Mondo Agnelli

Contents

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

Llanto por Ignacio Sánchez Mejías (Lament for Ignacio Sánchez Mejías) by Federico García Lorca copyright © Herederos de Federico García Lorca, from Obras Completas (Galaxia/Gutenberg, 1996 edition). English Translation by Galway Kinnell copyright © Galway Kinnell and Herederos de Federico García Lorca. All rights reserved. For information regarding rights and permissions of all of Lorca’s works in Spanish or in English, please contact or William Peter Kosmas, Esq., 8 Franklin Square, London W14 9UU, England.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750–8400, fax (978) 646–8600, or on the Web at . Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748–6011, fax (201) 748–6008, or online at .

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762–2974, outside the United States at (317) 572–3993 or fax (317) 572–4002.

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our Web site at .

Library of Congress Cataloging-in-Publication Data:

Clark, Jennifer, 1972–

Mondo Agnelli: Fiat, Chrysler, and the power of a dynasty / Jennifer Clark.—1

p. cm.

Includes bibliographical references and index.

ISBN 978–1–118–01852–1 (cloth); ISBN 978–1–118–22196–9 (ebk); ISBN 978–1–118–23611–6 (ebk); ISBN 978–1–118–24120–2 (ebk)

1. Fiat (Firm)—History. 2. Agnelli family. 3. Businessmen—Italy. 4. Automobile industry and trade—Italy. I. Title.

HD9710.I84F477 2011

338.7'629222092245—dc23

[B]

2011039738

To Dino

“The men who have changed the universe have never gotten there by working on leaders, but rather by moving the masses. Working on leaders is the method of intrigue and only leads to secondary results. Working on the masses, however, is the stroke of genius that changes the face of the world.”

