Ford versus Fiat
Ford is Italy's No. 2 automaker - with no thanks to the Italian government or the Agnelli family
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Europe's second biggest car market after Germany has always been a tantalizing prospect for the world's second-largest automaker.
But when the first Ford Streetka roadster rolled off the production line at the Bairo Canavese plant in northwestern Italy earlier this year, it became the first Ford passenger car fully produced in Italy. And Ford is not even building the car. Pininfarina is. Previous Fords built in Italy were either assemblies of kits shipped from the USA or else agricultural tractors.
In the 1920s Ford set up a complete knockdown plant in Trieste. But it has never managed to set up a full manufacturing operation. It tried mergers, acquisitions and organic growth. All have been thwarted, largely by Italian protectionism and the huge influence of the powerful Agnelli family. The Agnellis founded the country's biggest car manufacturer, the Fiat group.
The fact that Ford has managed to carve out a large slice of the Italian market despite such opposition, is an achievement.
Ford's first setback was the Italian government's refusal to allow the Trieste plant to assemble cars after 1931. Only agricultural tractors could be produced thereafter at the seven-year-old site. The plant had rolled out Model Ts to 33 different countries across three continents, according to the publication Ford Industries in 1924. "The combined population of these [nations, including much of Europe, the Middle East and Africa] is reckoned at 173,375,814," the publication stated. "It has been estimated that 75 percent of all the motor cars in this vast region are Fords."
Pressure from Fiat founder Giovanni Agnelli on Benito Mussolini's National Fascist Party government forced the closure of the Trieste car plant. Ford moved to a new site in Bologna, where it began assembling the original Fordson tractor in 1932. Sixteen years later this too was closed as the company began importing the new Fordson Major from a factory in the UK.
Since then, Ford has not assembled or contracted production of cars in Italy. But it kept trying.
In 1963, Ford came close to buying Ferrari. Twenty-five years later it almost bought Alfa Romeo. Both times it was defeated - by Fiat.
Ironically, in between these two missed takeovers, Ford tried to merge its European operations with Fiat Auto in a bid to create Europe's largest carmaker. That effort also failed.
The attempted Ferrari takeover reached its climax on May 20, 1963. After 22 days of intense negotiations, Ferrari founder Enzo Ferrari refused to sell his company to Ford. Five years later he sold 50 percent of his company.
In 1998, Franco Gozzi, Ferrari's personal secretary and press officer, revealed the sticking point in the Ford-Ferrari talks. It was apparently a simple misunderstanding.
A clause stated Ferrari would "submit to Ford for quick approval a general budget." Enzo Ferrari felt the provision would seriously limit the total freedom as racing team director he was promised. In fact, Ford meant only to take control of Ferrari's road car business.
During a meeting with Ford at 10 p.m. on May 23, 1963. Ferrari became angry and said he felt betrayed. He began shouting a series of insults (which Gozzi called "words you cannot find in any vocabulary.") Finally, he said quietly to Gozzi: "Let's go eat something," leaving the 14-member Ford delegation speechless. The deal was over.
Fiat let Enzo Ferrari have total control (with no budget limit) of the racing department until his death in August 1988. As per the initial 1968 agreement, Fiat bought another 40 percent of Ferrari after the death of the company founder.
Failed negotiations
Ford's attempt to merge its European operations with Fiat unravelled in October 1985 after a year of intense negotiations.
Ford Europe-Fiat was going to control 22 percent of the European market at a time when the biggest group was Volkswagen AG, with a share of just over 14 percent.
Ford was represented in the negotiations by Bob Lutz, then chairman of Ford of Europe, now General Motors vice chairman.
On the Italian side, Fiat group Chairman Giovanni Agnelli and CEO Cesare Romiti were assisted by Fiat Auto CEO Vittorio Ghidella.
According to Romiti, in a book published in 1988, Ford initially agreed to give leadership of the merged companies to Ghidella and 51 percent of the shares to the Italians.
But Romiti said Ford decided during a two-day secret meeting in a Long Island hotel in October 1985 that it "wanted to re-discuss both the majority of the shares and the management control to us." Romiti wrote that "Ford's counter-offer was to pass the majority of the shares and the management control to the US side after a determined period of time."
The Italians rejected this change and the merger talks were over.
"It was a pity," said Romiti in 1988. "A great opportunity was lost. I still think the same today."
In fact, Romiti believed Ford's change of heart had much to do with its decision to start talks to buy Alfa Romeo in early 1986.
The attempted takeover of Alfa Romeo was complicated by the fact that the Milan-based sporty brand was owned by Finmeccanica, one of the many sub-holdings of IRI (Istituto per la Ricostruzione Industriale), the main industrial holding of the Italian state.
After months of rumors and denials, Ford, on May 20, 1986, signed a memorandum of understanding with IRI to take over Alfa Romeo. According to a 1990 book by Anna Gervasoni and Gianni Razzelli, Ford offered to take an initial 20 percent, with the option to raise that to 51 percent within five years and to take total control five years after that.
The amount of cash Ford put on the table for the first 20 percent stake was never made public. But the five-year, 4 billion lira (E2.1 billion) investment plan was to be shared with the Italian state, which would have had to fund 80 percent of the relaunch effort.
Fiat gets Alfa
On September 25, 1986, Ford made its final offer for to IRI. The next day, Fiat - which had publicly stated that it was not interested in Alfa Romeo - announced it was joining the bidding. Fiat made an offer on October 24.
Fiat proposed to merge its Lancia premium brand with Alfa Romeo, creating a luxury brand group intended to top 600,000 units annually.
It planned the same size investment in Alfa as Ford, but Fiat was to take 100 percent of the company from the beginning, freeing the Italian state from contributions to its relaunch.
In addition to taking on debts of more than 700 billion lira (E361.5 million), Fiat also offered 1.02 trillion lira (E529.2 million) for Alfa's assets. In fact, high inflation would mean Fiat's deferred payment equaled _just 389.9 billion lira (E201.4 million) _in the end.
On November 6, 1986, despite opposition from worker unions and several politicians, IRI accepted the proposal.
Fiat took over Alfa Romeo on January 1, 1987, and incorporated it with Lancia, creating Alfa Lancia Industriale.
Ford was defeated again. Giovanni Agnelli said: "We annexed the weak province."
For Ford, the comment merely added insult to its injury.
You can reach Luca Ciferri at lciferri@crain.com.
