The country that gave us Sophia Loren and Leonardo da Vinci also gave us the century-old Fiat. The group's cars range from models like the popular Fiat Nuova 500 to the Alfa Romeo, Ferrari (85% owned), and Maserati brands. Fiat holds a 53% stake in Chrysler, and has management control of the US carmaker. Fiat reorganized its operations in early 2011 and sent its agricultural and construction equipment (led by 89% owned CNH Global), commercial vehicles (Iveco), and most of the rest of its nonautomobile operations to the newly created Fiat Industrial.
Reinvented and free of its industrial operations, "New Fiat" aims to drive an unadulterated auto company, able to manufacture six million cars by 2014. Its primary brands will include Fiat, Alfa, Lancia, Maserati, and Ferrari. If successful, Fiat could possibly shop around for a buyer for its Magneti Marelli (power train operations) and boost its ownership in Chrysler. Fiat, through its sale of stock, is also looking to invest in current and new factories and equipment in Asia, Europe, and North and South America. To that end, the company's Fiat Powertrain unit got the greenlight by the European Commission in spring 2011 to acquire Penske Corporation's 50% stake in VM Motori, an Italy-based diesel engines; General Motors (GM) has owned the other 50% since 2007. In addition to expanding Fiat's diesel engine offerings, the VM Motori deal should enhance the company's new V-6 engine.
Fiat earlier reached a deal with Chrysler and its majority owner at the time, Cerberus Capital Management, on a broad cooperative agreement that would give the Italian carmaker a 20% equity stake in Chrysler. In January 2011 Fiat upped its stake to 25% when Chrysler agreed to build a Fiat four-cylinder engine in a US factory. The stake was increased to 30% after Fiat fulfilled its second goal set forth by the US government -- to market one or more Chrysler vehicles in Brazil and Europe. Fiat obtained an additional 16% stake when Chrysler paid the $7 billion it owed to the governments of Canada and the US; Fiat then upped its stake from 46% to 53% in mid-2011. Fiat's increased ownership may negate the need for Chrysler to conduct an IPO. Fiat will provide technology and vehicle platforms to the American carmaker, allowing Chrysler to build and sell smaller, more fuel-efficient cars in North America.
President Obama said the US government would require Chrysler to repay the bailout loans it received from the US Department of the Treasury before allowing Fiat to take a majority stake in the company. Chrysler was able to complete new agreements with its labor unions, and most of its lenders were willing to swap their debt for a cash payout proposed by the Obama administration's auto task force. A group of lenders held out on the deal, however, and Chrysler filed for Chapter 11 protection from creditors, along with 24 of its US subsidiaries.
Chrysler and Fiat went forward with their plans when the American carmaker exited from bankruptcy reorganization, six weeks after its filing. Fiat appointed three of the nine directors on Chrysler's new board. Fiat CEO Sergio Marchionne became the CEO of Chrysler Group (as the restructured company is known), succeeding Robert Nardelli, and initiated a wide-ranging management reorganization.
Fiat subsequently picked up niche car maker Carrozzeria Bertone and plans to manufacture Chrysler vehicles at the Bertone plants. The Bertone name, associated with such fast plates as the Alfa Romero Giulietta Sprint and the Lamborghini Countach, highlights Marchionne's focus on producing Chrysler models outside of North America.
The Italian car company also has plans to return to the US for the first time in over 25 years. As part of the planned return, Chrysler has begun assigning Fiat franchises in about 120 US markets with expectations of that number going as high as 200 by 2011. The Fiat 500 minicar (subcompact) should reach dealer showrooms in early 2011. Also debuting in 2011 is a Chrysler-built Fiat-based sedan, which will carry the Dodge brand.
After two failed attempts, Fiat is again looking to expand into China. In 2009 the company set up a €400 million ($570 million) joint venture with Guangzhou Automobile Group to make cars and engines for the Chinese market. Its first China-made model is planned for a 2011 launch of a yet-to-be-unveiled brand of economical family sedan.
An earlier agreement with Chery Automobile of China to make and sell Fiat, Alfa Romeo, and Chery cars was called off when the companies discovered that their models would be in direct competition. A deal with Fiat's first partner, Nanjing Auto, ended when Fiat couldn't agree on a licensing fee for its technology; Nanjing Auto was subsequently taken over by Shanghai Automotive Industry Corporation (SAIC).
Although Fiat has not made any public statement regarding its intention to sell Alfa Romeo, VW chairman Ferdinand Piech has made public his desire to acquire the brand. Some see the deal making sense after Alfa Romeo sales dropped about 1% in 2009 compared to the previous year when Fiat expected a dramatic increase.
Fiat is also looking for growth in other emerging markets such as India, Russia, and South America. Fiat's joint venture with India's Tata Motors builds passenger cars, engines, and transmissions in India. That JV is part of a larger cooperative agreement that also has the companies making Tata trucks at a Fiat plant in Argentina.
The company is in partnership with Russia-based car maker Sollers to assemble as many as 25,000 vehicles a year of three Fiat models. Desiring to increase the manufacturing number to 500,000 vehicles per year, Fiat and Sollers signed a memorandum of understanding (MoU) in early 2010 to set up a joint venture for the manufacture of cars and SUVs at a new Russian plant. Viewed as a key joint venture, Prime Minister Vladimir Putin attended the ceremony when the news was announced; however, during 2010 the financial funding of the partnership came into question. When talks ended between Fiat and Sollers in early 2011, Ford took the opportunity to arrive on the scene with its own offer; Ford and Sollers subsequently signed an MoU. Fiat plans to go it alone, carving out a presence in Russia through its own independent strategies.
The founding Agnelli family, through holding company EXOR, owns about 30% of Fiat.