Overseas Perspectives       

by Sandra Giovanna Giacomazzi 

The Failure of Fiat:  Chronicle of a Crisis Foretold   (January 2003)

Crisis at Fiat. Why did so many Italians play dumb for so long?  It seems like the Clean Hands Trials revisited to me, the trials during the early nineties that “revealed” the corruptive liaisons of Italian political party financing, that everybody, even schoolchildren, knew about, though everyone pretended not to when the head chopping began.  With the crisis at Fiat it’s a similar case of feigned ignorance.  In the sense that most of Italy pretended not to know what was written in the cards, what was written in the stars, but most of all what was written in the rules of the market and in any Basic Economics textbook.  The governments of Italy and the Agnelli family have never done anything but walk determinedly down the road to this very destitute destination.

In the first place, Fiat has always obstinately refused to comply with the rules of sound and sensible competition by applying protectionist measures to the extreme.  During the 1980s, the percentage of cars produced by domestic firms in Italy was higher than in any other European country.  The import quotas for foreign cars were extremely low and import tariffs were extremely high.  Moreover, Japanese cars, the most competitive cars on the market, were still banned from the Italian market long after they had acquired quite a respectable share of the market in other European countries.

In the second place, Fiat had the unhealthy habit of using state funds to solve its problems of surplus labor.  And as if that weren’t enough, the government literally gave the Agnelli family the state racing-stable, Alfa Romeo.  And for that deadly deed, Italians can personally thank Romano Prodi, then president of the state financial holding, IRI, the man responsible for breaking negotiations with Ford, which was ready to pay a proper price for the prized auto company. (Later Romano Prodi became Prime Minister of Italy and he is now President of the European Union.  One of the many amazing stories of how mediocre men make messes and then make it to the top!)

Such an incestuous relationship between state and industry made it possible for Fiat to produce cars that didn’t need to compete on the domestic market, and with its virtual monopoly at home, it couldn’t be bothered with worrying about the global markets.  Anyone who dared to pronounce a blasphemy like the one just uttered was soon silenced.  Like Alan Fiedman who wrote a book published in both English and Italian, “Agnelli and the Network of Italian Power.”  They say that the Italian version disappeared even before it hit the shelves of the bookshops.  However, it’s not by hushing untellable truths that problems are solved.  Sooner or later the comb will catch the knots, as the Italians say, and this time, for Fiat, there doesn’t seem to be a hairdresser fit for the fixing!

A year and half ago I returned to Turin after a very long stay in the States.  I found the city ridden with road works.  “They’re building a metro,” they told me.  Turin has always dreamed of having a metro, but when I heard the news, I shivered and thought:  “This is it.  Fiat will be closing.”

Why was the building of a metro a signal to me of the beginning of the end?  Because in 1980 when the city was still growing, there was a huge promotional campaign for the city.  They called it the Transport Revolution.  They promised us intelligent traffic lights and a metro.  The traffic lights became ever more stupid and only now have they begun to build the metro, now that the population is diminishing and will do so even more with the vast number of foreseeable layoffs.

Why didn’t they ever build the metro when the city was growing?  The answer is obvious. Agnelli didn’t want one.  He preferred to sell his tiny utilitarian cars by the tons rather than render the city more viable.  Since the proposed “revolution” a metro was talked of many times, but to no avail.  The news that they were finally building one was to me an obvious omen of what ill was in the wind.  It was, therefore, no surprise when the managerial heads began to role a year ago or more recently when they began laying off factory workers.  What is surprising are the masses that act as if they never heard the few of us who have been making our Cassandra prophesies for years.  If you walk down the road to disaster, sooner or later, it may take a few decades, but you’re bound to get there.

January 2003


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