— Napoleon Bonaparte

Agnelli Family Tree

Timeline

July 30, 1863	Henry Ford is born in Dearborn, Michigan.
August 13, 1866	Giovanni Agnelli is born in Villar Perosa, near Turin.
April 2, 1875	Walter Percy Chrysler is born in Wamego, Kansas.
August 5, 1882	Italian engineer Enrico Bernardi, working in Padua, Italy, obtains patent number 14,460 for an internal combustion engine for use “in small machines.”
April–October 1884	Enrico Bernardi presents motorized three-wheeled car at Turin International Exposition.
January 29, 1886	In Germany, Karl Benz patents a gasoline-powered engine, after having tested it on a three-wheeled vehicle.
March 8, 1886	Gottlieb Daimler installs an internal combustion engine of his own design on a stagecoach.
January 2, 1892	Edoardo Agnelli is born in Verona, Italy.
May 18, 1895	First Italian car race is held, from Turin to Asti.
July 1, 1899	Fabbrica Italiana Automobili Torino, or FIAT, is founded in Turin.
November 30, 1901	Henry Ford founds Henry Ford Company in Detroit.
March 8, 1906	Agnelli becomes largest shareholder of Fiat.
April 1906	Agnelli makes his first trip to the United States.
June 23, 1908	Agnelli and two partners are accused of market rigging in the 1906 market crash.
August 12, 1908	Ford Motor Company makes its first Model T.
1912	Agnelli visits Detroit again.
July 5, 1913	Court of Appeals confirms Agnelli’s acquittal in market rigging trial.
June 8, 1919	Edoardo Agnelli marries Virginia Bourbon del Monte.
September 1, 1920	Fiat workers occupy Fiat factories.
March 12, 1921	Gianni Agnelli is born.
October 28, 1922	Benito Mussolini’s March on Rome.
March 1, 1923	Giovanni Agnelli is named a senator by Benito Mussolini.
July 24, 1923	Edoardo Agnelli is named chairman of Juventus, the Agnelli family soccer team.
October 25, 1923	Fiat’s Lingotto factory is inaugurated by Benito Mussolini.
June 6, 1925	Chrysler Corporation is founded.
July 27, 1927	Senatore Giovanni Agnelli creates family holding company IFI.
April 12, 1932	Fiat presents the Balilla, a successful small “people’s car,” at the Milan Fair.
July 14, 1935	Edoardo Agnelli, 42, dies in airplane accident.
December 19, 1936	Virginia Agnelli receives court order denying her custody of her seven children.
May 15, 1939	Mirafiori is inaugurated by visit of Benito Mussolini.
June 10, 1940	Italy enters World War II on Axis side.
July 25, 1943	Mussolini is ousted from power.
September 8, 1943	Italy announces its surrender to Allied powers, which had occupied southern half of the country.
May 10, 1944	Karl Wolff, Supreme Commander of Nazi SS forces in Italy, discusses German withdrawal with Pope Pius XII in meeting organized with help of Virginia Agnelli.
November 26, 1944	Fiat manager Vittorio Valletta is denounced by workers’ committee as a traitor for collaboration with Fascist government in report made to the CLN, the de facto government of occupied Italy.
January 12, 1945	Benito Mussolini’s Republic of Salò includes Fiat on a list of companies to be nationalized.
April 28, 1945	Turin is liberated by partisans; Valletta, Agnelli, and Camerana to be tried in “purge” of alleged Fascist-era collaborators.
May 2, 1945	German forces in Italy surrender.
November 30, 1945	Virginia Agnelli dies in a car accident.
December 16, 1945	Senatore Giovanni Agnelli dies of a heart attack.
December 19, 1945	Giovanni Agnelli and Vittorio Valletta are found not guilty of charges of Fascist collaboration.
December 1, 1948	Valletta travels to Washington, D.C., to request $35 million in Marshall Plan aid to equip Fiat plants for mass production. Financing is approved on April 27, 1949.
August 21, 1952	Gianni Agnelli almost loses his leg in a car accident in the South of France.
November 18, 1953	Gianni Agnelli marries Marella Caracciolo, daughter of Prince Carlo Caracciolo.
March 9, 1955	Fiat 600 is presented in Geneva, eventually selling four million units.
July 4, 1957	Fiat Nuova 500 is launched, and will go on to sell 3.6 million cars.
October 4, 1957	Gianni Agnelli and David Rockefeller watch the Sputnik launch together, at a Bilderberg Group meeting in Fiuggi, Italy, starting a long friendship.
August 7, 1962	Jacqueline Kennedy flies to Italy for the start of a three-week vacation with Agnelli and other friends on the Amalfi coast.
April 29, 1966	Vittorio Valletta tells Fiat board he resigns, paving the way for Gianni Agnelli to become chairman.
May 4, 1966	Fiat chairman Vittorio Valetta signs protocol to build factory in the Soviet Union in Togliattigrad.
March 30, 1969	First of several strikes occurs, indicating a deep radicalization of Fiat’s labor force.
June 21, 1969	Fiat buys 50 percent of Ferrari.
October 16, 1973	OPEC announces 70 percent increase in price of oil, leading to the first “oil shock” of the 1970s.
