in too limited numbers to impact the outcome of the war.
In 1945 the National Liberation Committee removed the Agnelli family from leadership roles in Fiat because of its ties to Mussolini's government. These were not returned until 1963, when Giovanni's grandson, Gianni, took over as general manager until 1966 and as chairman until 1996.
Fiat launched a nuclear research program in the 1950s. It was the first private company in Europe to host its own nuclear reactor.
Gianni Agnelli
Among the younger Agnelli's first steps after gaining control of Fiat was a massive reorganization of the company management, which had previously been highly centralized, with little provision for the delegation of authority and decision-making. Such a system was effective in the past, but lacked the responsiveness and flexibility needed by Fiat's steady expansion, and the growth of its international operations in the 1960s. The company was reorganized on a product-line basis, with two main product groups—one for passenger cars, the other for trucks and tractors—and a number of semi-independent division and subsidiaries. Top management, freed from responsibility for day-by-day operations of the company, was able to devote its efforts to more far-reaching goals. In 1967, Fiat made its first acquisition when it purchased Autobianchi; with sales amounting to $1.7 billion, it outstripped Volkswagen, its main European competitor, and in 1968 produced some 1,750,000 vehicles while its sales volume climbed to $2.1 billion. According to Newsweek in 1968, Fiat was "the most dynamic automaker in Europe...[and] may come closest to challenging the worldwide supremacy of Detroit." Then, in 1969, it purchased controlling interests in Ferrari and Lancia. At the time, Fiat was a conglomerate, owning Alitalia, toll highways, a typewriter and office machine manufacturer, electronics and electrical equipment firms, a paint company, a civil engineering firm, and an international construction company. Following up on an agreement Valletta had made with Soviet officials in 1966, Agnelli constructed the AvtoVAZ plant in the new city of Togliattigrad on the Volga. This began operation in 1970, producing a local version of the Fiat 124 as the Lada. On his initiative, Fiat automobile and truck plants were also constructed in industrial centers of Yugoslavia, Poland, Bulgaria, and Romania. In 1973, Fiat established Comau, an industrial automation company out of the various suppliers which had equipped the AvtoVAZ plant in Russia. Comau became an industry pioneer in the use of Robotics for vehicle assembly – a technology with which Fiat would become synonymous for in the 1970s, with its "Robogate" system for bodyshell manufacture, and the later FIRE family of robot-assembled engines in the 1980s.
Despite offering a relatively competitive range of cars, Fiat was not immune from the financial pressures that the auto industry confronted following the 1973 oil price shock. Towards the end of 1976 it was announced that the Libyan government was to take a 9.6% shareholding in the company in return for a capital injection worth an equivalent of £250 million. The size of the Libyan investment is apparent when it is compared to the £310 million IMF loan that the Italian government was trying to negotiate at the time. Other aspects of the Libyan agreement included the construction of a truck and bus plant at Tripoli. Chairman Agnelli candidly described the deal as "a classic petro-money recycling operation which will strengthen the Italian reserves, provide Fiat with fresh capital and give the group greater tranquility in which to carry out its investment programmes". Equally noteworthy was the fact that despite the dilutive effect of the Libyan investment on existing shareholders, the company's largest shareholder, the Agnelli family, retained a 30% stake in the recapitalised business.
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In 1979 the company became a holding company when it spun off its various businesses into autonomous companies, one of them being Fiat Auto. Vittorio Ghidella was named CEO. That same year, sales reached an all-time high in the US, corresponding to the Iranian Oil Crisis. However, when gas prices fell again after 1981, Americans began purchasing sport utility vehicles, minivans, and pickup trucks in larger numbers (marking a departure from their past preference for large cars). Also, Japanese automakers had been taking an ever-larger share of the car market, increasing at more than half a percent a year. Consequently, in 1984, Fiat and Lancia withdrew from the United States market. In 1989, it did the same in the Australian market, although it remained in New Zealand.
In 1986 Fiat acquired Alfa Romeo from the Italian government. Also, in 1986 15% of Fiat company stock was still owned by Libya, an investment dating back to the mid-seventies. US foreign policy under President Reagan's administration canceled a Pentagon contract to produce earth movers with Fiat and pressured the company into brokering a buyout of the Libyan investment. In 1992, two top corporate officials in the Fiat Group were arrested for political corruption. A year later, Fiat acquired Maserati. In 1995 Alfa Romeo exited the US market. Maserati re-entered the US market under Fiat in 2002. Since then, Maserati sales there have been increasing briskly.
