Fiat on the Skids

Italy's auto mammoth, Fiat, the second largest in Europe and sixth largest in the world, was considered until recently the private-enterprise showpiece of the Italian economy. Today, racked by labor troubles, declining sales, and most of all government interference in its affairs, it is being mentioned as a possible candidate for partial state owner ship. The company's leaders, 53-year-old Chairman Giovanni Agnelli and his 39-year-old brother, Managing Director Umberto, are deeply committed to keeping the company in the private sector, but they face conditions that Umberto has publicly labeled impossible.

Two weeks ago, indeed, a fed-up Umberto tried to quit in protest against a government-imposed labor contract that he considered the last straw. Umberto himself had asked Italy's Socialist Labor Minister Luigi Bertoldi to medi ate a three-month-old strike and slow down among Fiat's 200,000 workers.

Acting out of political considerations, as he freely conceded, Bertoldi granted the unions a $150 million settlement containing practically everything they asked for, including a $32 a month pay increase that was $8 higher than the company's final offer. Umberto handed in his resignation, but the Fiat board persuaded him to stay on.

To what effect is unclear: Umberto has stated that the contract makes it impossible for Fiat to operate at a profit. The award will raise labor costs 11.5%, on top of a 17% hike last year. Meanwhile, government regulations have clamped a lid on the prices that Fiat can charge, and its auto sales are down by as much as 45% because of apprehension over the energy situation. Even before the award, the company had slipped about $30 million into the red last year, its first loss in recent history.

The troubles point to a trend ominous for other companies besides Fiat: in attempting to cope with Italy's social and economic problems, the government is burdening the private sector with more responsibilities than it can handle. Fiat has tried to help by building big new plants in the depressed southern Mezzogiorno and worker housing in its home city of Turin. Umberto Agnelli criticizes the unions for not taking these expenditures into account when pressing for wage increases to catch up with the cost of living, spiraling at the rate of 15.6% annually; but his greatest scorn is reserved for the government. "There is no economic plan," he says acidly, "no consistent framework within which to operate. It would be possible to run the company like a civil servant, but that certainly is not what I want." Unless the government can find some way to alleviate the effects of the contract it has imposed, however, that is what may happen.

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