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Autos
The Fading Gianni Agnelli NEW YORK - With his impeccable fashion sense, breezy manner and pals like Jackie O and Ava Gardner, Gianni Agnelli used to be the Austin Powers of capitalism.
Shares of the American Depository Receipts of Italian conglomerate Fiat, which Agnelli's grandfather founded in 1899, have fallen from a peak of $45 four years ago to just above $10 today. One of the few bright moments for Fiat shares happened last spring, when rumors of Agnelli's death sent their value soaring. Today, by contrast, after Italian President Azeglio Ciampi met with his old friend and pronounced him well, Fiat shares were down by 1.2%. The Agnelli family fortune has shrunk from a high of $5 billion in 2000 to $2.3 billion today. The troubles spring from Agnelli's--the Italians call him l'Avvocato, or the attorney, because of his law degree--unwillingness to jettison Fiat's money-draining automobile business. Fiat not only used to dominate the Italian car market; it also used to symbolize Italy's astounding industrial growth after the devastation of World War II. Agnelli and Fiat are as tied into Italy's identity as the Ford family is tied into America's. But the auto giant, which used to have a 60% market share in Italy, has seen the removal of trade barriers whittle that percentage down to about 30%. Worse, the uncompetitive carmaker has not had a year in the black since 1997 and lost $540 million last year. In 2000, Agnelli sold a 20% stake in Fiat Auto to General Motors (nyse: GM - news - people ). The deal also allowed Fiat the option to sell the remaining shares to GM from 2004 to 2009. Though the contract seems like an incomprehensible act of charity by GM, Agnelli has insisted that he does not intend to sell the rest of the unit. Fiat's auto division is responsible for about 40% of the company's sales, with the rest coming from its financial services, energy businesses and other operations. Although he's doing his best not to admit that his car brand's time has passed, Agnelli does recognize that he is mortal. As his heir, Agnelli has apparently handpicked his 26-year-old grandson, John Elkann. Unfortunately for Fiat stakeholders, Elkann, a reported car buff, seems to be as smitten by the auto industry as his granddad is. But the young Elkann has also received tutelage from such cold-eyed corporate realists as former General Electric (nyse: GE - news - people ) boss Jack Welch, who sits on Fiat's board. And if de Lampedusa made one point in The Leopard, it's that the genius of an oligarchy is its historic ability to comprehend change and then adapt. The Agnellis have been doing that since 1899. More From ForbesItalian Cars We Wish They Still Made 09.02.02No one can make sexy sports cars like the Italians--and these five belle macchine should never have gone out of production. Horror Story 07.08.02 General Motors: Stay away from Fiat!
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