Paolo Fresco
Paolo Fresco became chairman of Fiat in 1998 with the hope that the veteran of General Electric would bring more emphasis on shareholder value to Fiat. By the time he took power, Fiat's market share in Italy had fallen to 41% from around 62% in 1984. However, a Jack Welch-like management style would be much harsher than that used by the Italians (e.g., precarious versus lifetime employment). Instead, Fresco focused on offering more incentives for good performance, including compensation using stock options for top and middle management.
But his efforts were frustrated by union objections. Unions insisted that pay raises be set by length of tenure, rather than performance. Another conflict was over his preference for informality (the founder, Giovanni Agnelli, used to be a cavalry officer). He often referred to other managers by their first name, although company tradition obliged one to refer to others using their titles (e.g., "Chairman Fresco"). The CEO of the company, Paolo Cantarella, ran the day-to-day affairs of the company, while Fresco determined company strategy and especially acted as a negotiator for the company. In 1999, Fiat formed CNH Global by merging New Holland NV and Case Corporation.
In 2003 Fiat shed its insurance sector, which it was operating through Toro Assicurazioni to the DeAgostini Group. In the same year, Fiat sold its aviation business, FiatAvio to Avio Holding. In February 2004, the company sold its interest in Fiat Engineering, as well as its stake in Edison.
Sergio Marchionne
Sergio Marchionne was appointed CEO of Fiat in 2004 and initially he impressed investors. At the end of the 2005 financial year, the company saw its first profit in 17 quarters of €196M for the first 9 months of FY2006.
Marchionne reduced Fiat's managerial bureaucracy refocused the business on markets and profit. While chairman, Luca di Montezemolo, dealt with politicians and unions, Marchionne rebuilt the car business. The success of the Grande Punto model was in large part responsible for the turnaround in Fiat's fortunes, but the award-winning 500 cemented it. Fiat formed a joint venture with India's Tata Motors, which has subsequently ended, and with China's Chery Motors which didn't conclude. In 2005 Fiat courted Ford, and returned to China with a joint venture GAC Fiat created in 2010. Under Marchionne Fiat also re-entered several large markets that it had exited years before, such as Mexico and Australia.
Fiat Group Automobiles (FGA) was created on 1 February 2007 from Fiat Auto.
Simultaneously Fiat Automobiles, Abarth & C., Alfa Romeo Automobiles, Lancia Automobiles and Fiat Light Commercial Vehicles were created, all controlled 100 percent by Fiat Group Automobiles. The former brand directors became CEOs of the new societies, while the employees and production facilities remained under Fiat Group Automobiles.
In December 2008 Marchionne announced Fiat had to become one of the top five automakers to survive in the long run. Under Marchionne's leadership, Fiat returned to Canadian and American markets with the new 500. However, since 2009, Marchionne has presided over a business that has experienced a loss in European market share from 9.3 to 6.2 percent. In December 2013, Marchionne announced that he intended to discontinue the Grande Punto so that the company could focus on "cool, high margin" Fiat 500 (2007) variants and the Fiat Panda.
In 2010 John Elkann became the Chairman of Fiat and shareholders approved a plan to demerger Fiat's capital goods businesses. Agricultural and construction equipment manufacturer CNH Global, truck maker Iveco, and the industrial and marine division of Fiat Powertrain Technologies were spun off into a new group on 1 January 2011. The parent company, Fiat Industrial, was listed on the Milan stock exchange on 3 January 2011.
In 2010 credit rating agency Fitch cut Fiat's debt rating to BB− after it had accumulated a debt of around €9,300,000,000. In 2013, Fiats debt rating was cut again, this time by Moody's, to Ba3 over concerns European demand was lower and debt was falling slower than expected. The Financial Times estimate of Fiat's debt at the time was almost €28,000,000,000.