May 30, 1974	Agnelli is elected chairman of Confindustria, Italy’s business lobby.
October 18, 1974	Cesare Romiti starts work as Fiat’s finance director.
June 20, 1975	Umberto Agnelli is elected senator with Christian Democrat party.
April 30, 1976	Carlo de Benedetti joins Fiat as CEO; he leaves in August after “disagreement on company policy.”
December 1, 1976	Agnelli announces that Libyan Arab Foreign Bank takes 9.7 percent stake in Fiat for $415 million.
November 2, 1978	Lee Iacocca becomes president and CEO of Chrysler.
March 26, 1979	OPEC announces 15 percent increase in price of oil in the wake of Iranian Revolution, touching off second oil shock.
September 21, 1979	Fiat’s Carlo Ghiglieno is killed by Prima Linea terrorists.
July 31, 1980	Umberto Agnelli announces decision to step down as Fiat CEO, paving the way for massive layoffs as well as the ascent of Romiti to position of CEO.
September 11, 1980	Romiti announces 14,469 job cuts, touching off a strike that ends October 14 with the “March of 40,000” middle managers. Fiat abandons plan for job cuts, and instead lays off 23,000 people.
January 20, 1983	Fiat launches the best-selling Uno at Cape Canaveral. The car will go on to sell six million units.
July 13, 1983	Chrysler president and CEO Lee Iacocca pays back loan guarantee to U.S. Treasury.
October 8, 1985	Fiat and Ford release statement saying plans for a joint venture, which had started in the spring, were no longer on the table.
September 23, 1986	Agnelli family holding company IFI buys back stake from Libyan Arab Foreign Bank in order to pursue U.S. defense contracts.
November 6, 1986	Italian government holding company IRI SpA announces decision to sell Alfa Romeo to Fiat, which had elbowed aside Ford Motor Company at the last minute to grab the state-owned automaker.
1989	IFI-IFIL begins diversifying into food, tourism, and hotel businesses.
May 10, 1990	Chrysler chairman and CEO Lee Iacocca writes Fiat chairman Gianni Agnelli a letter outlining the benefits of a merger between Chrysler and Fiat.
February 22, 1993	Milan public prosecutors issue arrest warrant for Fiat finance director Paolo Mattioli; Fiat becomes one of the many companies probed for corruption in an investigation that would change the face of Italy and pave the way for Silvio Berlusconi’s entry into politics.
August 31, 1993	Fiat Punto is unveiled, eventually becoming a top seller and symbol of Fiat’s 1990s comeback.
September 28, 1993	Fiat is forced to ask shareholders for $3 billion capital increase; Gianni Agnelli is to stay in chairman’s post until 1996, forcing Umberto—who had been in line to become chairman—to step aside a second time.
November 15, 1993	Fiat announces Giovanni Alberto Agnelli has been named to Fiat board. Umberto Agnelli resigns from the board.
January 1994	Fiat starts producing the Punto at its new high-tech, automated plant at Melfi in Basilicata, which opened in September 1993 with the help of government financing.
December 11, 1995	Gianni Agnelli announces he is stepping down as chairman; Cesare Romiti is to take his place.
April 10, 1996	Gianni Agnelli creates Dicembre, an unlisted company holding his controlling stake in the family’s limited partnership. The statutes say that administrative powers will be transferred to John Elkann in the event of Gianni’s death.
July 17, 1996	Gianni Agnelli writes letter leaving Edoardo Agnelli’s unwanted stake in Dicembre to John Elkann.
December 13, 1997	Giovanni Alberto Agnelli, Umberto’s son, dies of a rare form of cancer.
December 19, 1997	John Elkann is named to Fiat board at age 21.
May 7, 1998	Daimler-Benz AG and Chrysler Corporation announce plans to merge in what is initially billed as a “merger of equals.”
March 13, 2000	Fiat and General Motors announce partnership.
November 15, 2000	Edoardo Agnelli commits suicide.
March 1, 2002	Fiat announces 791 million euro loss for 2001, after having turned a profit in 2000,the last year it would earn a profit until 2005.
May 9, 2002	Gianni Agnelli flies to New York for prostate cancer treatment.
May 27, 2002	Fiat signs memorandum for three billion euro convertible loan with eight banks. The loan will be converted to equity in 2005 if Fiat is unable to pay it back.
October 13, 2002	Fiat top management visits Prime Minister Silvio Berlusconi at his villa to outline job cuts and recovery plan.
January 24, 2003	Gianni Agnelli dies of prostate cancer.
February 24, 2003	Margherita Agnelli refuses to sign papers regarding transfer of stakes in Dicembre, the company that holds Gianni Agnelli’s controlling stake in Fiat.
