TURIN - When Fiat SpA introduced Paolo Fresco to the Italian press last month, one question was on everyone's mind. Had the new chairman been hired to sell the company?
The tall Milan-born lawyer, who rose to vice chairman during 36 years with US conglomerate General Electric, was ready with an answer. 'If the Agnellis wanted to sell their company,' he said, 'they would have called a merchant banker, not a manager.'
But Fresco, 65, will almost certainly bring change to Fiat. A big merger is not out of the question.
He spent the last eight years at the side of a lauded chief executive, GE's Jack Welch. He brings Welch's obsession with shareholder value and a dash of American breeziness to Fiat's rigid corporate culture.
Fresco is teamed with Fiat's high-energy managing director, Paolo Cantarella. Together, the two Paolos are expected to accelerate the group's global drive.
Cantarella remains day-to-day boss. Fresco will focus on strategy, globalization and international agreements. And he will take a much more hands-on role than envisioned when he joined Fiat's board in June 1996.
At that time, he was to be a senior advisor to young Giovanni Alberto Agnelli, the fourth-generation heir designated to replace Cesare Romiti as chairman. After Agnelli died of cancer last December at 33, Fresco agreed to become chairman.
'I found him a great guy, full of new ideas,' he said of Giovanni Alberto Agnelli. 'His loss was a great tragedy.'
Fresco will begin working full time in October, spending most of the week in his office. He will live in a rented flat in central Turin.
Fresco is a hard man beneath his easy manner, say his associates. He is no caretaker chairman. He will have a decade before reaching Fiat's mandatory retirement age.
Some Fiat insiders worry about conflicts between him and Cantarella, 52.
'Paolo and I are complementary,' he said at the shareholders' meeting in June. 'We will work in partnership. We are helped by the fact we share the same basic principles: the creation of shareholder value, ethical rigor, transparency, development of human resources and respect for the customer.'
Fresco was hired by General Electric in 1962 to reorganize the company's legal office in Rome. He rose steadily in the ranks, eventually running GE in Europe before moving to the USA in 1986.
His American informality will be a turnabout for a company still influenced by the military style instilled 99 years ago by the founder, former cavalry officer Giovanni Agnelli. His nephew Gianni Agnelli, Fiat's honorary chairman, still refers to top management as the 'general staff.' To call a meeting is to 'summon the general staff.'
Fresco has a more casual style. At the shareholders' meeting in June, he referred to Cantarella as 'Paolo,' rather than 'Ingegner Paolo Cantarella.'
Fresco's choice of company car also reflects a different style. Rather than the traditional Lancia K used by most top Fiat executives, he went for a two-seat Alfa Romeo GTV coupe.
Fresco enters Fiat at a precarious time. With the end of Italy's car scrapping incentive on 31 July, he expects a fall in new-car orders.
'Add to that the crisis in Brazil and the potential attack of Asian exporters and you've got a situation of great difficulty,' he said. 'But we'll manage it.'
Fresco is also worried about the risks to international stability caused by Asia's economic crisis.
'We have not seen yet the return wave of the crisis,' he said. 'To recover, these countries could start a massive export policy at dumping prices and that could be a threat for Europe and USA.'
Fresco is not expected to change Fiat's basic structure or its focus on globalizing and core activities. Most non-core businesses have already been sold.
He has endorsed a group strategy that calls for six regions outside Western Europe where the Fiat's seven operating sectors must be present. The regions are: Mercosur, Poland, Turkey, Russia, India and China. The seven sectors are: light vehicles; trucks; agricultural-construction; auto parts; foundry; robots and assembly lines; insurance; and dealer and customer services.
Merger or takeover?
Since the Daimler-Chrysler link was announced, the industry has been full of speculation about tie-ups between other auto giants. Fiat is viewed as a merger or takeover candidate, and Fresco has been portrayed as the man to do the deal. He said that is not his job.
'In all my career, I worked to develop the company, not to sell or dismantle it,' he said. 'We are fortunate because Fiat has a strong international presence. That means that we do not need alliances.
'But we won't sit at the window and miss opportunities.'
Fiat has let two merger opportunities slip in the last 15 years, with Ford and with Chrysler. Fresco would not comment on those failed, long-ago talks.
He did say that 'with today's eyes, the withdrawal from Seat in Spain was a mistake.' Volkswagen bought the Spanish national car company after Fiat withdrew as a partner in the 1980s.
A GE-style focus on profitability is at the top of Fresco's agenda.
'Profit margins are still low and to increase them will be a primary objective,' he said.
Return on group sales last year was 3.3 percent compared to 3.5 in 1997. But profits in the car business in the first quarter were just 0.1 percent.
'Ghastly,' Fresco said.
But otherwise he likes what he sees. Since he became chairman on 22 June, he has visited several Fiat units with a team of management consultants.
'I am humble enough to say that I have still a lot to learn,' he said.
One shareholder asked Fresco whether he should buy Fiat shares. 'Without a doubt, buy,' came the reply. 'Not because of me, but because of what Fiat is capable of doing.'