Surviving the fall of a king: the regional institutional implications of crisis at Fiat Auto

In the fall of 2002, Italy’s one truly giant industrial company fell into the deepest crisis in its troubled history. Faltering under an enormous debt load and rapidly falling market share, Fiat Auto announced mass layoffs and the closure of 18 plants worldwide, including two in Italy. In Turin, the automaker’s historic home, the news was particularly alarming. Crisis at a major employer is unwelcome news anywhere, but for Turin and the surrounding Piedmont region, Fiat is far more than just a major employer. In this city built around — and in part by — Fiat and the auto industry, perhaps the Fordist world’s most prototypical one-company town, a substantial crisis at the center brings legitimate fears of larger systemic effects in the regional manufacturing economy. Turin is home today to a sophisticated multi-firm automotive production system, consisting of both small and large automotive supplier firms, automotive design firms and niche producers such as Pininfarina, Bertone and Giugiaro, a highly specialized machine tool industry, large Fiat-owned research and technology transfer and training organizations (CRF and ISVOR), and university programs providing research and technical training. Sustained by this system, the Piedmont region has relatively smoothly absorbed steady declines in the automaker’s regional employment and production since the beginning of the 1990s, with regional automotive suppliers diversifying and exporting as they become increasingly independent of Fiat. However, although this articulated system was born very much of an interaction between Fiat, its suppliers and other regional actors, it has always had Fiat at its center in a directive role, as the sole actor with both the interest and the ability to provide key collective goods. The Piedmont region today is thus faced with an essential and unanswered question: What will happen to the networks of relationships and diversity of productive services if the crisis extends beyond the already substantial lowering of Fiat production volumes to include significant reductions in Fiat’s local investment in higher-level research and other directive activities? The livelihoods of thousands rest on the answer to this question, and there is thus great debate in the region over what, if anything, should be done. In this article, we critically engage this debate, drawing on comparative political economy, theories of institutional path dependence, and the Italian literature on industrial district models of production to identify possible futures and feasible strategies for key actors in the Piedmontese regional political economy. The article is in four sections. The first outlines the conceptual apparatus we use to analyze the challenges faced by the Piedmontese productive systems, drawing on literatures in economic geography and political economy. The second speaks to those aspects of the current crisis at Fiat Auto most relevant to our story, and discusses the regional implications of this and previous crises at Fiat. Our third section, the empirical core of the article, recounts the development of the regional manufacturing economy, describing its evolution from a sort of absolutist productive monarchy in the post-war period to today’s relatively open system. In closing, we sum up the implications of our argument by looking at what can be done to stimulate the growth of new institutional forms to help direct the system following the weakening of its one-time monarchical player.