Fiat SpA History

Company Perspectives:

Fiat is an Italian industrial group with a strong international presence. Operating primarily in the automotive industry and related services, it is also a major player in other manufacturing activities. Fiat grows and creates value by supplying innovative products and services for maximum customer satisfaction and globalizing its activities. Its organization is focused on the empowerment of its employees.

Key Dates:

1899:

Fabbrica Italiana Automobili Torino (FIAT) is founded in Turin, Italy, by Giovanni Agnelli and a few other Turin businesspeople.

1906:

Fiat is incorporated as Societa Anonima Fabbrica Italiana di Automobili.

1908:

Fiat manufactures its first aircraft engine.

1909:

The company's first U.S. site is inaugurated at Poughkeepsie, New York.

1914:

Fiat produces their first trucks for freight haulage.

1915:

Fiat's first airplane comes off the line.

1917:

The company's steel manufacturing and railroad industry begins.

1919:

Fiat produces their first wheeled tractor, the "earth machine."

1922:

The Lingotto Project goes on stream, as the first automobile manufacturing plant designed for mass production and the largest automotive complex in Europe; Fiat produces the world's first electric diesel locomotive.

1927:

The holding company, IFI (Industrial Fiduciary Institute) is formed.

1953:

The Fiat 1400 is produced as the first Italian vehicle offered in a diesel version.

1965:

Fiat signs an agreement with the Soviet Untion for the construction of an automotive complex in Togliattigrad.

1969:

Fiat acquires Ferrari and Lancia.

1976:

Fiat's Brazilian plant becomes operational; and Libya acquires a 10 percent interest in Fiat under an arrangement with Colonel Khadafi.

1983:

The company introduces the innovative Uno.

1986:

Fiat Auto acquires Alfa Romeo.

1991:

Fiat acquires New Holland.

1993:

Fiat acquires Maserati and introduces the Punto.

1999:

Fiat acquires Case Corporation and New Holland NV, to expand its agricultural business.

2000:

The company's railroad activities are sold to Alstom.

2001:

Global Value is launched, a joint venture with IBM to manage technological infrastructure and software applications.

Company History:

Fiat SpA, one of Europe's largest companies, is perhaps best known as a manufacturer of automobiles. However, the company also produces commercial vehicles, construction machinery, thermomechanics and telecommunications equipment, metallurgical products, engine components, railroad stock, tractors, and airplanes. Fiat has interests in bioengineering, transportation, and financial services companies and also owns one of Italy's leading newspapers, La Stampa.

Fiat's Turin Becomes "Italy's Little Detroit"

Fiat was founded in 1899 by Giovanni Agnelli, an ex-cavalry officer, and a few other Turin businesspeople. The city of Turin, often known as "Italy's Little Detroit," was developed with Fiat money; in the 1990s, half of its population, either directly or indirectly, remained dependent on Fiat for its livelihood.

The company (Fabbrica Italiana Automobili Torino) began manufacturing automobiles and engine parts for the automotive industry early in the 20th century. With the advent of World War I, however, Fiat significantly expanded its production line, and as the years passed, the company became a conglomeration of various manufacturing enterprises. By the early postwar years, Fiat was manufacturing so many products that Giovanni Agnelli felt it was time to improve central administration.

To help him in his reorganization efforts, Giovanni Agnelli hired Vittorio Valletta, a university professor and former consulting engineer, in 1921. Their aim was to control all of the manufacturing processes as completely as possible, thus reducing their dependence on foreign suppliers. Soon the company became more diverse by pouring its own steel and producing its own plastics and paints. In a further reorganization, Agnelli formed a holding company, the IFI (Industrial Fiduciary Institute), in 1927. In the 1990s, IFI remained one of the wealthiest and most influential holding companies in Europe. It also remained a closed company, owned and operated by Giovanni Agnelli's heirs.

