The earthquake that was the 2007 real estate collapse and subsequent debt crisis in the United States caused an economic tsunami that crashed on Southern European shores. Italy’s economy is in tough shape these days. As of this printing, the formerly free-spending country was teetering on the precipice of credit default and was fighting to remain in the euro zone. Deep austerity measures that have public employees, especially, facing a frightening new reality, have been implemented to save the nation from financial ruin.
It was well known for decades that the Italian government was spending itself into a big problem. It struggled for years, but managed to keep its debt within European Union limits. But even at the height of the crisis, when Greece looked poised to return to its former currency and some bets were on Spain to do the same, even the hardiest cynics deep down could not fathom the euro zone without its third-largest economy. For one thing, the country is now also the world’s fourth-largest issuer of bonds, but also because, unlike some of its Mediterranean brethren, Italy does actually manufacture goods that the rest of the world wants.
Any discussion about Italian production starts in Turin, the industrial city that gave birth to Fiat. The Turin carmaker, founded in 1899, was for many years the motor of the national economy. It sold cars to the average Italian in staggering numbers in the postwar years, becoming Italy’s largest private employer”a title it has not yet surrendered.
But in 2002, faced with overwhelming competition from foreign cars and saddled with debt from unprofitable acquisitions, Fiat hit the breaking point. It announced plans to lay off some 8,000 workers, mainly in the South, and added fuel to the debate over selling the historic carmaker to a foreign company.
This was the final straw in Fiat’s gradual acceptance of the fact that it would have to start thinking small. The adjustment period was painful. But by 2007, it saw some limited success with its more diminutive models (the classic Cinquecento, for example, got a closer look and a new design). And throughout, the brighter stars in the carmaker’s galaxy, Ferrari and Alfa Romeo, continued to shine. This, after all, is what Italy does best: high-end, chic, boutique.
The company swiftly turned around its fortunes in this rapidly consolidating market, and in 2011 it completed its takeover of U.S. carmaker Chrysler when it purchased 6 percent of those shares from the U.S. government.
As in almost all Western economies, mass manufacturing has largely moved abroad from Italy and has been supplanted by the service industry (notably tourism, in this case), but the country can still boast a wide array of high-quality manufactured products, thanks to their cutting-edge design. These small and medium-sized companies have long been the country’s bread and butter and probably represent its immediate future: high-end shoes and clothing, specialized machinery.
The rise to fame and fortune of these once-little ateliers, and how they plan to grow while not relinquishing control, is the second economic story of the budding century. Prada, Gucci, Versace, and Armani have similar beginnings, nurtured by a family or individual, but their plans as grown-up companies are varied.