Fiat CEO steps into limelight with rescue plan


By William Schomberg

MILAN, June 24 (Reuters) - When Fiat's new CEO Giuseppe Morchio presents his plan to rescue the Italian carmaker and industrial conglomerate on Thursday, eyes will be as much on him as on his numbers.

The man who once made a fortune from a multi-billion-dollar deal at Pirelli was lured back into big business in February by Fiat's controlling Agnelli family.

Since then he has been working in virtual silence on how to cut costs and reverse a slump in car sales.

Morchio, 55, unveils the plan -- reported to include as many as 12,000 job cuts -- at 0830 GMT on Thursday. Then he flies to London to meet a wary financial community to drum up support for an expected two billion euro capital increase.

"We have heard so many times that Fiat will recover and so far it hasn't happened. He really needs to be convincing, especially if he's going to try to sell two billion euros (in new stock)," said Deutsche Bank analyst Gaetan Toulemonde.

John Lawson, a car sector analyst with Smith Barney in London, said: "Thursday will be a good opportunity to understand him as well as the company's plans."

Morchio faces a fine balancing act. Investors want drastic action to curb losses. But the government has blocked previous attempts at major layoffs at Italy's biggest private employer.

Reports say most of the job cuts, which would affect about five percent of group employees, will fall at foreign units including farm equipment maker CNH Global NV , based near Chicago.

Other likely moves include more spending on research to help Fiat recover its knack of making popular cars.

Fiat is already deep into a restructuring programme and has sold billions of euros worth of assets to cut debts.

It hopes a string of new cars will help it claw back market share which recently hit record lows, and is waiting to see if partner General Motors Corp will contribute to a five billion-euro refinancing of its struggling car arm.


Analysts see the new plan building on existing strategy. With a reputation for toughness, Morchio will not shy away from hard decisions, people who have worked with him say.

"He's the kind of man you either love or hate," said one. "He drove his team at Pirelli crazy by calling them up in the middle of the night or at weekends. He imposes his personality."

Some Fiat-watchers say the new man in charge could unsettle the head of the group's core car division, Giancarlo Boschetti, whose attempts to end the sales slump have largely won analysts' praise since he arrived only 18 months ago.

Morchio has been given direct control over Fiat Auto and there has been speculation Boschetti could resign.

As Fiat's fourth CEO in the year he was named, Morchio was a surprise choice for the Agnellis. Unlike his immediate predecessors -- Paolo Cantarella, Gabriele Galateri and Alessandro Barberis -- he had never worked for Fiat.

Morchio began his industrial career with Manuli Rubber , a small Italian group, before becoming a rising star at Pirelli. After 13 years with the group's tyre division he moved to its cables arm. Acquisitions he oversaw there turned Pirelli into the world's number one power cable-maker.

Critics point to the subsequent slump in growth in the sector and its low margins.

Morchio's most spectacular deals came in 1999 and 2000 with the sales of fibre optics systems and components firms to Cisco Systems Inc and Corning Inc raising over $6 billion, just before telecoms valuations plunged.

The Corning deal landed Morchio an estimated $150 million as he cashed in stock options, and opened the door to a life of leisure until the Agnellis sought him out.

"When Mr Umberto Agnelli called me, I had no hesitation," Morchio told Il Sole 24 Ore in April. "This is the biggest industrial company in the country, with so many problems but also with huge turnaround potential."



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