Acquisition of Chrysler
On 20 January 2009 Fiat Group and Chrysler Group announced their intention to form a global alliance. Under the terms of the agreement, Fiat would take a 20% stake in Chrysler and gain access to its North American distribution network in exchange for providing Chrysler with technology and platforms to build smaller, more fuel-efficient vehicles in the US and providing reciprocal access to Fiat's global distribution network. Agreements were signed on 30 April 2009, with Fiat's future shareholding capped at 49% until all government loans had been repaid.
In addition, the proposed agreement would entitle Fiat to receive a further 15% (without cash consideration) through the achievement of specific product and commercial objectives. No cash or financial support was required from Fiat under the agreement. Instead it would obtain its stake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one or more Fiat models for in the US. Fiat would also provide engine and transmission technology to enable Chrysler to introduce smaller, fuel-efficient models in the NAFTA market.
The deal was engineered by Fiat chief Sergio Marchionne. The principal objective of the partnership was to provide both groups with significantly enhanced economies of scale and geographical reach at a time when they were struggling to compete with larger and more global rivals such as Toyota, Volkswagen and alliance partners Renault and Nissan.
Fiat would not have to pay any money for its 20% of Chrysler. On 7 June 2009, the Indiana State Police Pension Fund, the Indiana Teacher's Retirement Fund, and the state's Major Moves Construction Fund asked the US Supreme Court to delay the sale of Chrysler to Fiat while they challenge the deal. The funds argued that the sale went against US bankruptcy law because it unlawfully rewarded unsecured creditors ahead of secured creditors. On 9 June 2009, the Supreme Court lifted the temporary hold, clearing the way for Fiat to acquire Chrysler. See Indiana State Police Pension Trust v. Chrysler for more information. On 10 June, the Supreme Court announced that Fiat was now an owner of the Chrysler Group.
Marchionne was appointed CEO of Chrysler following its emergence from bankruptcy proceedings. Under his leadership, Chrysler has taken on a structure similar to that of Fiat and has released, in quick succession, a large number of completely redesigned or refreshed vehicles. Fiat launched its 500, which had been available in Europe since 2007, in the United States and Canada in 2011, marking the company's return to the American auto market, which it had been absent from since 1984. Prior to this, Fiat's main presence on the continent was Mexico, where it offers a greater variety of products than in the United States and Canada.
On 10 January 2011 Fiat announced that it had increased its share in Chrysler from 20% to 25% following the achievement of the first of three performance objectives. On 11 April 2011, it announced achievement of the second performance objective, increasing its stake a further 5% to 30%. On 24 May 2011, Fiat announced that it had paid Chrysler US$1,268 million for a further 16% interest, increasing its stake total stake to 46% (fully diluted). The transaction coincided with Chrysler refinancing its debt to the U.S. and Canadian governments. On 25 May autonews.com reported that Fiat could buy government stakes in Chrysler as soon as the end of July 2011, increasing its total stake to 54%.
In May 2011 it emerged that Fiat could actually increase its stake in Chrysler Group to more than 70 percent through the exercise of further options.
In a regulatory filing dated 22 July 2011, the Michigan-based automaker reported that Fiat held a 53.5% interest (fully diluted). Fiat and Chrysler have both stated that they expect that interest to reach 58.5% by the end of 2011 as result of achievement of the third of the three performance objectives. On 5 January 2012 Fiat released press info that the ownership has increased to 58.5%. The stake was further increased to 68.49% in July 2013. On 1 January 2014, Fiat announced it would be acquiring the remaining shares of Chrysler owned by the VEBA worth $3.65 billion. The deal was completed by 21 January.
On 29 January 2014 it was announced that Fiat Group and Chrysler Group would be merged into a new company, Fiat Chrysler Automobiles (FCA), incorporated in the Netherlands with tax domicile in the UK. Fiat Chrysler Automobiles will become the owner of Fiat Group. On 1 August 2014, Fiat Group received necessary shareholder approval to proceed with the merger (which followed board approval). FCA will be listed on the New York Stock Exchange with an additional listing on the Mercato Telematico Azionario in Milan to follow. The merger became effective 12 October 2014.
Recreation
The Fiat Group owned the Sestriere skiing facilities; the village in the Alps is a creation of the Agnelli family. The Sestriere skiing facilities were sold by the group in 2006.
From Wikipedia’s article on Fiat S.p.A., shared under CC BY-SA 4.0.5