Shareholder value. Transparency. Customers coming first. They are commonplace concepts in Corporate America. And true, they are starting to be heard in some European executive suites. But when Paolo Fresco, named as chairman of Italian auto maker Fiat on June 22, throws them around in his very first talk to shareholders, it's a sign that a bold new era just might be beginning at one of Europe's biggest companies.
Fresco's refreshing words reflect the lessons he learned at General Electric Co. The 65-year-old Milan-born lawyer spent 36 years at GE, including the last six as deputy to Chairman and CEO John F. Welch Jr. "Fresco's experience from GE will be his main contribution to Fiat," says Fiat CEO Paolo Cantarella, who stands to be Fresco's key ally. Some Welch-style decision-making could have far-reaching effects throughout the Turin-based giant, with sales of $54 billion. Fresco has a broad mandate from the Agnellis, who own 30% of Fiat. Look for him to dump marginal businesses, pump up the winners, and perhaps finally help find Fiat a merger partner.
Fresco's compensation package should please shareholders. While Fiat won't comment, his pay is thought to be linked to Fiat's share price. That would be remarkable in Italy, where clubby insider dealmaking often takes precedence over boosting share price. Fiat shares have risen 51% over the last 12 months, but that's less than half their level of 12 years ago.
SMOOTHER OPERATOR. Fresco's approach, say insiders, will be markedly different from that of predecessor Cesare Romiti. He was a brilliant manager, but his gruff style often antagonized labor, government, and even the business Establishment. In contrast, Fresco is known as a smooth global player.
Although Fresco doesn't officially start full-time until his GE duties wind down in October, the pressure is already uncomfortably high on Fiat. Hefty Italian government incentives on new-car purchases, which sent car sales soaring 40% last year, end on July 31, promising to deflate Fiat's most important single market. When quotas on Japanese cars come off next year, it could hit Fiat in its bread-and-butter small- and midsize-car business.
Fiat has already been getting into shape. A $2 billion bet to manufacture a "world car" in such countries as Brazil, Argentina, and Turkey is giving Fiat a headstart in high-growth markets of the future. And since 1995, Fiat has been steadily selling off noncore assets. A leaner, more focused group will make it easier for Fresco to accomplish a key part of his agenda: negotiating the right strategic alliance. Such a linkup seems even more crucial now that Daimler Benz and Chrysler are merging.
Fiat's new duo looks formidable, with international dealmaker Fresco eyeing strategic linkups while nuts-and-bolts car man Cantarella makes sure Fiat's new models are winners. Throw in a few concepts from the school of Chairman Welch like shareholder value, and Fiat's future could be surprisingly bright.