It’s understandable that most American commentaries on the auto industry restructuring signalled by president Obama on Monday have concentrated on the likely fate of GM (see also Nate Silver’s analysis — he’s as good as he is at psephology), the firing of Rick Wagoner and the schadenfreude associated with Cerberus’ humilation. But as someone who has casually followed the auto industry for years, mostly with a European spin, what’s astonishing is the rise of Fiat.
Back in the late ’80s the magazine I ran did a cover story about the European car industry. Britain’s one remaining mass manufacturer, Rover Group, was already a basket case, but we tried to get a sense of what was happening elsewhere in Europe. What seemed clear is that there were too many companies chasing too few sales. Even assuming Rover would go to the wall, there had to be other casualties. The three big German manufacturers, VW, Daimler-Benz and BMW, looked likely survivors. The two French firms, PSA and Renault, were a bit wobbly. But the clear loser in Europe was Fiat. It was almost entirely dependent on its domestic market, which looked vulnerable to entry from stronger foreign marques. And it was ensnarled in a Byzantine corporate structure that had more to do with Italian politics and the whims of the Agnelli family than good business sense. Fiat wasn’t long for this world.
Our judgment in 1988 looked like it would be vindicated a number of times. Domestic market share sank from the 60s to the low 40s by the mid-1990s. Gianni Agnelli, l’Avvocato, who was Italy’s Rockefeller, JP Morgan and Carnegie wrapped in one for many decades, was being exposed as a figure ill-adapted to a globalized industry. The company sought salvation, as so many others have, with a new chairman reared by Jack Welch at GE. Paolo Fresco engaged in some valuable corporate clean-up, and CEO Paolo Cantarella was the necessary car guy rather than a political Machiavelli, but there didn’t seem to be any magic bullet for Fiat.
Enter Sergio Marchionne. He has engineered a recovery from near-death for Fiat. Consider how remarkable the turnaround has been. Only nine years ago, Fiat grabbed at an alliance with ailing GM, in the hope that the US group would eventually do the decent thing and absorb the failing Italian firm. GM’s problems worsened, but so did Fiat’s, to the point where GM was happy to pay a $2 billion penalty in 2005 to get out of its Italian entanglement.
Only four years later, a revitalized Fiat looks like the only hope for the hapless Chrysler. Marchionne may be one of those rare beasts who is extraordinarily gifted at management. Carlos Ghosn, who saved Nissan and shored up Renault, is another one. The car industry is fortunate to have two such prodigies. I’m skeptical whether Fritz Henderson, GM’s new CEO, is made of similarily Right Stuff, but we’ll see. For now, I’ll continue to be amazed at Fiat’s return from the dead. And I wouldn’t mind a Cinquecento to drive around Berkeley.