Why Fiat gives up competing in Europe?

Type de publication:



Gerpisa colloquium, Paris (2013)


Corporate Governance, crisis, Fiat


Why Fiat waiver to compete in Europe?

by Giuliana Commisso and Giordano Sivini,

Research Center on Governance of Economic Processes (GEP), University of Calabria - Italy 

“Spending on new product is one of the things that a carmaker should never cut. Saving cash helps only in making agony last longer, because only new products that consumers are willing to buy will build your future success”. Starting from this statement we wonder why Sergio Marchionne, CEO of Fiat, “knowingly decides to move strategy from strenuously defence of market shares to cash flow supremacy”.

First of all, we remember that Marchionne was chosen by the Fiat owners as CEO to prevent that the consolidation of Fiat was achieved by eroding the wealth of the Agnelli family. The cash flow supremacy adopted by Marchionne meets the need not to take entrepreneurial risks. Summing up the lines of the industrial strategy of Marchionne we see that they allowed the growth of Fiat as long as the car market was expanding. With the crisis of the Italian and European market Fiat's profits are reduced and dividends tend to disappear.

Secondly, we examine the ownership structure of Fiat and we highlight the importance of dividends for the Agnelli family and its orientation to draw rents from the industrial system that controls without risking ventures.

Thirdly, we see that in the crisis of Fiat, Marchionne has guaranteed dividends to the Agnelli family splitting the holding into two groups: Fiat Industrial, which includes companies that carry out industrial activities and Fiat Group Automobiles, which includes companies involved in the car activities. From the point of view of the Agnelli family Fiat Industrial is the good company that gives dividends, while Fiat Group Automobiles is temporarily a bad company that does not give dividends, waiting to be combined with Chrysler.

In conclusion we note that Marchionne refusing to compete on the European market and separating the industrial activities from those of the car has satisfied the two requirements of the Agnelli family, not to take risks embarking on entrepreneurial initiatives and feed its rents system. 

(The quotations are from Balcet G., Commisso G., Calabrese G., “Structuring and restructuring Fiat-Chrysler. Weak two carmakers can jointly survive in the new automotive arena?”)

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