Fiat Crisis Management

Crisis Management

FIAT

The Italian automobile company FIAT is synonomous with success, with brands such as Ferrari, Maseratti, Alfa Romeo and the FIAT brand, one usually thinks of class and success when the brand is mentioned. By and large the FIAT brand has been suuccesful for over one hundred years, the group's activities were primarily focused on the industrial manufacturing of cars, industrial and agricultural machinery. With time the group has diversified into other fields, and it now has activities in a broad range of sectors in industry and financial services. It is Italy's largest industrial concern. It also has significant global interests, operating in 61 countries with 1,063 companies that employ over 223,000 people, 111,000 of these employees are outside Italy. However in recent years the company has fallen on hard times. Faced with a multitude of threats including, rising steel prices, increased competitveness from Japanese and Korean manufactureres and a strong Euro, FIAT endured heavy losses in sales and turnover since 2001. The company lost 445 million euros in 2001 and just over 820 million euros in the first half of 2002, not to mention sales in Europe and Italy falling by roughly twenty percent and the FIAT factories operating at only seventy per cent of its maximum capacity. Furthermore chances of a recovery through the Latin American markets were scuppered due to the financial crises there. However a management overhaul, large scale redundancies and the release of many new cars on the market has helped FIAT to drag itself out of a deep crisis that was so significant it brought a large scale downturn in the Italian economy.

COMPANY HISTORY

FIAT was founded on the eleventh of July 1899 at Palazzo Bricherasio in Turin and the company charter of "Societа Anonima Fabbrica Italiana Automobili Torino" was agreed and signed. The company was founded by a group of investors who became the board of directors. On the board of directors, Giovanni Agnelli was recognised as a potential chairman and because of his determination and strategic vision he was in 1902 made the Managing Director of the company.The first FIAT factory was opened in 1900 near the Italian town Corso Dante. One hundred and fifty workers were employed there and the factory produced 24 cars. FIAT quickly began entering motor racing competitions, and did so with great success, thus creating and enhancing the FIAT name. FIAT's reputation was such that in 1908 FIAT heade towards the promising American market, in that year FIAT Automobile co. was founded in the United States.The company grew quickly there and soon diversifeid into other automotive sectors, commercial vehicles trams, trucks and marine engines were all being made under the FIAT name as production soared. In 1916 the Lingotto factory was built, the factory which had five floors and a test track on the roof was the largest in Europe,and the prize posession of the Italian automotive industry. Throughout the nineteen twenties FIAT again expanded their activities, this time to the electricity and steel industries which included railway and public transport. Also in 1923 FIAT produced the first car with four seats, the 509, which went on to achieve massive success for the company but also revolutionised how cars would be produced. FIAT became renowned for its human resource management policies which included health care, specialised schools and sports clubs.

During the years of Mussolini's reign in Italy FIAT had to rescale it international ambitions and focus on the domestic market. During the second world war FIAT had some of its important plants desttroyed during attacks, however the reconstruction of these plants was funded by Marshall aid and was completed by 1948. Throughout the nineteen fifties Italy experienced a significant economic boom and it was the automotive industry that was the main ingredient of this success. Profits, Production and employees all increased at FIAT, who were enjoying exceptional success in the areas of automobiles and farm machinery, exports also increased. In 1966 Giovanni Agnelli, the grandson of the first chairman, became company president. In these years there was a trend toward increased automation of the manufacturing processes to deal with the oil crisis and to continue on the path of technological innovation. In 1979 the auto sector was set up as an independent company: Fiat Auto S.p.A., which included the brands Fiat, Abarth, Autobianchi,Lancia, Ferrari.

The Ferrari brand was initially acquired at 50%, a share that rose later to 87%. In 1984 the company took over Alfa Romeo followed up by acquiring Maserati, a prestigious sports car brand, in 1993.

In 1996 Giovanni Agnelli became the Honorary President of the Fiat Group and Cesare Romiti took the position of CEO. In 1997 the parent company left it's premises in Corso Marconi and moved to the Palazzina Fiat of Lingotto. To cope with the crisis of the early 1990s, the company accelerated its expansion into the international markets and established a world-wide presence which allowed it to achieve just over 60% of its turnover outside Italy. In the late 1990s, increasingly aggressive competition prompted Fiat to concentrate its attention on the developing markets. The Fiat brand was promoted as an innovative brand proposing avant-garde technological solutions at affordable prices. To celebrate the Company's 100th Anniversary, in 1999 the Fiat logo was renewed and proposed in a round version, to be used as the new products logo. In 2003 Giovanni Agnelli, who had been at the helm of Fiat for almost half a century died, Umberto Agnelli took over as chairman but died in 2004, and now Agnelli's grandson John Elkann is chairman, a position he assumed at just twenty eight years of age.

CRISIS

In May 2002, Fiat Auto reported a loss of Ђ429 million for the first quarter of 2002. This loss, one of the largest ever in Italian corporate history, was just one of a multitude of problems that the FIAT group was staring at. Meanwhile, the company's newest car release, the Stilo, which FIAT hoped would revive its car business, failed to achieve the expected sales targets, and Fiat Auto's market share in the Europe dropped down to just 7.9% in May 2002, a jump from 14% in 1990.

FIAT's diversification drive towards the end of the 1990s had left the group with rising debts as some of the investments and acquisitions turned out to be in effective and disappointing.While FIAT's diversification moves were usually looked at disapprovingly, it was Fiat