Fiat's Early Automobiles

In its first two decades, Fiat produced only two types of automobile: the basic, limited options model and the deluxe model. The company had little incentive to offer other models since it was protected by the Italian government's high-tariff policy (known as "kept capitalism"); as a result, imported cars were far beyond the reach of the average Italian. Indeed, more than 80 percent of all the cars sold in Italy were Fiats, and much of the remaining 20 percent of the country's car sales consisted of expensive Italian-made Lancias and Alfa Romeos.

Finally sensitive to Italian complaints that Fiat's "cheap" car was too expensive, the company developed the Topolino, or "Little Mouse," a four-cylinder, 16-horsepower two-seater that averaged 47 miles per gallon. It was an immediate success and accounted for 60 percent of the Fiats sold in Italy up until the mid-1950s.

Fiat's Plants Targeted by Allied Forces

Fiat flourished in World War II as it had in World War I, and profits increased significantly under Benito Mussolini's much heralded modernization program. But the company's production of planes, cars, trucks, and armored vehicles for the European and African campaigns of the Axis forces made its plants prime targets for Allied bombing raids.

Fiat faced the postwar era with war-torn plants and antiquated production facilities, and at the height of its disarray, in 1945, Giovanni Agnelli died. Valletta was named president and managing director and immediately set about reviving the company's fortunes, aided by Agnelli's grandson, Giovanni Agnelli II, who became a senior vice-president.

Once the Allied effort to rebuild postwar Europe was under way, Vittorio Valletta applied to the U.S. government for a loan to renovate and modernize company facilities. He reasoned that Fiat was crucial to Italy's recovery and should therefore be entitled to special help. Well aware of the political benefits of a strong Italy, the Americans granted Fiat a US$10 million, six-month revolving loan. Other loans soon followed, and the company was back in business, gearing up for full production ahead of most of its West European competitors. By 1948, Fiat's holdings represented 6 percent of Italy's industrial capital.

But fewer people were able to buy cars than before the war, and Fiat, like other car manufacturers, felt the effects of a smaller market. In response, to reduce its production costs substantially, Fiat built a plant for its 600 and 1300 models in Yugoslavia that was able to produce about 40,000 automobiles yearly. Other foreign expansion followed rapidly. Additionally, the company managed to secure a lucrative manufacturing contract from NATO.

Fiat's foreign forays were a mixed blessing; its Italian workers began to fear for their jobs and worker agitation became a severe problem. On a few occasions Vittorio Valletta was held prisoner in Communist-led worker uprisings in Turin. The political situation did not cease until the mid-1950s when the U.S. government tied an anti-communist clause to its US$50 million offshore procurement contracts with Fiat. This resulted in the firing, relocation, and political reeducation of many Fiat employees, as well as improvements in the company's already elaborate (by U.S. standards) social welfare program. The Italian workers formed three unions, the largest of which cooperated closely with company management.

Vittorio Valletta spent US$800 million in expansion and modernization in the 15 years following World War II and built the most impressive steelworks in Italy. By 1959, Fiat sales reached US$644 million, representing one-third of its country's mechanical production and one-tenth of its total industrial output. The price of Fiat's stock quintupled between 1958 and 1960; even so, Fiat did not reduce the relative price of its cars.

Fiat Joins EEC

Still running the company in 1960 at the age of 76, Vittorio Valletta was a keen supporter of Italy's membership in the European Economic Community (EEC). He was sure that Italian companies were strong enough to survive direct competition from the other five members. Fiat itself had the advantage of a highly trained staff, the swiftest production lines in Europe, and listed assets of US$1.25 billion. But Italy's organization of manufacturers, Confindustria, opposed EEC membership, believing that France and Germany would quickly dominate the market. Nevertheless, by the end of the first year of membership, Italian companies made 283 deals with companies in other EEC countries; the only deal involving the giant Fiat was a sales arrangement with the French automaker Simca.

