Ciao Gianni, but now what?

Gianni Agnelli has stepped down from running Fiat, a move that could signal the end for the Agnelli dynasty, says Andrew Gumbel

In 1962, Gianni Agnelli had a remarkable encounter with the Soviet leader, Nikita Krushchev, at a bilateral trade meeting in Moscow. This was a full four years before Gianni was to take up his birthright as chairman of Fiat, and indeed he was better known at the time as a jet-setting playboy than as an industrialist. But Krushchev, ever an acute observer of the mechanisms of western capitalism, took him aside and hugged him warmly.

"I want to talk to you, because you will always be in power. That lot," the Soviet leader said, pointing to a clutch of Italian cabinet ministers on the other side of the room, "will never do more than just come and go."

Krushchev was perhaps more prescient than he realised at the time. Over the ensuing decades, Italian politics languished in a state of protracted chaos, but Gianni grew in both power and stature as one of the truly enduring figureheads of post-war Italy. Not only has Fiat prospered as the country's leading private company, with interests in almost every walk of Italian life, but Gianni has also constructed a myth around himself and his family making them the closest thing that republican Italy has to royalty.

The reputation of the man Italians know as l'Avvocato (the Lawyer) goes before him: he is a savvy captain of industry who has diversified Fiat away from cars and trucks into banking, insurance, publishing, textiles and food; he is the national guru whose every pronouncement on economics or politics is assiduously reported in the press; the charming socialite with a legendary appetite for the good life and a past littered with glamorous love affairs and wrecked sports cars; and the scion of a dynasty endowed with aristocratic breeding, several sumptuous homes and the most exclusive of connections.

Thanks in large part to him, the Agnelli family is the cream of the Italian industrial elite known as the salotto buono, the "good salon". He has a controlling interests in two of the country's three most influential daily newspapers, he dominates the Italian car market by owning both Alfa Romeo and Fiat, he has shares in Italy's leading mineral water company Ferrarrelle as well as its main foreign competitor, Perrier, and he is chairman of Juventus, one of the country's most successful football teams.

And yet there comes a time when even the Agnellis of this world have to bow out. Yesterday, just a few days shy of his 75th birthday, Gianni finally stepped down and handed over the reins to his loyal and long-standing number two, Cesare Romiti. There was no grandiose farewell ceremony, just a symbolic handover in another busy day for the country's premier industrial conglomerate. Even the shock of a non-Agnelli taking over the company was muted. Romiti, at 72 no spring chicken himself, is being handed the reins of power just long enough for the younger generation, and in particular Gianni's 31-year-old nephew Giovanni Alberto, to reach full managerial maturity.

To hear Gianni describe it, the decision seems to have been taken with remarkable ease. Cardinals have always retired at 75, he likes to say, and so should industrialists. But the road to this week's handover has been far from smooth, entailing several years of desperate searching and internecine struggle both within the Agnelli family and within the corporate structure of Fiat itself. For a long time the succession was the great unmentionable topic, one that no Fiat executive ever aired in public and one with which no journalist ever dared confront L'Avvocato. The source of the taboo was one all too familiar to ageing European dynasties: the Agnellis were bent on keeping the company within the family if at all possible, but for all their blue blood (and their bloodline is well endowed with Italian nobility), they could find few family members remotely capable of running a concern the size of Fiat, let alone one who could maintain the regal status that goes with the position.

The final decision - to hand over to a "commoner" for an interim period - is thus a matter of the greatest delicacy. There was a precedent, when the general manager Vittorio Valletta took over the company for 20 years in the Forties and Fifties while Gianni lived the high life of endless parties and glamorous love affairs on the Cote d'Azur. But this time round there is more at stake than the folies de jeunesse of the heir apparent. Romiti is no ordinary outsider. As a tough, often ruthless, general manager and a largely self-made man, he represents everything in Fiat the Agnellis despise. He and Gianni's younger brother, Umberto, have conducted a bitter personal feud ever since Romiti was appointed number two to Gianni in Umberto's place in 1980. Since then, whenever crisis has beckoned at Fiat, it has always been Romiti, not Umberto, who has taken charge and saved the day.

