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Too famous to fail?

First there was Battista the founder, then Sergio the son, next Andrea the grandson, and now the latter's young brother Paolo. For nearly 80 years, successive members of Italy's Pininfarina family have turned the car design and engineering firm into a national monument.

Famed for its iconic shapes for Ferrari, Maserati, Lancia, Alfa-Romeo, Rolls Royce and many others, Carrozzeria Pininfarina is truly famoso.  It's one of those global brands that brings tears to the eyes of president Berlusconi, stirs the heart of the average Italian, and makes its bankers quake with fear.

Unfortunately, the future of Pininfarina now rests on the goodwill of those fearful bankers. The firm is about €125 million in debt according to the latest quarterly report. Long-term borrowings are about €75 million and short-term debt makes up the rest. The value of production in the first three months of 2009 collapsed by more than half compared with equivalent quarter last year, and losses hit €8.5 million. The company's trading on fumes, mainly but not entirely because of the credit crunch and subsequent collapse in car sales.

But who would dare take Pininfarina to the scrapyard? Certainly not the bankers or minor shareholders. (Although the shares are listed on the Borsa Italiana, the family owns nearly 55% of the business.) So instead of moving in, US-style, and breaking up the firm, the lenders and board, with young Paolo at its head and father Sergio as honorary chairman, are patiently working through a mutually agreed programme of rehabilitation that should restore the marque  to profitability. Even better, the family's working together, unlike the warring clans in the feud between Porsche and Volkswagen.

So far the patient's progress is steady. The recovery is based on a strategy of consolidation – more baldly, a general sale or shut-down of assets that have been bleeding the parent -- plus a headlong retreat to the safety of the home base in Turin. In 2009 alone, four French businesses, a Swedish one and a joint venture with Volvo, have all gone along with nearly 800 employees.

Clearly, Pininfarina overreached itself. Indeed Paolo's elder brother and former chief executive, 51 year-old Andrea, was already working on a turnaround plan when he was killed in August last year while riding his motor scooter. A true grandson of the legendary founder Battista, Andrea was an engineer and auto man to his fingertips. He had worked on several Ferrari designs including the California, the firm's latest contract for the prancing horse brand.

Even a cursory analysis of the recovery plan shows Pininfarina is heading pretty much back to its roots. Instead of cross-border adventures, it will henceforth focus on what it does best – design and engineering. The stats tell the story. While the value of production in the manufacturing operations slumped by 60%, matching almost exactly the decline in total number of cars that came off all of Italy's assembly lines in the first quarter of 2008, the value-added side of the business is booming, relatively speaking.

That's the styling and engineering operations, the ones that produced the California, the latest Maserati GT, the cabriolet version of the Ford Focus, the Rolls –Royce Hyperion and other bespoke vehicles, the exquisite little battery-powered BlueCar due for production in 2011, and all those drool-making concept cars. Always the first love of the family, these operations produced revenues comparable with last year while profit margins "significantly increased", according to Paolo.

So, by going back to the past, it looks very much as though Carrozzeria Pininfarina might achieve the unthinkable and survive into a fourth generation to the immense relief of president Berlusconi.

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