Hard-nosed business decisions must come first in Italian family-run enterprises, the new chairman of Fiat told the Associated Press (AP) on Thursday, stressing that the nation’s companies also need to innovate rapidly and become more transparent.
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Luca Cordero di Montezemolo, taking over the struggling conglomerate controlled by the Agnellis, reportedly praised the way the family mobilised to fill its top slots after two deaths and a sudden resignation, but added that business must come before family ties.
“I strongly believe that one of the most important elements in Italy is the family entrepreneur, but I think the family entrepreneur is different from a normal family,” Montezemolo told The Associated Press in his first interview with the international press since taking over his new position.
“When you are an entrepreneur you have different responsibilities,” he reportedly said. “If you have a fantastic son, if he’s good, it’s good. If he’s not good, it’s better to hire a manager.”
AP said Montezemolo, who also leads the Italian business lobby, takes over at Fiat as the car giant struggles to regain its financial health – the company has lost billions of dollars in recent years and suffered painful personal losses.
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By GlobalDataA major blow came when stylish Fiat boss Giovanni “Gianni” Agnelli died in 2003 – his younger brother, Umberto, who had assumed the chairmanship and begun a turnaround, died suddenly in May, the report noted.
AP said the Agnelli family chose Montezemolo, a longtime Agnelli protege who made his name turning around Fiat’s Ferrari, as the new chairman, but chief executive Giuseppe Morchio quit, apparently disappointed not to be chairman himself.
“In 48 hours, they lose within one year another charismatic family leader and the managing director. And in 48 hours, with real courage, they have been able to look ahead and to appoint a new chairman and a new managing director,” Montezemolo reportedly said.
AP said the Agnellis have resisted strong pressure to dump Fiat’s money-losing automotive unit, focusing on cars and selling off other businesses – the company is hoping to break-even at the operating level this year, do the same at Fiat Auto by the end of 2005, and return the entire group to profitability in 2006.
Montezemolo reportedly refused to comment on the future of Fiat and the possibility of ceding the auto unit but the next year will be crucial.
According to the Associated Press, in 2005, Fiat could try to exercise an option to sell its automotive operations to General Motors, which bought 20% of Fiat Auto in 2000. Also next year, a €3 billion bank loan comes due. If Fiat can’t come up with the money or a deal, the banks could take a controlling stake in the company, the report added.
The report said it’s a tough task for Montezemolo, who found himself at the top of Fiat just days after taking over as head of the business lobby, Confindustria.
“I didn’t expect it, I didn’t look for it, and it’s a big, big responsibility — Fiat. But in that moment, for me, it was impossible to say no. So now I am in this situation. I will try to do my best, but it’s difficult,” he told AP.
The news agency noted that leading the business lobby and being chairman of Fiat are different types of jobs – one requires shaking up the Italian business world; the other requires pleasing the Agnelli family and it’s unclear whether those goals will always be in accord.
“In Italy, the conflict of interest isn’t damning and people are not even too upset about that,” University of Chicago business professor Luigi Zingales told AP. “By American standards, would this be considered strange? Yes. By Italian standards? Probably not.”
He reportedly noted that Italy’s premier Silvio Berlusconi has also faced accusations of a conflict of interest, being a media mogul as well as the top government official.
Montezemolo, 56, who studied law in Italy and at Columbia University in New York, indicated to AP that he hoped to end the disunity in the Italian business world, which includes many small- to medium-size enterprises that increasingly struggle to compete internationally.
His rise to the top of Fiat and Confindustria has produced high hopes.
“Luca di Montezemolo embodies qualities that Italians like: He’s rich, he’s powerful, he has movie-star looks,” Alan Friedman, a journalist and author of “Agnelli: Fiat and the Network of Italian Power”, told AP, adding: “He’s considered very close to the Agnelli family, so there’s an almost Kennedy-like quality about Montezemolo in the Italian perception. And, most importantly, because of his association as president of Ferrari, he’s also a bit of a popular folk hero.”
