HISTORY OF FIAT

FIAT HISTORY

'''Fiat S.p.A.''' (also known as the '''FIAT Group''') () is an automobile manufacturer, financial and industrial group based in Turin, Northern Italy.

The name is an acronym for '''Fabbrica Italiana Automobili Torino''' (Italian Car Factory of Turin), founded by a group of investors--Giovanni Agnelli among them--in 1899. His grandson Gianni Agnelli was Fiat chairman from 1966 until his death on January 24, 2003. However, from 1996, he only served as an "honorary" chairman. After his removal as leader, Paolo Fresco served as CEO and Paolo Cantarella as chairman. Umberto Agnelli then took over the reigns as chairman from 2002 to 2004. After Umberto Agnelli's death on May 28, 2004, Luca Cordero di Montezemolo was named chairman, but Agnelli heir John Elkann became vice chairman at age 28 and other family members are on the board. At this point, CEO Giuseppe Morchio immediately offered his resignation. Sergio Marchionne was named to replace him on June 1, 2004. The group's activities were initially focused on the industrial production of cars, industrial and agricultural vehicles. Over time it has diversified into many other fields, and the group now has activities in a wide range of sectors in industry and financial services. It is Italy's largest industrial concern. It also has significant worldwide operations, operating in 61 countries with 1,063 companies that employ over 223,000 people, 111,000 of whom are outside Italy.

Fiat corporation, starting from the late 1960s, has bought (or gained control of) a wide range of companies, including:

* ''Car companies'' are run by Fiat Auto and Ferrari. Fiat Auto runs well known firms like Lancia, Autobianchi (already bought by Lancia), Alfa Romeo, Fiat, Innocenti, and Citroën (sold shortly afterward in 1976). Fiat also owns some brands of industrial vehicles including OM and Iveco. Ferrari and Maserati are owned by the Fiat Group, but both are run by Ferrari. Light automobile sales accounted for 46.8% of total revenues during fiscal 2004 (3.2% of which is from Ferrari).²

* ''Agricultural and construction vehicles'' - Fiat group also owns CNH Global (which includes: Case Construction, Case IH, Flexi-Coil, Kobelco, New Holland, New Holland Construction, and Steyr); and Fiat-Hitachi Construction. CNH is the second largest agricultural equipment manufacturer in the world after Deere & Company. It is also the third largest producer of construction equipment after Caterpillar and Komatsu. It accounts for 20.9% of revenues.³ CNH is the most prized company inside Fiat because it has driven growth and is very profitable. It also shows great promise for growth in third-world markets.⁴

* ''Buses'' - produced with the Fiat, Iveco or Irisbus names.

* ''Aviation'' - aircraft and related components were produce by FiatAvio (now Avio, an independent company), which also controls EVL, a space industry.

* ''Military vehicles'', see Ariete

* ''Vehicle components'' - the major Italian component maker Magneti-Marelli is owned by Fiat, and in turn owns the other brands Carello, Automotive Lighting, Siem, Cofap, Jaeger, Solex, Veglia Borletti, Vitaloni and Weber; other accessory brands include Riv-Skf and Brazilian Cofap.

* ''Steelmaking and metallurgy'' - Fiat owns Teksid and produces machines for the industry (also for car factories) with Comau (now Comau Systems), which bought the American Pico, Renault Automation and Sciaky.

* ''Publishing'' - notably, Fiat group also owns important editorial brands, like La Stampa (created in 1926 for the famous newspaper), Itedi, and Italiana Edizioni. Some national and local newspapers are owned or otherwise controlled by the different companies. A specialised advertising space reseller is Publikompass, supported by the Consorzio Fiat Media Center.

* ''Financial services'' - An important insurance company, Toro Assicurazioni, allows Fiat to control a relevant part of this market (also with minor companies like Lloyd Italico, Augusta Assicurazioni) and to interact with some associated banks.

* ''Construction'' - Ingest Facility and Fiat Engineering work in various fields of construction, while IPI is a mediation company that also deals with the management of real estate properties.

* ''Information technology'' - Fiat is present in IT fields and in communications with ICT - Information & Communication Technology, Espin, Global Value, TeleClient, and Atlanet.