February 26, 2003	IFIL announces appointment of Umberto Agnelli as chairman and Giuseppe Morchio as CEO. It names a new board, including Luca de Montezemolo and Sergio Marchionne.
February 28, 2003	Fiat announces a group loss of 4.3 billion euros for 2002.
December 17, 2003	Lapo Elkann, Fiat marketing executive, launches a sweatshirt with Fiat’s vintage logo emblazoned across the front.
February 18, 2004	Margherita Agnelli and Marella Agnelli sign an accord agreeing on division of Gianni Agnelli’s wealth. Margherita receives over one billion euros in the settlement.
March 2, 2004	The new Fiat 500 precursor, the Trepiuno, is presented at Geneva Auto Show.
May 28, 2004	Umberto Agnelli dies of cancer.
June 1, 2004	Fiat board names Sergio Marchionne as CEO, its fifth in two years.
September 1, 2004	Marchionne names new Fiat Auto management team.
September 4, 2004	John Elkann and Lavinia Borromeo marry on Lake Maggiore.
February 14, 2005	Fiat announces it has dissolved partnership with General Motors.
April 23, 2005	Fiat’s creditor banks receive letter from a Lehman Brothers banker with offer from an unnamed buyer for a stake in the company.
April 25, 2005	Fiat’s banks announce they will convert three billion euro loan to equity on September 20; on the same day, IFIL chairman Gianluigi Gabetti approves plans for unlisted finance arm Exor to enter an equity swap contract for Fiat shares.
July 8, 2005	Marchionne gives optimistic presentation about Fiat’s turnaround to analysts at Mediobanca in Milan.
September 15, 2005	IFIL announces equity swap.
January 30, 2006	Fiat says Fiat Auto returned to profit (21 million euros) in the fourth quarter after 17 consecutive quarters of losses. Fiat Group ends 2005 with a net profit of 1.4 billion euros, compared to a loss of 1.6 billion euros the year before.
February 13, 2007	Italian stock market watchdog Consob fines Gianluigi Gabetti, Franzo Grande Stevens, and Virgilio Marrone a total of 16 million euros for equity swap.
May 14, 2007	Cerberus Capital Management announces plan to buy Chrysler brand from Daimler Chrysler.
May 31, 2007	Margherita Agnelli announces she is suing Franzo Grande Stevens, Gianluigi Gabetti, Siegfried Maron, and Marella Agnelli in order to gain full disclosure of her father’s assets.
July 4, 2007	Fiat launches new 500 with big event in Turin.
March 12, 2008	Chrysler president and vice chairman Tom LaSorda visits Fiat CEO Sergio Marchionne in Turin for the signing of Fiat’s purchase of a Chrysler engine plant, and they discuss making a small car model together.
July 2, 2008	Merrill Lynch issues an analyst report suggesting General Motors could go bankrupt, sending its shares into a tailspin.
September 15, 2008	Lehman Brothers announces bankruptcy filing, credit markets shut down, and consumers are no longer able to borrow money to buy cars.
November 4, 2008	U.S. Senator Barack Obama is elected President of the United States.
November 18, 2008	Chrysler chairman and CEO Robert Nardelli, General Motors chairman and CEO Richard Wagoner, and Ford Motor Company chairman and CEO Alan Mulally attend hearing at U.S. Senate on their $25 billion federal aid request. The three executives have traveled to Washington on a corporate jet, sparking outrage. Another hearing will take place December 4.
December 19, 2008	U.S. President George Bush approves emergency financing for Chrysler and GM.
December 29, 2008	Chrysler and Fiat sign memorandum of understanding giving Fiat a 35 percent stake in Chrysler in exchange for engine and other technology.
December 31, 2008	Loan and Security Agreement awards $4 billion to Chrysler.
February 17, 2009	Chrysler and General Motors submit viability plans to Task Force.
February 20, 2009	U.S. President Barack Obama announces creation of his 10-member Presidential Task Force on the Auto Industry.
March 25, 2009	Marchionne and team reach outline of deal at meeting with Steve Rattner and Ron Bloom of Task Force.
March 30, 2009	Obama makes speech saying that Chrysler has 30 days to come to an agreement with Fiat or face liquidation.
June 10, 2009	Marchionne makes his first speech to Chrysler employees at the Auburn Hills headquarters.
November 4, 2009	Chrysler releases five-year plan.
March 17, 2010	Turin court rejects Margherita Agnelli’s request for her father’s advisers to provide a full accounting of his wealth. She later appeals; case is ongoing.
May 21, 2010	Marchionne unveils new Jeep Grand Cherokee at Jefferson North Assembly Plant.
September 14, 2010	Chrysler presents model refreshes to dealers at Orlando Dealer Announcement Show.
February 6, 2011	Eminem Super Bowl commercial airs.
May 24, 2011	Payback day. Chrysler repays loan from U.S. Treasury.
July 28, 2011	Marchionne creates a single management team for Fiat and Chrysler.