But Romiti is not the only cause for concern in the Agnelli ranks. Over the years, controversy over the succession has slowly gnawed away at the very myth of the family, revealing dysfunctional relationships and personalities crushed by the weight of their genealogical heritage. The process began in spectacular fashion on the evening of 27 October 1986, when Gianni's only son, Edoardo, called an extraordinary news conference in Assisi, a few steps away from a World Peace Day celebration led by the Pope, to announce that he was ready to take on the responsibilities of managing Fiat "personally".

Edoardo, then 32, had spent most of his life in a search for deep mystical meaning, turning alternately to Indian philosophy and the Catholic church, and nobody could take him entirely seriously. But by drawing attention to his position as heir apparent to the Fiat "throne", he touched on a raw nerve that succeeded in embarrassing absolutely everyone. Romiti, in one of his characteristic bouts of trouble-shooting, went on television a few weeks later to ram home the point that the young Agnelli - who had never worked and was known to his friends in New York as "Crazy Eddy" - had nothing to do with the running of the company in any respect. But even he could not hide the awkward truth that trouble was afoot in the House of Agnelli. Four years later, Edoardo embarrassed his elders again when he was arrested in Kenya for possession of heroin. As Gianni himself was eventually forced to admit, the natural heir to the dynasty was a weak, unstable, deeply unhappy man with a recurrent dependency on drugs.

And Edoardo was not the only problem in the succession. Gianni's only other child, Margherita, showed no inclinations towards the business world either, preferring instead to devote herself to motherhood, rearing no fewer than eight children. Where else could he turn? For a long time the only option seemed to be his younger brother Umberto, the only other Agnelli of Gianni's generation to take an active interest in Fiat's affairs. And yet Umberto's fate in life seems to have been to stand in the shadow of his more charismatic brother who is 13 years his senior. In the Seventies he performed indifferently as Fiat's general manager and eventually had to be replaced - by Romiti - because of severe cash problems and industrial unrest. The newspapers marvelled at such a humiliation. "My name is Agnelli," ran the headlines, "and I can't run Fiat."

Much more recently, in 1993, a revitalised Umberto seemed set, once again, to take over the company. But then another crisis loomed, with Fiat weighed down by an uncompetitive production schedule, an overbloated workforce and losses of 1.8 trillion lire. Egged on by Romiti, the company's major shareholders made clear they did not trust Umberto to turn Fiat around, and finally persuaded Gianni to stay on a couple more years rather than relinquish control to his brother. The gamble paid off in one sense, because in short order Fiat produced the prize-winning Punto, Bravo and Brava models and returned triumphantly to profit. But the succession question was as open as ever.

A solution of sorts presented itself in the shape of Umberto's son, Giovanni Alberto, generally known as Giovannino to distinguish him from his uncle. Here was a man, albeit a very young one, with true promise - bright, affable, cosmopolitan and well introduced into business circles through the scooter company Piaggio which his mother owns and he currently runs. "He is the only decent personality suited to this job," says Salvatore Tropea, a journalist who knows the whole family well. "He is what you might call a normal person, which in the context of the Agnelli dynasty is already saying a lot."

Last summer, Gianni and Umberto gave a joint interview to a French business magazine earmarking the young man for great things in the future. No doubt their thinking is that Giovannino will ease into the chairmanship when Romiti himself reaches Fiat's statutory retirement age of 75 in 1998 - thus ensuring that an Agnelli will be in charge of the company in time for its centenary celebrations in 1999.

But Romiti may have other ideas once he enjoys the autonomy that the chairmanship will bring. Gianni has vowed to keep a close eye on Fiat even in retirement by retaining the chairmanship of the Agnelli family holding company IFI and as head of the shareholders' association. But his influence will not last for ever, particularly if his indifferent health fails to hold. The more conspiratorial talk around Fiat these days is of sweeping changes and, possibly, an attempt to freeze out Giovanni Alberto altogether.

Romiti won't have it all his own way; among other things, he will first have to shake off charges of accounting fraud and illegal party financing brought by Italy's anti-corruption magistrates. But his appointment, at least on a symbolic level, has already gone a long way towards breaking the legendary strength of the Agnelli dynasty. Even Romiti's great rival Umberto said recently: "I believe the age of the family firm is over." As Cesare Romiti takes over his erstwhile boss's fabled office on the eighth floor of Fiat's headquarters on the Corso Marconi in Turin, he must surely wonder if it will ever be occupied by another Agnelli again.