Fiat – never regarded as one of the great motor manufacturers – is ready to become the world's second-largest carmaker, rescuing a German and a US manufacturer along the way.
From its headquarters in Turin, the Società Anonima Fabbrica Italiana Automobili Torino wants to crystallise the international dreams of Giovanni Agnelli, who founded the company in 1899 and whose family still control about one-third of the business.
Inspired by the success of Henry Ford and his Model T, Fiat began its international expansion in the US in 1908, producing cars, vans, marine engines, lorries and trams.
By the 1990s, under the leadership of Agnelli's grandson Gianni, known as l'avvocato (the lawyer), more than 60% of sales came from abroad. But for decades the carmaker's history has been punctuated with failed deals with rivals.
In the 1960s, the Italian company tried to buy a stake in Citroën but failed after the French president, Charles de Gaulle, stopped the move for protectionist reasons. In the 1980s, it held talks with Ford to merge their European car operations but did a hasty U-turn after realising the men from Detroit wanted to be in the driving seat.
In 1990, Fiat, Renault and Volvo discussed a possible alliance with Chrysler – which also got nowhere. Then, in 1999, the company tried to buy Volvo's car operations but was shunted out of that deal by Ford. A year later, Fiat rejected a takeover approach from DaimlerChrysler.
In 2004, when the chief executive, Sergio Marchionne, came on board, Fiat switched its focus to efficiency and revenues, ending an unprofitable relationship with General Motors and relaunching old models such as the Cinquecento and the Panda.
The company is Italy's largest industrial group and the Agnellis also control other businesses, including Juventus football club and the Ferrari formula one team.
When the global credit crunch took hold, rising unemployment and cost cuts around the world pushed the group into the red in the first quarter of the year.
Marchionne believes consolidation is the only answer to the crisis and recently struck a deal with Chrysler to take the failed US firm out of bankruptcy proceedings. Fiat, he says, needs a partner to produce a total of 5.5–6.0m cars a year in order to survive. Last year, Fiat produced 2.15m cars and light commercial vehicles (excluding its Ferrari and Maserati supercars), a number set to increase to 4.2m vehicles after the Chrysler deal.
But warning signs have already started to emerge. In March, Standard & Poor's downgraded the company's credit rating to junk status as it "did not have enough available resources in the form of bank lines and existing cash to fully cover its financial maturities in the subsequent 12 months".
The credit-rating agency also warned there could be further downgrades if "it sees evidence that Fiat's involvement with Chrysler translates into cash outflows" or if the car market deteriorates further.
