Autopasti

by John Montgomery

Today's corporate landscape is littered with the stunning collapses of companies like Enron, WorldCom, and Global Crossing. The fall of the stock market doesn't mean much until your personal retirement account is mostly worthless paper or your job is threatened. Most of us considered ourselves lucky to have employment in 2002, holding off our own personal economic downturn. We have seen the implosions at Lucent, United Airlines and Tyco, but what about the latest news on Fiat's fortunes?

Fiat S.p.A., Italy's largest company, has fallen on hard times. Fiat employs a quarter of a million workers in 61 countries, building cars with the Ferrari, Maserati, Alfa Romeo, Fiat and Lancia brand names. They own Iveco Truck, Magneti Marelli, Fiat Avio aircraft engines, Teksid Aluminum Engine foundry, Comau automated robotics and the New Holland brand of tractor and agricultural machinery.

Fiat Auto division is responsible for the biggest losses, which makes about 40 percent of total revenues. An operating loss of up to 1.2 billion euros ($1.3 billion dollars) in 2002 will be posted as sales continue to slump. The banks gave Fiat a three billion-euro rescue loan in May 2002, in return for collateral to convert the debt into equity if loans default. That means that the banks could take control of the Fiat group from the Agnelli family if they default on the rescue loan. Moody's Investors Service cut Fiat's debt ratings in December to junk status, which will make their ability to secure investment capital and fight off default much more difficult. Sadly, Fiat CEO Giovanni Agnelli passed away on January 24, 2003, putting even more pressure on the family.

Fiat Auto lost money in eight of the last nine years, spending the last decade ignoring huge car buying markets (people with checkbooks and paved roads) in North America and other developed countries to pursue perceived emerging markets (people without checkbooks and paved roads) in third world countries like India, China, Brazil and Argentina. Drastic financial measures are now necessary to pull Fiat from drowning in a sea of debt. Fiat has sold a number of assets to pay the piper; like 34% ownership of Ferrari. Fiat stock shares have fallen 55% in the last year, more than any other auto company. Yet Fiat's highest paid employee, F1 pilot Michael Schumacher will keep his job. Over 15,000 less talented workers have been laid off, with more cuts coming soon. Fiat's corporate offices at 375 Park Avenue in New York City were recently closed.

In 2000, Fiat and General Motors signed a merger in which Fiat bought 5% ownership of General Motors while the General took 20% control of Fiat. The marriage was hailed as a great mutual benefit, increasing buying power and technology sharing for both companies. But Fiat recently sold its 5% stake in GM for $1.16 billion, which will "substantially improve" its net debt standing. More importantly, Fiat negotiated a "put option" three years ago to sell the remaining 80% of Fiat to General Motors starting in 2004. General Motors can do nothing but hope Fiat gets it's act together before it pulls the rip cord on it's "sell option" golden parachute next year.

Meanwhile, Fiat's automotive orphans here in North America sit and watch on the sidelines, hearing stories from afar about their troubled parents back in Italy. Fiat abandoned it's North American dealer network in 1982, then bailed from Alfa Romeo owners in 1995.

In spite of the bad news about the manufacturer of our beloved cars, it is hard for us living in Fiat's automotive wasteland to get teary eyed. Fiat never gave a darn about us here in North America, or spent one lira to help owners or the enthusiast clubs after the lights went out.

Fiat Lancia Unlimited is the largest Fiat Lancia car club in North America, and our survival and success over the last 20 years as orphans can be attributed to only two things; Owner enthusiasm for the cars and a network of North American parts vendors who stepped up to the plate for the vacated Fiat network to back us up and keep the cars running. There is no question that without support of vendors like Vick Autosports, International Auto Parts, FAZA, Bruce's Parts Bin, C. Obert & Co., and Bayless Fiat Lancia World, your car would be at best a non running museum curiosity or at worst a recycled soup can. The collective brain trust of these fine vendors is the glue holding our cars together. Think about that next time you're at AutoZone or Pep Boys trying to buy oil filters, fan belts or spark plugs for your Fiat. Without our specialty Fiat vendors, this club and its orphan cars would cease to exist.

Fiat, Lancia and Alfa owners in North America love their cars, and will surely forgive their long lost parents if the Italian auto maker decides to come back and sell cars in North America. When GM gets Fiat as a result of their prenuptial agreement in 2000, it may be very good news indeed. General Motors will have to find an outlet for all the production and engineering capability. In the meantime, Fiat intends to go down swinging, spending 2.6 billion euros a year to launch 20 new models by 2005. The bottom line is we'll see cars of Fiat's design and construction here in the North America again. The cars may not say Fiat, Lancia or Alfa Romeo on the hood badge, but we'll get cars again.

You heard it here first.