Vittorio Valletta's confidence in his company's competitiveness within the EEC was seriously questioned when, in 1961, intra-community tariffs were lowered and import quotas were dropped. At the same time, American automakers such as General Motors, Ford, and Chrysler were significantly expanding their European operations. It quickly became apparent that Fiat had underestimated the potential sales of foreign-made cars in Italy. Unwilling to wait months for delivery of a Fiat, or simply tired of its models, Italians were more than ready to consider the increasing array of foreign vehicles. Moreover, Fiat misjudged its domestic market and failed to introduce a model that might appeal to the many Italians moving from the lower- to the middle-income bracket. In three years, from 1960 to 1963, Fiat's domestic sales dropped a massive 20 percent, from 83 to 63 percent.

The company filled the gap in its product line with its 850 sedan, and by 1965, Italian car imports had dropped to 11 percent. But part of the revival in Fiat's domestic sales was effected by less positive means: the company launched a vigorous campaign against car imports enlisting the aid of its newspaper, La Stampa. This campaign was aided and abetted by the Italian government, which angered car-exporting countries by imposing a supposedly nondiscriminatory anti-inflation tax on automobiles.

Meanwhile, Fiat's exports improved and sales to underdeveloped nations flourished. In addition to its assembly plants in Germany and Austria, the company built plants in numerous other countries, including India, Morocco, Egypt, South Africa, Spain, and Argentina. Fiat also signed an agreement with the Soviet Union in 1965 for a facility capable of producing 600,000 units a year by 1970.

Giovanni Agnelli Succeeds Valletta

After running Fiat for 21 years, Vittorio Valletta was succeeded in 1966 by Giovanni Agnelli II, the founder's grandson. Under Agnelli's leadership, the company's annual sales came close to US$2 billion by 1968, and for a short time Fiat edged out Volkswagen as the world's fourth largest automaker. At that time, Fiat's cooperative arrangement with the French carmaker Citroen made it the world's sixth largest non-American firm; the company operated 30 plants and employed 150,000 workers. Giovanni Agnelli II candidly credited Fiat's success to the company's near monopoly of its domestic market for half a century, but he warned that more sophisticated production methods were required if Fiat was to survive in the international market. He imposed a schedule for new models of two years from drawing board to assembly line and standardized many car parts to allow more interchange between models.

Giovanni Agnelli II also sought to further diversify Fiat's products to lessen its dependence on autos and trucks, which accounted for 86 percent of its revenue. At the same time, he set about improving the company's flagging sales performance in underdeveloped countries, and in 1969 he made two notable acquisitions. Fiat took full control of the Italian car manufacturer Lancia and announced a merger with Ferrari, the famous Italian racing car company. When Ferrari's problems had surfaced in 1962, owner Enzo Ferrari had turned down the Ford Motor Company,but accepted financial backing from Fiat. Further losses forced Ferrari to sell, and his company was reconstructed as Fiat's Racing Car division.

While the Ferrari and Lancia acquisitions were good for Fiat's image both at home and abroad, its domestic situation worsened. The company had to contend with Italy's 7.3 percent inflation rate and a series of strikes; 1972 production fell short by 200,000 vehicles. For the first time in its history, Fiat failed to show a profit or pay an interim dividend. Fortunately, news from abroad was good. Agnelli's younger brother, Umberto Agnelli, who had doubled sales at Fiat France in 1965 to 1970 and constructed successful plants in Argentina and Poland, had gone on to direct American sales. The number of Fiats sold there doubled between 1970 and 1972 and Fiat cars became the fourth largest selling import in the United States. Umberto returned to Italy as second-in-command to help his brother with the pressing problems at home.

Fiat Thrives in Foreign Markets

However, Fiat's domestic fortunes deteriorated to the point where the company seemed a likely candidate for partial state ownership. In 1973, Fiat slipped US$30 million into the red, and after a three-month strike in 1974, Italy's Socialist Labor minister granted the union a monthly pay increase significantly higher than Fiat's final offer. Amidst Fiat's loud protests, the government also imposed ceilings on the prices the company could charge for its automobiles--and this at a time when sales were down 45 percent because of worldwide apprehension over the energy crisis. Finally, it seemed, the days of government protection for Fiat were over; the politicians now had to listen to their constituents, many of whom, at that time, viewed the industrial bosses as enemies of the people. Fiat's case was not helped by the Agnelli brothers' refusal to reveal the value of IFI, the family-owned holding company whose funds--in Swiss banks--were beyond Italian government scrutiny.

