All In The Family

By Jeff Israely

It's not the fine-dining experience you might expect an Agnelli would prefer. The anointed heir to Italy's greatest industrial fortune is settling into his chair at Vittoria, a homespun Torino trattoria where plates clank every time the nearby kitchen door swings open. But for John Elkann, the 30-year-old who is vice chairman of both Fiat and IFIL, the Agnelli family's $7.7 billion holding company, it is the perfect setting for a power lunch. "You know why I really like this place?" he asks, lowering his voice and widening his eyes. "Because it's fast."

Those are the words of a young man on the move. It has been nine years since he was handpicked by his grandfather Giovanni (Gianni) Agnelli to be next in line to take the reins of the family's vast automotive and financial empire. And while Fiat's fortunes have roller-coastered, Elkann has been methodically groomed for the throne of one of Europe's legendary financial kingdoms. Guiding an entrenched business dynasty in a competitive global marketplace is a tall order for the tall executive--a lofty 6 ft. 2 in., though still baby-faced. "He is now the point of reference for what is quite a sprawling family empire," explains Giuseppe Berta, a professor of economic history at Milan's Bocconi University and author of the recent book The Fiat After Fiat. "This is a delicate moment. Elkann is still rather young, and there are some conflicting ideas within the family about their holdings. But he is the only one who can lead them into the future."

Of course, the prize is not yet Elkann's. Although his decision-making role and public presence have recently begun to swell, Fiat chairman Luca di Montezemolo and CEO Sergio Marchionne are still largely in charge. The Fiat Group, which counts CNH tractors and Iveco trucks among its holdings, has been buoyed recently by strong numbers from its once suffering automobile division. Under the turnaround leadership of Marchionne, European sales of the auto group (which includes the Fiat, Lancia and Alfa Romeo brands) jumped 23.2% in the first five months of this year, representing nearly half of the overall company's revenues. With Fiat rolling toward recovery--and his increasingly central role in the holding company's day-to-day management and the dynasty's long-term destiny--Elkann decided to give his first-ever extensive interview. He spoke with TIME about his rapid rise in Italy's leading business family, Fiat's struggle to adapt to a shifting global playing field and a young man's relationship with his famous silver-haired grandfather.

The death of that formidable figure and of Gianni's younger brother Umberto Agnelli, both from cancer within 16 months, created the vacuum that forced Elkann--the eldest child of Gianni Agnelli's daughter Margherita and French-Italian writer Alain Elkann--to step to the fore ahead of schedule. He did so amid a two-year corporate crisis that began in 2002 when weak management damaged brand image and forced a $3.8 billion bank bailout to stave off potential bankruptcy. "If the situation had been different, I might have had more time to ease into the job. But I was forced into the middle of a bad moment," Elkann says. "The company was being mismanaged. The family leadership was aging and sick. The financial community didn't support us anymore. At that point, you have the choice to let it go or try to fix it."

The public outpouring in Italy when Elkann's grandfather died sealed the family's decision to commit to Fiat's future, even if it meant the hard work of selling assets, overhauling management and reinvesting in the core company--hardly the typical Italian way of doing business. "This country paid a great tribute to my grandfather," Elkann says. "It was a family feeling to respond."

Although his ascendancy to the Fiat throne unfolded like a Victorian play, Elkann insists that it was "very natural." Born in New York City and raised in Britain, Brazil and France, he returned to his parents' hometown of Torino to study engineering at the rigorous Politecnico University. That was when Elkann began to pass Sundays on the family yacht and afternoons at the Fiat offices with his grandfather. Speaking from his corner office, the same space Agnelli once occupied, Elkann recalls how he first inched into the family business under his grandfather's watch. "I saw him here or maybe on the boat," he says. "I would ask questions, and he always responded."

Not yet 20, Elkann clearly had a deep drive for business. Between his university exams, he would forgo vacations to embark on internships within the company's holdings--at an English headlight plant, a French Fiat dealership, a Polish assembly line. "It was a gradual process of being tested and wanting to be tested," he says. "[Agnelli] saw that I was committed to the work. He believed you should do what you like doing in life. He believed in people developing the capabilities they're most suited for."

