Fiat Essay

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The history of the Italian carmaker Fiat, also FIAT (i.e., Fabbrica Italiana Automobili Torino, that is, the Italian Automobile Factory of Turin), has shaped the development of Italy’s car industry and has been considered the icon of Italian capitalism. Today, Fiat produces in 61 countries with 1,063 companies that employ over 223,000 people. The 2007 revenue was equal to €58,529 billion and the net income was equal to €2.054 billion.

The company was founded in 1899 by a group of investors including Giovanni Agnelli, who eight years later became the main shareholder. Shortly after World War I a transformation in the system of production was undertaken along the lines of Taylorism. But it was not until the end of World War II that a system of mass production could develop. Thanks to the Marshall Plan and the European Recovery Program, a reorganization of the system of production was undertaken. During the Italian golden age of economic growth, the internal market expanded. The Turin firm may also have benefited from this as a result of heavy protectionism.

Starting from the early 1990s the automobile manufacturer experienced a major financial crisis. Among the causes: A loss of market share in Italy and Europe, and the downward trends in market demand; in many of the emerging economies that Fiat entered, registrations stagnated. As a result of the enormous debts accumulated, the major Italian banks intervened for the recapitalization of the company. After an early terminated alliance with General Motors and an additional financial intervention of the banking system, both a major restructuring of the corporate organization and a redefinition of shareholders’ prerogatives were undertaken. After 2004, Fiat managed to reaffirm the brand at home and expand abroad. In 2005, under CEO Sergio Marchionne, the Italian carmaker saw its first profits after four years of significant losses.

Among the factors that contributed to the success of Fiat, four appear to have played a key role. The first factor was diversification. The company invested both in vertical integration and in other sectors. Among the current productive activities: Fiat automobiles represent the core business of FIAT; industrial vehicles (IVECO); agricultural and construction equipment (CNH Global); metallurgical products and components (Teksid, Marelli, Comau); services (Toro Assicurazioni); and publishing and communication (La Stampa, Itedi, and Italiana Edizioni). The second was protectionism. In the early stages the company benefited from the closed market. In the postwar period, tariffs and quotas were also high while the mass market and mass marketing were developing. After the golden age, the company gained the status of national champion, and only under the pressure of the European Union was the Italian car sector liberalized in the early 1990s. The third, internationalization. From the early stages, Fiat exhibited a marked international attitude due to an undeveloped domestic market. This affected all initial production and the choice of markets.

In recent years, Fiat continues to try to broaden its market share in Italy, in Europe, and elsewhere in the world. In 2007, Fiat’s market share in Italy was 24.7 percent, and its market share in Europe was 6.2 percent. The last factor contributing to Fiat’s success is management. Among the most influential people: Giovanni Agnelli, the founder; Vittorio Valletta, who played a key role in the reconstruction of the company after World War II; Gianni Agnelli, the founder’s grandson and chairman between 1966 and 1996, who undertook a significant reorganization of the company management. Sergio Marchionne, who became CEO in June 2004 shortly after Umberto Agnelli’s death, introduced a major change in managerial organization. In 2009, Fiat was involved in the U.S. government rescue of Chrysler Corporation, forming a partnership with the ailing U.S. auto maker.

Bibliography:

  1. Giuseppe Berta, La Fiat dopo la Fiat: storia di una crisi, 2000-2005 (Mondadori Editore, 2006);
  2. Valerio Castronovo, Fiat: Un Storia del Capitalismo Italiano: [1899-2005] (Rizzoli Editore, 2005);
  3. Stephan Faris, “The Turnaround: How Fiat, Once a Wreck of a Car Company, Got Hot Again,” Fortune (v.155/9, May 14, 2007);
  4. “Fiat: Rebirth of a Carmaker,” Economist (v.387/8577, April 2008);
  5. Francesca Fauri (1996), “The Role of Fiat in the Development of the Italian Car Industry in the 1950’s,” Business History (v.70/2, 1996).

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