Read the article and comment on its title. Why Fiat is cool again

Fiat knows how to throw a good party. An estimated 100,000 people celebrated the launch of the new Fiat 500 (known as the Cinquecento) in Turin on July 4th. The company flew in 7,000 people from 63 countries, including some 4,000 car dealers, 1,000 journalists and 100 financial analysts. Eight government ministers and assorted celebrities attended a show choreographed by Marco Balich, the creative director of the Winter Olympics in Turin. The car was displayed in the main squares of 30 Italian cities.

The new Fiat 500's retro-chic styling has huge nostalgic appeal in its home country, where it is synonymous with la dolce vita of the post-war years, when the original Cinquecento motorised ordinary Italians. Yet the price tag, at €10,500 - 14,500 ($14,40019,900), is hefty for a small car. Some observers question whether non-Italians will choose the new 500 over rival models made by Renault, Volkswagen and others.

Fiat's top brass, however, has few doubts. "After three cathartic years to turn around the group, this is not the launch of a car, but the launch of Fiat," gushed Sergio Marchionne, who took over as boss of the Fiat group in 2004. For John Elkann, vice-chairman of Fiat and representative of the dominant Agnelli family's interests, the re­vival of the little car exactly 50 years after the launch of the first Fiat 500 was nothing less than "a new beginning".

For once, this may not just be management hype. Only four years ago Fiat, Italy's biggest industrial group, had the look of a company that had given up the will to live. So sickly was its auto division that without a €3 billion ($2.8 billion) bank bail-out in 2002, the group would have faced bankruptcy. Between 2001 and 2004, the firm lost €8 billion on its car business, which includes great names such as Alfa Romeo, Lancia, Ferrari and Maserati. At this low ebb, Fiat's chairman, Umberto Agnelli, brother of the legendary Gianni, who had died the year before, succumbed to cancer - but not before identifying Sergio Marchionne, a 52-year-old Italian-Canadian, as the man to inject new life into Fiat.

Since taking over in 2004, Mr Marchionne has been both effective and lucky. He has cut costs, laid off workers, increased the sharing of components between models and formed alliances with other caretakers to speed development. He extracted €1.55 billion from General Motors in 2005 as compensation for unwinding an ill-considered put option to buy Fiat's car business. But his biggest stroke of luck was that even before his arrival, Fiat had once again started to make cars that people wanted to buy, such as the new Panda in 2003 and the Grande Punto in 2005. Earlier this year its European market share ticked up to 8.5%. But as Fiat itself shows, fortunes in the car industry can turn with extraordinary rapidity. (Abridged from "The Economist" July 14' -20" 2007)


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