Prologue

At 10:13 a.m. on May 24, 2011, Chrysler CEO Sergio Marchionne received a phone call with confirmation from Citigroup that the smallest of the Big Three Detroit car companies had repaid the U.S. and Canadian taxpayers for $7.6 billion in loans made in 2009, when the two governments stepped in with funding to keep the near-dead automaker up and running.

Marchionne turned back to his Macintosh, finishing up the two speeches he would give in the next few hours: the first to employees at Chrysler’s headquarters, and the second to factory workers at Sterling Heights. He combed through his palylist until he found what he was looking for: Bruce Springsteen’s version of “Eyes on the Prize.”

After the green light from Citi, Marchionne left his office and rode down the escalator in the glass-topped atrium of Chrysler’s giant headquarters in Auburn Hills, Michigan, to give his first speech of the day to employees, who were gathered around the four floors of the open space cheering as he passed by on his trip down to the podium below. It was the same podium he had used to make his first speech to his new staff on June 10, 2009, the day Chrysler came out of bankruptcy and began the long, hard slog that had turned it from a money-losing company back into a profitable one.

Marchionne had spent the nearly two years that had elapsed since then shuttling back and forth on Fiat’s rented jet between Turin and Detroit, working to meld the two companies into one, often sleeping on the flight over the Atlantic and putting in a full working day when he arrived. Sometimes he had been so tired that he seemed hard-pressed to remember what he was saying. But he thrived in his high-profile role as the auto industry’s new conqueror, albeit one who looked like a university professor and sounded at times like a late-night disc jockey.

Marchionne took the podium wearing his trademark black sweater, which today was decorated with a red, white, and blue button that proclaimed, “paid, May 24, 2011.” The button might as well have read “How the hell . . . ?” He thanked employees in his curiously accented English for their hard work in achieving their goal of releasing 16 new or reworked car models in just under two years. They had accomplished what almost everyone said would be impossible. At one point during the speech, his deep voice became emotional and he had to pause.

If someone had told Marchionne when he arrived at Fiat in 2004 that he would be at Chrysler headquarters today making this speech, or that he would be planning to build a Maserati SUV at Chrysler’s Jefferson North Assembly Plant (JNAP) or launching the Fiat 500 in the United States, he would have laughed his head off. Ridiculous. After all, Fiat had been bleeding millions of euros each and every day back then. It didn’t have the right cars and wasn’t in the right markets. And, worst of all, the company that had once symbolized modern Italy’s own postwar comeback had ceased to be loved by Italians themselves.

From the outside, Fiat’s cashless offer for Chrysler, the bones of which had been hammered out in great haste with private equity fund Cerberus at the end of 2008, had looked every bit as laughable as a Fiat turnaround had in 2004. After all, if the hallowed German auto giant Daimler-Benz—the company founded by the inventors of the internal combustion engine—couldn’t run Chrysler profitably, how could Fiat, a much smaller, mass-market carmaker? And Chrysler had already been saved by the government once back in 1979. But Marchionne knew in his gut he could do it. Each company had what the other one lacked. Fiat had small cars and was a player in Europe and Latin America, but was nowhere in the United States. Chrysler had some strong-selling trucks and minivans, but no international presence. As he delved into Chrysler’s books in early 2009, or walked down its long corridors, or sat around the table at the U.S. Treasury Department in Washington, D.C., he had played out the turnaround movie in his head. The trick was to combine the two. He saw quite clearly how he could meld the two companies into one and make it work.

When Lee Iacocca repaid the $1.5 billion in loan guarantees Chrylser had received from the U.S. Congress in 1979, he chose to make his 1983 announcement at the historic National Press Club in Washington, D.C. “We at Chrysler borrow money the old-fashioned way,” he said with a proud flourish, ever the showman. “We pay it back.” Chrysler’s payback in 2011 was decidedly a more low-key affair. Marchionne was not standing in front of a large check. He was standing in front of his factory workers. For the public ceremony, Chrysler chose its Sterling Heights assembly plant.

