At the heart of Italy’s largest industrial grouping, profits and reputations are being damaged, writes John Glover
IN the opulent surroundings of Turin’s snooty Circolo del Whist (whist club), Republican Italy’s version of a royal family met for its annual dinner last week. The meal was hosted by Avvocato Gianni Agnelli, the patriarch of the dynasty that, among much else, controls the Fiat car-building group.
Always a society event, this year the shindig had added cachet. It marked the first official appearance of Avery Frances Howe, the 31-year-old British-American who recently married Giovanni Alberto Agnelli, Gianni’s nephew and heir apparent. The glamorous and slightly exotic Avery Agnelli has taken on a similar role in her new family to that played in another dynasty by Diana Spencer.
The feast is held before the family gets down to the real business – working out how much it is really worth.
This takes place at the annual meeting of Giovanni Agnelli & Company, named after the founder of Fiat, the Avvocato’s grandfather. Members of the Agnelli family have shares that guarantee them a flow of dividends and control of one of Europe’s largest industrial empires.
The family owns all the shares of Giovanni Agnelli, which exists to own 82,5% of the voting shares in IFI. The rest are directly owned by members of the family. IFI has consolidated sales of over 82-trillion lire, making it Italy’s largest industrial grouping, but does little itself aside from owning Juventus soccer club.
IFI operates through IFIL, another conglomerate with interests in food, hotels, shops, paper and cement; and through Fiat itself, which is 33% owned by IFI and IFIL. Fiat also has interests in chemicals, insurance, construction and publishing.
But all is not going swimmingly at the heart of the empire. For a start, this year the board of Agnelli decided to boost its reserves and cut its total dividend payout from 19,4-billion lire to 17-billion, perhaps making it tough for the youngsters to keep up the Ferrari instalments.
More fundamentally, a generational change is coming up. Gianni Agnelli is 75; Cesare Romiti, who replaced him last year as president of Fiat, turns 75 in 18 months’ time. Beneath the surface, power struggles are under way as family factions manoeuvre for influence.
Giovanni Alberto, dubbed to his distaste “Giovannino”, is the son of Gianni’s brother, Umberto. Relations between Romiti and Umberto, who is president of IFIL and managing director of IFI, have verged on outright hostility.
Romiti and Umberto are suing each other over a publishing company that IFI sold to Gemina, another conglomerate in which Fiat is a main shareholder. Romiti was closely involved in Gemina. The publisher turned out to have a huge hole in its accounts, and Gemina is asking an arbitrator to award it its money back. Since this appears to have taken place under Romiti’s nose, the damage to his standing is considerable.
Added to that, Romiti last week learned that he and Fiat’s chief financial officer will stand trial in January on charges of issuing false company data and illegal financing of the political parties.
And then there is Fiat itself. Accustomed to a sympathetic hearing from governments, it has discovered that Romano Prodi’s centre- left coalition is indifferent, and the labour minister seems to support car- workers’ pay demands. The Italian market’s parlous state will mean drooping profits in Fiat’s core business.
All this has weakened Romiti’s hand. However, Prince Charles-like remarks from Giovannino have raised eyebrows among the family. The role of a company, he said in one interview, “is to improve society … perhaps that is more important than simply producing profits”. He has also talked about “cutting back the cartels of old shareholders”, and called for greater competition among investment banks.
That is a reference to Mediobanca, the Milan bank that organises “old shareholders” and sits on Fiat’s board. With 18 months to go before Romiti hands over, the field at Fiat is still open.