However, Fiat's foreign holdings continued to offset its severe troubles on the home front, and the company thrived in the less saturated markets of Eastern Europe, Turkey, and South America. Its largest overseas investment was an US$86 million plant in Brazil, which became operational in 1976. Other foreign ventures included a project with the American Allis Chalmers company, an important manufacturer of earth-moving equipment with units in the United States, Italy, and Brazil, and under an arrangement with Colonel Khadafi in 1976, Libya acquired a 10 percent interest in Fiat. This purchase cost Moammar Khadafi US$415 million, and Fiat shares immediately rocketed on the Milan Exchange. Since Libya paid almost three times the market price, serious questions were raised about Khadafi's long-term motives. But Fiat had no such qualms; Khadafi's purchase eased its cash flow at a time when the company earned less than US$200,000 on sales of about US$4 million and had dipped into reserves in order to pay shareholders.

Meanwhile, the company's domestic woes continued. In 1974, with a heavy backlog of unsold cars to keep it going, Fiat fired all of its Italian workers with violent records. A year later, the company laid off a massive 15 percent of its Italian work force and was able to weather the ensuing strike.

Fiat's management was convinced that it could beat its powerful competitors by producing cars at the lowest-possible price. Through its subsidiary Comau, a leader in the automation field, Fiat retooled and partially robotized its factories and standardized yet more Fiat car parts. The assembly robots provided the company with much greater flexibility on production lines, since the machines could easily be programmed to perform a variety of tasks on a variety of models. Further worker layoffs were justified by Fiat by the rise in production rates. The annual output per worker in 1979 was 14.8 units; in 1983 the output was up to 25 units per worker.

Fiat's bold and successful moves to modernize were matched by major changes abroad. The company entirely removed itself from the U.S. market, choosing not to compete against General Motors, Ford, Chrysler, and Japanese imports. In South America, the company closed operations in Uruguay, Chile, Colombia, and Argentina, retaining only its facility in Brazil. Fiat's international operations were also brought under the aegis of a new holding company, the Fiat Group.

Although it had retreated from several large international markets, conceding in part its role as an export-oriented company, Fiat had led the way in Europe toward factory automation during the early 1980s, a move that several of Europe's other volume carmakers--Volkswagen, General Motors, Renault, Peugeot--copied. In 1986, Fiat purchased Alfa Romeo, paying state-owned Finmeccanica US$1.75 billion to acquire the luxury car manufacturer. The following year, the first Alfa Romeo car, the 164, to appear under Fiat ownership made its debut, selling strongly in Italy but recording disappointing sales elsewhere. The dismal sales performance of the 164 was the first of many difficulties Fiat would experience with Alfa Romeo, as sales and production volume dipped throughout the remainder of the 1980s and into the early 1990s. By 1993, the number of cars manufactured under the Alfa Romeo name had slipped to slightly over 100,000, roughly the same number produced in 1970 and considerably less than the number of cars manufactured before Fiat's takeover.

Fiat Acquires Maserati

In 1989, Fiat acquired part of another luxury car manufacturer, paying US$120 million for a 49 percent interest in Maserati SpA, then four years later purchased the remaining 51 percent from De Tomaso Industries for US$51.2 million. The addition of Alfa Romeo and Maserati to Fiat's automobile operations broadened the company's collection of automobile lines, bringing two luxury brand names to the company's established Ferrari, Innocenti, and Lancia-Autobianchi models. Despite the less-than-robust sales performance of Fiat's Alfa Romeo unit, annual sales grew prodigiously throughout the latter half of the 1980s, more than doubling between 1985, a year in which merger discussions with Ford Motor Company collapsed, and 1990. Fiat's ability to generate additional income from the increase in its revenues also met with considerable success, providing resounding evidence that the company had recovered from the financial malaise that characterized its operations during the early 1980s. In 1981, Fiat's income as a percentage of sales was a miserable 0.4 percent; by 1986 the company was realizing 7.2 percent of its annual sales as profit and its pioneering move into factory automation appeared to be paying dividends.