The choice was an apt one. The old Chrysler had earmarked the plant, where 1,200 people produced the Dodge Avenger and its sibling the Chrysler Sebring, as one of five to be closed when the company entered bankruptcy. Both of these midsize cars had not sold well, competing with the better-selling Toyota Camry, Honda Accord, Chevy Malibu, and Ford Focus. Consumer Reports called the Sebring “one of the least competitive family sedans on the market.”

Soon after Chrysler emerged from bankruptcy, the plant—and the cars—got a second chance. Sterling Heights reopened in June 2009. The Sebring and the Avenger were among the first Chrysler models to benefit from the transfer of Fiat technology, both of them earmarked for a Fiat dual-clutch transmission, which delivers a boost in fuel economy that will help them compete with the more gas-efficient models from Honda, Ford, and Hyundai for the 2012 model year. More importantly, perhaps, the decision signaled to skeptical engineers inside Chrysler that Fiat planned to make good on its promise to share technology.

The Sebring’s transformation went far beyond a new transmission. It kept the same motor and body, but got a new grille, front end, rear end, fenders, lights, interior, suspension, instrument panel, seats, and name—the Chrysler 200. The old Chrysler had been forced offload many of its poor-selling models like the Sebring onto rental and corporate fleets, and 2010 had been no exception, since the company lacked fresh product. But the Chrysler 200 was on track to pare its January-to-August 2011 fleet sales by half of what they had been for the same period the year before.

After rap star Eminem took a Chrysler 200 on a proud, defiant spin through a grim Detroit in the award-winning “Imported from Detroit” Super Bowl ad, the former ugly duckling became the top-selling Chrysler-brand car in May 2011. It still had a hard time competing against leaders from Toyota and Honda, but it was no longer simply a joke.

Even though today’s payback day was a low-key affair, that didn’t mean it wasn’t an important day for Chrysler. Repaying the government loan six years ahead of time, with money borrowed on Wall Street, was made possible by the recovery of the U.S. financial markets, as well as by Chrysler’s own progress. It was an opportunity that Marchionne grabbed, and was important for several reasons. It let Chrysler cut its interest payment by about $300 million each year. It gave Fiat the chance to increase its stake to 46 percent from 30 percent, thus bolstering its management control. And above all, it was a symbolic milestone in Chrysler’s long road to recovery. It had posted a $116 million profit in the first quarter, its first profit in five years.

Chrysler was still not out of the woods, but it had started to recover a lot more quickly than anyone had predicted.

At Sterling Heights later that day, Marchionne took a factory tour with veterans of the Presidential Task Force on the Automotive Industry: Ron Bloom, who was serving as President Obama’s assistant for manufacturing policy at the time; Brian Deese, deputy director for the National Economic Council; and United Automobile Workers (UAW) vice president General Holiefield. UAW president Bob King was there, too. Hundreds of ecstatic workers were sporting “paid” buttons. There were smiles, handshakes, backslaps, and bear hugs all around.

For Marchionne, the spring of 2011 was his “Houdini” moment. Detroit and Washington had watched transfixed as he was nailed into a metaphorical packing crate and lowered into water, in the car world’s equivalent of the great escape artist’s most popular act. Time magazine in April had included Marchionne on its list of the world’s 100 most influential people.

If it was a big day for Marchionne, in a way it was even bigger for union leader General Holiefield, who stood half a head taller than Marchionne when he handed him his black UAW T-shirt onstage and, beaming, shook his hand. Holiefield’s bargaining skills in 2008 had resulted in the union’s health care trust becoming the second-biggest shareholder after Fiat. Holiefield had worked at Chrysler for 38 years, starting at the Jefferson assembly plant. His father had worked there before him.

