The Fiat Group has invested more than $2 billion in Poland and plans further investment. Generally, for Italian companies, investment in the Polish economy is good business.

Fiat is among the largest foreign investors in Poland and one of the biggest exporters too. The value of foreign investment channeled from Italy by the Fiat Group exceeds $1.75 billion. Added to this are domestic investments made by the corporation's Polish subsidiaries; in all Fiat has invested more than $2.2 billion in Poland to date.

Even though Fiat is primarily associated with car production, the Italian corporation is represented in Poland by a number of companies active in various sectors. In addition to strictly manufacturing businesses, the group includes companies active in the financial sector and services. The Fiat Group is also a major employer. Polish companies belonging to Fiat have a combined work force of about 10,000.

History
Fiat's ties with Poland date back to the start of last century, when Herman Meyer, the representative of the Turin-based company in Poland, began selling the first models. In 1920 Fiat made an agreement with the Herman Meyer company as a result of which the company Polski Fiat was established. In the late 1920s, the Polish authorities began negotiations with the Italian corporation to launch assembly and then production of passenger cars and trucks. In 1931, Polski Fiat Sp. Akc. was founded; the shareholders were Fiat and Państwowe Zakłady Inżynieryjne, the latter 90-percent held by the state. This was the first agreement in Fiat's history under which it transferred a license to a foreign partner for the production of cars. The license involved the Fiat 508 and 518 models.

World War II disrupted Fiat's operations in Poland. A new chapter of cooperation began with the signing in 1965 of a license agreement that led to the launch of production in Poland of the Fiat 1500 passenger car, referred to as the Polish Fiat 125. In 1973, production of the Fiat 126p began at the FSM small-car factory in Bielsko-Biała-a car that for many years was the most popular automobile in Poland, contributing to the promotion of driving in the country.

In 1987, a licensing agreement was signed for the production at FSM of the X1/79, later called the Cinquecento. "This was a breakthrough agreement not only for the Polish car industry, but also for the Italian corporation," says Enrico Pavoni, president of Fiat Auto Poland, who at the time was director of the Fiat representative office in Poland. "For the first time in its history, Fiat decided to open production of a new model outside Italy."

Pavoni, who has been in Poland since 1978-with a two-year hiatus in the early 1990s, when he managed a Fiat representative office in Moscow-has taken part in all negotiations involving Fiat's cooperation with the Polish automotive industry. "The political and economic changes that took place in Poland in the late 1980s and early '90s opened new opportunities for the development of Fiat's operations in Poland," says Pavoni. "It was possible to start talks on financial involvement and production under one's own name."

The negotiations resulted in the establishment of Fiat Auto Poland in 1992, in which Fiat Auto took 90 percent of the stock and the Treasury took the remaining 10 percent. The company took over the production assets of FSM, in which cars under Fiat licensing had been made for many years. At the same time, Magneti Marelli Poland and Teksid Poland were established, the former active in the production of components and the latter operating as a foundry.

Not just cars
In the following years, Fiat launched more new companies, and not only in the automotive sector. Bielsko-Biała, for example, is home to Fiat Avio Polska, a company that deals with research for the needs of the aviation industry, while in Płock, New Holland Bizon produces agricultural combines. One of the youngest companies in the Fiat group is F.A. Powertrain Polska, a joint venture with General Motors. In March, this company launched production of an innovative diesel engine.

Companies active in the financial sector are playing a growing role: Fiat Bank Polska SA, one of the largest car banks in Poland, and Fiat Finance Polska, active in leasing, factoring and the financing of Fiat dealers and suppliers. Fiat also owns two insurance companies offering both property and life insurance.

The corporation's service operations are also developing rapidly, including Midas, a company dealing with rapid servicing of cars. "In Poland we have seven service companies active in areas such as accounting, human resource management, real estate management, computerization and telecommunications and customs clearance," says Pavoni. While some of the companies exclusively work for the needs of the group, others provide services for outside customers as well. In all, the Fiat group in Poland comprises 23 companies, including two joint ventures.

President for hard times
Fiat Auto Poland is the crown jewel of the Fiat group in Poland; the condition of this company has the strongest influence on the image of the Italian corporation. The problems currently being experienced by Fiat Auto, the parent company of Fiat Auto Poland, coupled with the more than two-year-long crisis in the Polish automotive market, are a great challenge for Pavoni, who in April last year became the new president of Fiat Auto Poland.

"I'm not saying that what's happening in the parent company has no bearing on us," says Pavoni. "After all, we belong to the Fiat group. But, it seems to me that the problems of Fiat Auto are not serious enough to cause major changes in the functioning of Fiat's Polish companies, especially as the automotive segment of the Fiat group has undergone major restructuring. The organizational changes introduced are designed to bring order to, and improve the functioning of, individual companies. And this should quickly produce visible results."

Pavoni says the condition of Fiat Auto is "not that bad." This is confirmed by plans to introduce 20 new models over four years. "I'm convinced that these new models, as well as those introduced recently, will prove successful," says Pavoni. "All these activities, including a reduction of debt, organizational changes and the introduction of new models, are bound to contribute to an improvement in the profitability of the sector."

In Pavoni's opinion, the Polish automotive market also has good prospects for growth. "However, a major revival in the Polish auto market won't be possible without an improvement in macroeconomic indicators, including faster growth of gross domestic product, reduced unemployment and increased exports," he says. "Unusually important is also a stable rate of the zloty, faithfully reflecting the condition of the Polish economy. A higher price of the Polish currency hits local producers, exporters in particular. This is clearly demonstrated by the car market, where imported cars are beginning to enjoy more popularity than those produced at home. We also count on economic recovery throughout Europe, because foreign markets account for almost half our sales."

Decreased sales in Poland forced Fiat's Polish companies to reduce their work force by about 1,000 last year. Further layoffs are not planned for the time being, especially as the corporation plans to continue developing production in its Polish factories. One example is the production of the new Panda, thanks to which the Tychy plant has hired 200 new workers.

A second homeland
For the Turin-based corporation, Poland is certainly one of its key markets abroad. This is shown not only by its investments to date-more than $2 billion-but also by the choice of Poland as the host country to produce the new model.

Pavoni's personal ties with Poland are also strong. He has been working here for many years, and also has a Polish family. He has mastered Polish and feels at home here. "I have yet to make up my mind as to whether I will continue living in Poland after retirement or whether I'll return to Italy," Pavoni says. "I feel at home in Poland. When I arrived in 1978 I was supposed to be here for no more than two years."

Pavoni is a rare example of a manager today whose whole professional career is linked to a single company. He began working for Fiat when he was still in college, aged 19. He has remained loyal to the company for 34 years. "Some time ago, I had some proposals to change my job, but I didn't take advantage of them, because I've always felt good at Fiat. Working for the same company, I've been dealing with a variety of things, from bringing automotive companies and suppliers to the Polish market to the organization of a bank and insurance companies. Probably, in no other company could I find such an extensive range of activities compared to what Fiat has offered me."

Pavoni belongs to a group of foreign managers who, in addition to business management, are also involved in public activities. Pavoni is chairman of the Polish Union of Private Employers of the Motor and Tractor Industry and vice-president of the Polish Confederation of Private Employers.

Despite his huge business experience, Pavoni has never been tempted to build his own firm. "Good managers aren't always good entrepreneurs, and vice versa; that's why everyone should do what they're good at," says Pavoni. "I have an idea for after I retire. My secret dream is to become a dealer of niche cars such as Ferraris or Maseratis-of course, in Poland."