* ''Leisure'' The group owns the Sestriere skiing facilities (being this village on Alps a creation of Agnelli family).

In the 1970s and 1980s, the company became a pioneer in the use of industrial robotics for the assembly of motor vehicles. Fiat assembly plants are among the most automated and advanced in the world.

* ''Other services'' Fiat Gesco, KeyG Consulting, Sadi Customs Services, Easy Drive, RM Risk Management and Servizio Titoli are minor companies that work for public services, delivering services in economics and financial fields. Other activities include industrial securitisation (Consorzio Sirio), treasury (Fiat Geva), Fiat Information & Communication Services.

Fiat supports the ''Fondazione Giovanni Agnelli'', an important foundation for social and economic research. ''Palazzo Grassi'', a famous ancient building in Venice, now a museum and formerly supported by Fiat, was eventually sold to the Venice casino in January 2005.

Fiat has recently begun sponsoring the Jamaican bobsledding team and promoting this sponsorship through commercials. Many like Jamaican athletes because they see them as underdogs and as people who enjoy life. While Volvo sponsors golf, Mercedes tennis, and Hyundai soccer, Fiat is trying to look unique and more light-hearted. Further, the team is relatively cheap to sponsor.⁵

The group is present in many countries, not only in the West. Notably, it was one of the first companies to build factories in Soviet-controlled countries, with the best known examples in Vladivostok, Kyiv and Togliattigrad. The Russian government later continued the joint venture under the name AutoVAZ (known as Lada outside the former USSR). The venture was most notable for the Lada Riva. Fiat also has a subsidiary in Poland at Tychy, (formerly called FSM) where Fiat's small cars (the 126, Cinquecento and now Seicento) are made. Fiat has factories in Brazil, Turkey, China and India, where local variants of Fiats are produced as well as a world car, the Palio. The company holds the second position in the Brazilian automobile market with a market share close to 25%.

Fiat has articulated that it wishes to focus on expanding into third-world markets because, in the words of former chairman Paolo Fresco, “those are the only markets where you can expect growth.”⁶ And it is true that Fiat’s specialization in smaller cars puts it at an advantage in those markets, but cars sold in third-world countries tend to be much simpler than those sold elsewhere (e.g., most lack air conditioning), and thus require much less money to develop.

History

Giovanni Agnelli led the company until his death in 1945, while another man, Vittorio Valletta, administered the day-to-day activities of the company. In 1908, the first Fiat was exported to the US.⁷ By 1910, Fiat was the largest automotive company in Italy—a position it has retained since. That same year, a plant licensed to produce Fiats in Poughkeepsie, NY, made its first car. This was before the introduction of Ford’s assembly line in 1913. Owning a Fiat at that time was a sign of distinction. A Fiat sold in the US cost between $3,600 and $8,600 ($73,909 to $176,561 today). Compare this to the $825 ($17,000 today) Henry Ford charged for his first Model Ts in 1908.⁸ However, upon the entry of the US into World War I in 1917, the factory was shut down after US regulations became too burdensome. By the early 1920s, Fiat had a market share in Italy of 80%.⁹ In 1922, Fiat built the famous Lingotto car factory--the largest in Europe up to that time-- which opened in 1923. Fiat made military machinery and vehicles during World War II for the Italian Army and Air Force. Fiat made fighter aircraft, which was one of the most common Italian aircraft used along with the Savoia-Marchetti, and also made light tanks and armored vehicles. These machinery were weak compared to some of the German and Soviet machinery, but were still used often. In 1945—the year Hitler’s ally Mussolini was overthrown as leader of Italy--the Italian Committee of National Liberation 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 1996.¹⁰