He had witnessed Chrysler’s annual revenue fall from $66.1 billion in 1998, when Daimler-Benz bought the company for $38 billion, to just $41.9 billion in 2010. He had seen employment wither to 51,623 from 123,180 during that same time. And finally, he had ended up sitting at the U.S. Treasury around a table with Marchionne, Ron Bloom, former UAW chief Ron Gettelfinger, and a bunch of other people, hammering out a deal that would save Chrysler. The sooner Fiat paid back the government and turned the company around, the sooner the union’s health care fund could cash in what was essentially an IOU for real money.

Sergio and General had launched some blistering exchanges at one another during the talks in Washington that led to Fiat’s taking management control of Chrysler. Both liked to use highly colored language to make a point. The stakes for the union were high: the Task Force had rolled back historic salary and benefit gains made by the union in its 70 years of negotiations. And the unions had already made concessions with the creation of the health care trust a few years before. But Holiefield knew that if the union dug in its heels and refused, Chrysler workers would lose their jobs and their health care fund. The union’s concessions on its generous labor contract gave Detroit’s automakers the flexibility they needed to end decades of bad practices—like making too many cars in order to keep factories running and then shoving the unwanted metal onto dealer lots and into showrooms. As a result, inventory volumes had fallen in 2010, and so had rebates. So far, it was a happy ending—until the next economic slump.

Holiefield was realistic about the auto industry’s problems and its prospects. He knew that Chrysler’s heyday was long gone, and that the world as he’d known it had vanished. He knew the poor quality of Detroit’s cars was partly to blame, and saw Fiat’s technology and factory management systems as a way to remedy that. He and Marchionne had both recognized that they wanted to get the job of fixing Chrysler done, and to move on. If he couldn’t get a whole loaf of bread, he would try to get three-quarters. And that’s what he did.

Fiat’s controlling shareholder, Fiat chairman John Elkann, was not at Sterling Heights that day, and most of the workers probably would not have recognized the tall, slim, and quiet young man if he had been. John had been sitting on Fiat’s board since 1997, when he was 21 years old, and then inherited control of Fiat from his grandfather, Gianni Agnelli, when the elderly patriarch of the auto dynasty passed away in 2003. In a sense, he had been preparing Fiat for this partnership for his entire adult life. Where Agnelli had basked in the limelight afforded him by his powerful position as a leading industrialist, John preferred to appear in public much less. But he had been deeply involved with Marchionne since the CEO arrived in 2004 to turn Fiat around, and had totally backed Sergio in his audacious bid for Chrysler. The two spoke nearly every day, and communicated back and forth on private message via BlackBerry. Later on “paid” day, Sergio would fly to Washington, D.C., to meet up with John, who was spending the day there, and the pair would fly back to Italy together.

The Fiat-Chrysler partnership had been a big decision for John and his family. Many of the world’s car companies, including Toyota, Ford, Peugeot-Citroën, and Porsche, are still linked to the families that founded them. A mix of family ownership and government protectionism had often thrown up roadblocks to auto industry mergers in a business that sorely needed them, since too many carmakers were chasing too few buyers. By accepting a diluted stake in a bigger company with a stronger chance of surviving, John had positioned the family as an industry trailblazer.

Ron Bloom took the stage for the first speech of the day, his average Joe face looking uncharacteristically cheerful. His unflappable manner and quiet voice masked razor-sharp negotiating skills. Ron’s background on Wall Street and in restructuring the steel industry as it downsized in the 1990s had made him uniquely suited for his task of shepherding Chrysler’s squabbling stakeholders into an agreement in those frantic months as winter turned to spring in 2009.

His experience with the steel industry had made Bloom believe for many years that General Motors was heading for bankruptcy, and he had told former UAW chief Ron Gettelfinger as much five years before, when Ron still worked for the United Steelworkers union.

Bloom’s role in the Chrysler talks had been key. First of all, he had banged Fiat and Chrysler’s no-cash deal into a format that he felt would be more acceptable to U.S. taxpayers, working on milestones to mark Fiat’s technology transfer and reduce the risk that it could simply loot the company. At the same time, he had helped convince President Obama that Chrysler had been worth saving, because letting it go under might push the U.S. economy from recession to depression. Last, he had done more than anyone to find the common ground between Fiat and the UAW that had led to them all being at Sterling Heights that day. Ron had taken a very carefully calculated risk for the benefit of workers and their families. And it had paid off.

