Wanted: A Few Good Managers At Fiatby
Gianni Agnelli had an electrifying message when he got up to address the traditional end-of-the-year get-together of auto giant Fiat's top management on Dec. 11: After 30 years as chairman of Italy's largest industrial group, he would finally be stepping down. For many, it was more abdication than retirement. The patrician Agnelli, age 74, is not only his country's most important industrialist. He is also the most famous and influential Italian and is often seen as the uncrowned king of Italy. Until now, a Fiat without Agnelli seemed unthinkable.
But Agnelli's departure doesn't augur immediate, dramatic change at Fiat. Agnelli promoted Managing Director Cesare Romiti to the chairmanship--the first nonfamily member to occupy the post since the mid-1960s. Romiti, who has been No.2 at Fiat since 1976, will have just two years in the top spot before he reaches the mandatory retirement age of 75 in June, 1998. His most pressing task: building a new management team.
Finding his own successor as chairman won't be a problem for Romiti. Waiting in the wings is Gianni's nephew, 32-year-old Giovanni Alberto Agnelli. The Brown University-educated, fourth-generation Agnelli is widely expected to get the top spot. "There's no longer an Agnelli at the head of the group? One will return after Romiti," says Gianni's sister, Susanna Agnelli, currently Italy's Foreign Minister.
Romiti's big challenge is to find the right mix of younger managers to run Fiat in the coming years. Almost certain to figure for a promotion will be Romiti protege Paolo Cantarella, 51, head of Fiat's booming auto division. Thanks in part to the hot new models the Piedmontese engineer has put on the market, Fiat's somewhat tired image has become one of the snazziest in Europe in just a few years.
Beyond Cantarella, the search for talent could get harder. Executive suites at the headquarters in Turin have been in disarray since 1993, when such major Fiat shareholders as Deutsche Bank, Milan's Mediobanca, and France's Alcatel Alsthom complained about record losses and falling market share. They forced Gianni to rescind plans to hand over power to younger brother Umberto. Top management has also been been battered by Italy's anticorruption investigators, who in early December called for Romiti to stand trial on charges of running a $25 million slush fund.
The investigation could become a serious problem for Fiat's new chief. If he's forced to spend time and energy on a legal fight, Romiti could be distracted from rejuvenating Fiat's executive suite. Most observers contend that Fiat--like many other big Italian companies--has already come clean about illegal payments to Italian politicians. Romiti also has been credited for pushing through a groundbreaking code of corporate ethics for Fiat employees in November, 1993, in the wake of Italy's anticorruption investigations. The charges against Romiti are expected eventually to be dropped. But the Italian justice system moves slowly.
AMBITIOUS PLANS. Industrially, Fiat has fewer worries. Romiti, says Carlo Di Grandi, auto analyst at Paribas in Londmn, has to stay the course "and maximize what has been done until now." Fiat's multibillion-dollar retooling is paying off: A series of successful model debuts, including last year's winning Punto, has helped Fiat boost its share of the highly competitive European market by one percentage point this year, to 11.5%. Sales should be up more than 17%, to $49 billion, while net income this year is likely to clock in at a record $1.4 billion. Meanwhile, debt has been more than halved, to around $600 million.
And Fiat has other ambitious plans. Cantarella has been successfully positioning Fiat as a major player in key developing markets such as Brazil, Poland, and Turkey. In mid-December, Fiat became the first European volume producer to unveil a "world car" designed for production in emerging markets. It plans to make the car, called the Palio, in as many as eight countries by late 1998, Cantarella says.
By then, odds are, Cantarella will move up to be CEO of the entire group. And another Agnelli should be back in the driver's seat.
The Challenges Facing Romiti
-- Speed up repositioning of Fiat cars and trucks in Europe as premium products and reduce reliance on price-cutting
-- Push sales of the new Fiat world car, designed for such emerging markets as Brazil, Poland, and Turkey, to offset sluggish growth in Europe
-- Quickly pave the way for a new generation of managers to take over at Fiat