Gianni Agnelli

Among Gianni's first steps after he gained control of Fiat was a massive reorganization of the company management, which had previously been highly centralized, with almost no provision for the delegation of authority and decision-making power. Such a system had worked effectively enough in the past but lacked the responsiveness and flexibility made necessary by Fiat's steady expansion and the growth of its international operations in the 1960's. 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. Then, in 1969, it purchased controlling interests in Ferrari and Lancia. According to ''Newsweek'' in 1968, FIAT was “the most dynamic automaker in Europe . . . [and] may come closest to challenging the worldwide supremacy of Detroit." In 1967 Fiat, with sales amounting to $1.7 billion, outstripped Volkswagen, its main European competitor; in 1968 Fiat produced some 1,750,000 vehicles while its sales volume climbed to $2.1 billion ($11.5 billion today). At the time, Fiat was a conglomerate, owning Alitalia Airlines, toll highways, typewriters and office machines, electronics and electrical equipment firms, a paint company, a civil engineering firm, and an international construction company. That same year, Fiat acquired Citroën--one of France’s major three automakers at the time. However, in 1976, it sold the company. Following up on an agreement that Valetta had made with Soviet officials in 1966, he constructed a Fiat plant in the new city of Togliattigrad on the Volga that went into operation in 1970. On his initiative, Fiat automobile and truck plants were also constructed in industrial centers of Yugoslavia, Poland, Bulgaria, and Romania. In 1979, the company became a holding company when it spun off its various businesses into autonomous companies, one of them being Fiat Auto. That same year, sales reached an all-time high in the United States, 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 (theirs increasing at more than half a percent a year). Thus, in 1984, Fiat and Lancia withdrew from the American market. In 1989, it did the same in the Australian market.

In 1986, Fiat acquired Alfa Romeo from the Italian government. In 1992, two top corporate officials in the Fiat Group were arrested for political corruption.¹¹ A year later, Fiat acquired Maserati. In 1994, 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

was brought in as chairman of Fiat in 1998. The hope was that the veteran of General Electric would bring more of an emphasis on shareholder value to Fiat. By the time he took power, Fiat's market share in Italy had fallen to around 41%¹² from around 62% in 1984.¹³ However, a John 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. Nevertheless, 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, Managing Director 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 fact, many speculated that main reason he was chosen for the job was to sell Fiat Auto (although Fresco fervently denied it).¹⁴

Recent events

As part of the recent divestitures, 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.

Fiat faces a multitude of threats, including rising steel prices (up 68% between January and October 2004),¹⁶ a strong Euro, and increased competition from Japanese and Korean car manufacturers in Europe. Although the light-vehicle market share of Japanese and Korean automakers in Europe is less than in the US (12.5% and 3.9%, respectively versus 30% and 3.9% in the US), it has been increasing steadily at about a half a percent a year.¹⁷ Fiat has also suffered operating losses for four years now.

Sergio Marchionne

Generally, if Mr. Marchionne is nearly as successful as he was when working at the Swiss quality-assurance service company SGS, then Fiat's future is brighter than many predict.

Fiat Car Models

European Car of the Year Awards

*1967: Fiat 124 *1970: Fiat 128 *1972: Fiat 127 *1984: Fiat Uno *1989: Fiat Tipo *1995: Fiat Punto *1996: Fiat Brava/Bravo *2004: Fiat Panda (New)

Endnotes

. # “Fiat SpA,” ''Encyclopædia Britannica,'' Encyclopædia Britannica Online. [Accessed November 20, 2005]. # Obituary, ''The New York Times,'' Jan. 25, 2003, A p1+ # John R. Weinthal, “Industrial Review: AUTOMOBILES,” ''1992 Year in Review,'' Encyclopaedia Britannica, Inc. # “Estimated Europe light-vehicle registrations by manufacturer, Dec. & 12 months,” ''Automotive News Europe''. Automotive News Data Center. . # ''Automotive News 1985 Market Data Book''. Crain Communications, Inc. # Luca Ciferri, "Fresco Brings Taste of New World to Fiat," ''Automotive News Europe'' (August, 1998) vol. 72, p. 6. # "Saving Fiat," ''The Economist,'' December 3, 2005, p. 64, vol. 377. # "Company Profile," pp. 23-24. # "Estimated Europe." # Fiat S.p.A., "HIGHLIGHTS OF RESULTS," ''2004 Annual Report,'' p. 10. # "Saving Fiat," p. 65.

Source: Wikipedia

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