The talks at the Treasury Department “had been neither simple nor easy,” Bloom told the crowd of autoworkers, who frequently interrupted his speech with cheers.

President Obama “did what a government does in times of crisis: he lent the company a helping hand,” he said.

Finally, it was Sergio’s turn to speak. Someone yelled, “Thank you!” as Marchionne took the podium.

“Look, I already gave a speech in Auburn Hills this morning and I almost broke up, so don’t start this!” he joked, pointing a finger out into the crowd.

Marchionne deeply believed in the power of groups of people to change entire organizations if the right conditions are created by their leaders, and today that belief provided one of the main themes for his speech. That change, in turn, creates personal transformation that shapes future leaders and the people they lead, he told the crowd. He mentioned Lou Gerstner’s resurrection of IBM, the Manhattan Project, and Bill Clinton’s 1992 victory as examples of how leaders “have the power to refuse our consent.”

He continued, “Survivors are different people, special people. You and I are survivors. We have collectively found the strength to fight against the death sentence. We are special people. I urge you never to forget the experience we’ve been through.”

As he often does, before the end of his speech he told his listeners they still had a lot of work to do.

“Today is a major milestone for Chrysler Group, but our work is by no means finished,” he warned, quoting Winston Churchill’s famous statement after the British won an important World War II victory. “This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

This is a tale about power, and unexpected outcomes. It is a Greek tragedy with a Hollywood ending, spanning two centuries and uniting two continents. It is about a family’s power to shape a country, an individual’s power to shape a company, and a government’s power to shape an industry.

Fiat’s purchase of a stake in Chrysler for sweat equity in 2009 was one of the most surprising results of the economic chaos unleashed by the bursting of the U.S. credit bubble and its subsequent devastation of the world’s largest economy. Little known in the United States, Fiat was the only automaker willing to step up to the plate with a plan to partner with Chrysler, giving the scrappy American icon its last chance to live to fight another day.

The story starts on January 24, 2003, when Agnelli family patriarch Giovanni Agnelli (known as Gianni) died of cancer amid one of Fiat’s worst crises in its 104-year history. Then it reaches back to the end of the nineteenth century to look at the passion that drove a group of auto industry pioneers to set up what became Fiat, and how the earlier Giovanni Agnelli (Gianni’s grandfather) founded a dynasty powerful enough to dictate policy to governments, but scarred by private tragedy.

The story then jumps to the early twenty-first century, when Giovanni Agnelli’s descendants were struggling to avert Fiat’s collapse, which would have sent a tidal wave of unemployment across Italy’s slow-growth, manufacturing-based economy. It documents how Fiat recovered under the leadership of an unlikely group of individuals thrown together by chance and necessity, who galvanized Fiat’s workforce to help them rip apart the automaker and reinvent it for a new era.

The story ends in the United States, where bold—and controversial—moves by two presidents from two different parties lent taxpayers’ money to support an industry that the government decided was too important to fail. Chrysler’s lifeline was given on the condition that the carmaker come up with a viable survival plan, which, in turn, forced the company into a frantic search for a partner. Fiat was the only company that stepped up to the plate, because its past experience had given it the skills and the vision to attempt to execute a transatlantic auto merger where others in the past had been unsuccessful.

How Fiat CEO Sergio Marchionne, working with the Agnelli family, achieved the seemingly impossible turnaround of not one but two “left for dead” carmakers is the subject of this book.

Notes

. Lee Iacocca and William Novak, Iacocca: An Autobiography (New York: Bantam Books, 1984), 295.

. Brad Wernle and Luca Ciferri, “Chrysler Mulls RWD Mid-Sized Replacement,” Automotive News, June 22, 2009.

. Bradford Wernle, “Chrysler 200 Takes the Brand’s Sales Lead in May,” Automotive News, June 6, 2011.

. Brent Snavely, “Chrysler Pays Up, More Work Ahead,” Detroit Free Press, May 25, 2001.

. Chrysler video.

Part I

THE POWER OF A FAMILY