In 1990, however, Fiat's growth came to a stop. A global recession that crippled the economies of many countries hit the European car market particularly hard, exacerbating the traditional problems--high labor costs and industry overcapacity--that plagued European carmakers. Fiat's profits plummeted 51 percent in 1990, and its income as a percentage of sales slipped to 2.8 percent. The recession continued to hamper sales throughout the early 1990s as Fiat struggled to withstand the debilitative effects of the dwindling demand for automobiles. By the mid-1990s, the European car market was showing some signs of recovery but continued to be stifled by depressed economic conditions, inhibiting Fiat's ability to reap the rewards that, under more favorable conditions, would be derived from its enviable share of the European car market.

In an effort to expand its global productivity, Fiat developed new automobile models designed for a broader and more competitive market. The result of this strategy was the introduction in 1993 of the Punto, an intermediate car designed specifically to meet the needs of European drivers. In 2000, Fiat entered into an alliance with General Motors, which created joint ventures in purchasing and power-train production. Following this agreement, Fiat Auto Holdings BV was created and became Fiat's main automotive sector, including automobile and light commercial vehicles, with the exception of Ferrari and Maserati.

In further attempts toward diversification, Fiat continued to make their other products more marketable. Agricultural and construction products made way for aviation equipment, commercial vehicles and production systems. Innovations in the mass transit area produced light transport vans and quarry and construction vehicles, as well as long-distance highway trucks. Although active in the railroad industry from its early beginnings, in 2000, Fiat sold its railroad activities to Alstom.

Fiat's Ten Operating Sectors Aim at Globalization

The year 2000 witnessed the development of Fiat's ten operating sectors: Automobiles, Agricultural and Construction, Machinery, Commercial Vehicles, Metallurgical Products, Components, Production Systems, Aviation Publishing and Communications, Insurance and Services. The Agricultural sector, under the auspices of CNH Global in 1999, acquired New Holland NV and American Case Corporation, and excelled in the production of tractors, harvesting and baling equipment, and loaders. Growth in this sector remained positive in 2001 due to a favorable dollar conversion rate and strong demand for farm equipment in North America.

Iveco (Industrial Vehicles Corporation), the Commercial Vehicles sector of Fiat, came about in 1974 as the result of an agreement between Fiat and Germany's Klockner-Humboldt-Deutz. This sector has been active in the transport industry, producing light to heavy commercial vehicles. Assisting in the developing momentum in this sector, the EuroCargo Tector (intermediate vehicle) was introduced in September 2000. In the following year Iveco acquired a 50 percent share in Irisbus from Renault and began establishing markets in South America, Eastern Europe, and Asia.

Teksid, headed up the Metallurgical Products sector with headquarters in Avigliana, near Turin. This sector specialized in the production of metal components for the automotive industry, including cast iron, aluminum and magnesium, and established Fiat as the world leader in the production of engine blocks (cast iron), cylinder heads (aluminum), and instrument panels (magnesium). New plants during 2001 were in various stages of development in Sylacauga, Alabama in the United States; Hua Dong, China; Mexico; and Strathroy, Canada.

Magneti Marelli, created in 1919, designed, developed, and produced high-tech automotive components, systems and modules. In 2000 this sector established itself as the world leader in the field of car lights, second in Europe for instrument panels, and third for petrol injections systems.

The Production Systems sector, or Comau, began machine tool production in 1935, and continued to expand its product range. In 1999, Fiat acquired Pico (American bodyworks systems) and Renault Automation and Sciaky, strengthening its position as a major supplier. New branches were established in Australia, China, Romania, and Germany.

