The company fell because of embezzlement of funds by the Agnelli family, which owns about 34% of the normal shares through the holding companies Ifi and Ifil. The Agnelli Family control maintenance has been a priority hence making it hard for Fiat to enter into treacheries and joint businesses that are common among its rivals. Fiat has been investing slowly in the quality improvements and other innovations placing itself at a weak position of quality guarantees when competition was opened in the market. The company had many debts that amounted to 6bn, with its falling selling that fetched it losses. Still in this state about 6000 job were lost and production was stopped in 18 plants.
The company offset some ventures such as insurance and aero- engines operations. Even though Mr. Berlusconi had promised to improve economy, cut taxes, and reforms in the structure, he faced troubles to accomplish them as he faced public rejection to the unpalatable changes. Intense competition and a declining market share is the main problem, which causes the following. as domestic brands tend to dominate home market, Fiat’s proportion of sales in Italy is high. Still, this dominance is on decline, as in 2004 domestic brands had fallen approximately for 30% of sales. Fiat’s business face generational turnover and increased overseas competition. Initially, Fiat was closely allied with the government which was instrumental to its post-war economic recovery and which enabled Fiat to shelter from international competition.
In addition, the company concentrates on the compact market in European countries whereby with a small company they can continue to pay more attention to the quality of their products. Fiat’s vehicles have been enhanced greatly which made the company get over $ 70 million Euros as the demand of their cars increased.
The company needs to turn around the business so that it would be attractive enough for General Motors to its shares.