Fiat (Fabbrica Italiana Automobili Torino) was founded in 1899 by wealthy Torino landowner Giovanni Agnelli, who imported Henry Ford's assembly line. Agnelli chose his grandson Gianni as his business heir after Gianni's father was killed in a 1935 plane accident, just as Gianni would later anoint Elkann. With his aquiline features and elegant but easygoing manner, Elkann certainly evokes his grandpa, among the 20th century's most admired business leaders and the epitome of globetrotting savoir faire.

Such leadership is vital in a dynasty with a Kennedyesque whiff of tragedy. The originally anointed successor to Gianni Agnelli was Umberto's eldest son Giovanni Alberto, who died rather suddenly from fast-spreading stomach cancer in 1997, at 33. Gianni's only son Edoardo committed suicide by jumping from an overpass in 2000. Last year Elkann's younger brother Lapo, head of Fiat marketing, nearly died from a cocaine overdose.

Elkann immersed himself in business instead. After getting his degree, he entered General Electric's highly competitive corporate-audit-staff program, in which he got hooked on high finance. That bent will come in handy as he focuses on IFIL, Italy's largest holding company, with stakes beyond the car business in banking, corporate consulting and publishing.

Now more than ever, the dynasty's future will be anchored by Elkann, known to friends and family as Jaki. Although the new capofamiglia of the Agnelli dynasty has made high-profile appearances at a number of important business events, it was his response to the recent match-fixing scandal consuming Italy's top soccer club--Juventus, which the Agnelli family has owned since 1923--that earned him the most plaudits. When evidence emerged that Juve (think New York Yankees) was implicated, he swiftly replaced management and established a new team code of ethics. In Italian sports, that was revolutionary.

Most important for the long-term strategy of IFIL, Elkann spearheaded the family's decision last September to push its stake in Fiat above 30% for the first time since the bank bailout. He did so over the loud protests of his second cousin Andrea Agnelli, also 30, son of Umberto and a Fiat board member. Differences of opinion are part of every family, Elkann notes, but he insists that he aims to bring all into the fold, citing his grandfather's views. "He believed that leadership is consensus," Elkann says. "He won the support of the family and business partners and the community. He believed you lead by getting the best from the people around you."

Elkann has won the support of IFIL chairman Gianluigi Gabetti, 81, among Agnelli's closest confidants. Elkann and Gabetti get credit for picking Marchionne, the man largely responsible for the car-company turnaround. Besides launching two successful new models, Panda and Grande Punto, and streamlining management, Marchionne personally negotiated the deal that forced General Motors to pay $2 billion to Fiat to free itself from a put option in the companies' 2000 joint-operating accord that could have compelled the U.S. automaker to buy Fiat outright. In the coming years, however, Elkann is expected to become the singular face of Fiat.

That's O.K. for appearances, says Bocconi historian Berta, and he thinks that the family's continued financial presence is important for Fiat's stability but the professional managers should run the shop. Another Gianni Agnelli, Berta says, would be impossible today. "Elkann must fulfill the role of chief stockholder. That means being less of a presence in the operation of the company than his grandfather," he says. "Back then, Fiat acted like an institution in Italy. Fiat has to behave like a normal company."

Gone are the days when nationalism and protectionism meant that as many as 85% of cars sold in Italy were Fiats. Now the company needs a genuinely global approach, which includes pursuing local alliances to build specific products, much like a November deal inked with Ford to jointly turn out compact cars in Poland. Fiat, which is particularly strong in Brazil, has been looking for expansion possibilities in India and China.

Yet Elkann may be especially suited for such global challenges, having grown up on three continents. "Moving around, you adapt quickly to environments," he says. "If you are competent in many things, you don't have the depth of knowledge in any one field. I'm more long than deep. But fortunately for me, the family's interests were already diversified by both business and geography."

Along with sports and the family business, a passion Elkann shared with his grandfather was art. The creative DNA has multiplied through his author father and painter mother. "Artists have a sensibility that others don't have," he says. "They have a way of reading into the future." And so, in their own way, do business leaders. They just tend to have less time. Fiat's Fortunes [This article contains charts. Please see hardcopy of magazine.]

Total Revenue in billions of dollars

'96--'05 $55.1 billion

Net Income in billions of dollars '96--'05 $1.58 billion Source: Fiat S.p.A.