FiatAvio, the Aviation sector, began in 1908 and continued in 2001 to develop, produce, and distribute components and systems for airplanes and helicopter engines, as well as assemble turbines for marine propulsion. It produced propulsion systems for launchers and satellites in space operations, and was the world leader in power transmission technology for aircraft engines. It participated in programs with General Electric, Pratt & Whitney, and Rolls-Royce.

The Fiat Group created Editrice La Stampa in 1926 to publish Turin's daily newspaper, La Stampa Itedi. Italiana Edizioni SpA was created in 1980 to further develop Fiat's Publishing and Communications sectors through a single entity. In 1999 an Internet portal was created in partnership with CiaoWeb (www.ciaonordovest.it).

In 1998, the Fiat Group created Toro Targa Assicurazioni as part of a joint venture with Targa Services to distribute insurance products through the Fiat car dealer network. Toro Assicurazioni, created in 1833, remained one of the largest insurance groups in Italy.

The Business Solutions sector was created in 2000 and grouped together service companies operating in the field of shared services for businesses, especially information technology. Global Value was launched in 2001, the result of a joint venture with IBM to manage technological infrastructure and software applications.

In 2001, Fiat operated in 61 countries; ran 242 manufacturing plants and 131 research and development centers. Forty-six percent of their production was generated outside Italy; exports accounted for over 67 percent of total sales. The success of Fiat's globalization strategy continues to depend on diversification. A presence in markets around the globe will be an integral part of the group's strategy as it focuses not only in its present markets, but also on emerging countries such as India, China, Brazil, and Argentina. According to a press release delivered by the Group in February 2002, "In order to operate with greater agility and flexibility in this challenging environment, the Group is implementing decisive measures throughout its industrial organization, from the redefinition of its processes, to the structural reduction of its inventories, from the restructuring and streamlining of its manufacturing facilities to the reorganization of the entire Automobile Sector." Fiat which began as one of the founders of the European motor industry, will continue to follow its original growth strategy--penetration of foreign markets and focus on innovation.

Principal Subsidiaries:Bioengineering International BV; Business Solutions SpA; CNH Global NV; Comau Pico Holding Corp.; Comau Service SpA; Comau System SpA; Deutsch Fiat GmbH; Ferrari SpA; Fiat Acquisition Corporation; Fiat-Allis BV; Fiat Automoveis, s.a.; Fiat Auto SpA; FiatAvio SpA; Fiat Concord SA; Fiat do Brazil SA; Fiat Financing Holding BV; Fiat France SA; Fiat USA, Inc.; IHF SA; Itedi SpA; Iveco N.V.; Magneti Marelli SpA; Maserati SpA; Teksid S.p.A.; Toro Assicurazioni SpA.

Principal Competitors:BMW; The Ford Motor Company; Volkswagen.

Further Reading:

• Biagi, Enzo, Il signor Fiat: Una biografia, Milan: Rizzolii, 1976.
• Castronovo, Valerio, Giovanni Agnelli: La Fiat dal 1899 al 1945, Turin: Einaudii, 1977.
• "Fiat Auto Buys All of Maserati," Automotive News, May 24, 1993, p. 2.
• "Fiat Performs CPR to Revive Alfa Romeo," Automotive News, May 16, 1994, p. 26.
• "Honorary Chairman Says Fiat Betting on Growth of Auto Sector," Xinhua News Agency, April 29, 2002, p. 1008119.
• Kurylko, Diane T., "Mercedes, Fiat Discuss Joint Venture," Automotive News, April 18, 1994, p. 45.
• "Who'll Take Over from the Patriarchs?" Business Week, May 13, 2002, Is. 3,782, p. 60.
• Wielgat, Andrea, "Fiat Optimistic about Sales," Automotive Industries, April 2002, Vol. 182, Is. 4, p. 4.

Source: International Directory of Company Histories, Vol. 50. St. James Press, 2003.

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