After Gianni, There Are Mostly Questions

Italian political and business leaders are wondering how much longer Gianni Agnelli can run Fiat. Agnelli, 74, chairman of the Italian auto giant and patriarch of Europe's richest industrial dynasty, had an abdominal aneurism removed at New York Hospital on Apr. 25. His recovery is said to be slow and uncertain. Agnelli tried to kill the rumors of his retirement in early June during a television interview. "I will remain," said a somewhat frail-looking Agnelli, "as long as I'm necessary."

But signs increase that the three-decades-long Agnelli era may be drawing to a close, and that major changes may ensue at Fiat. Days after the TV interview, Agnelli slipped and injured his spine while yachting. He missed the June 22 annual meeting of IFI, the family holding company that controls 30% of Fiat. Cesare Romiti, meanwhile, Agnelli's 72-year-old chief ally and the hands-on managing director of Fiat since 1976, must devote more and more time to defending himself from a judicial inquiry into illegal slush funds allegedly managed from his office.

Fiat officials claim not to be worried. "The succession to Agnelli and Romiti is open, but it's not a problem for now," asserts Ernesto Auci, the head of Fiat's press office. Not everyone agrees. "My impression is that we will see changes at the top of Fiat sooner than later," says a source close to the Agnelli family. One person mentioned as a possible successor is Paolo Cantarella, head of the prospering car division.

Should Agnelli and Romiti step down in the next year, at least they will be leaving Fiat much stronger than it has been in years. Powered by the competitive edge of a devalued lira as well as popular new car models, Fiat turned a $1.1 billion loss in 1993--its worst ever--into a $612 million profit on $39 billion in sales last year.

MANY SHARES. Even if a possible succession goes smoothly, the Agnelli clan may still want to raise more money from its Fiat holdings, a desire that could dictate Fiat's future shape. Income from the family fortune gets divvied up among more than 300 descendants of Giovanni Agnelli, who founded the company in 1899. It's a far-flung bunch. A granddaughter, Susanna, is Italy's Foreign Minister. A great-granddaughter has an olive oil business in the south of Italy, while another family member raises terriers in rural Georgia. Egon von Furstenberg, the New York fashion designer, is a great-grandchild.

While probably no member of the extended Agnelli family is about to go on the dole, there is rising pressure, insiders say, for better returns from Fiat and other family holdings. To help address those needs, IFI's dividend was raised more than 60% on June 22, to 340 lira per share. While IFI's preferred stock trades on the Milan bourse, the clan holds 100% of the common, and bylaws make sales to outsiders difficult. IFI says while its stock in other companies may go, no change is planned for the Fiat stake. "But the problem, that more and more family members need cash, is still there," says a Milan banker close to the family. So some sort of push by the family to sell a chunk of Fiat is possible.

Others may want more out of their Fiat shares, too. France's Alcatel Alsthom, Germany's Deutsche Bank, and Italy's Assicurazioni Generali and Mediobanca together control 10% of Fiat's capital. They may not be patient investors anymore. Pierre Suard, the Alcatel chief and Fiat board member, was forced from office by a series of scandals. His successor, Serge Tchuruk, may not be as committed as he was to holding Alcatel's 2.2% Fiat position, especially since Alcatel's profits are suffering. Deutsche Bank--slowly moving away from industrial participations as it concentrates on banking--is said to be looking at ways to increase the value of its 2.5% stake in Fiat. One option could be to dust off proposals to merge Fiat's car division with another European manufacturer. Deutsche Bank will not comment on plans for its shareholdings.

The Agnellis will still wield plenty of power at Fiat, even if the family dilutes its stake or if group units are spun off. Giovanni Alberto Agnelli, the 31-year-old nephew of Gianni--known as Gianni Jr. in Italy--has been quietly groomed to play a leading role at Fiat. The Brown University graduate has steadily moved up the ranks of the $1.1 billion family-held Piaggio motor-scooter group and was recently named chairman. He was named to the Fiat board at the end of 1993 and on June 3 became the first of the fourth generation to make it to the board of the family holding company. The Agnelli saga will continue, even after Gianni takes his final bow.

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