Spirito de Cova

Bruno Cova and his team at beleaguered Italian giant Fiat are some of the busiest people in the business, but as Steve Hoare reports, The Lawyer Award winners can handle it

Fiat general counsel Bruno Cova takes a break from the signing of the sale of Fiat’s aviation arm to talk to The Lawyer. “I was hoping to get it done before we spoke, but it looks like it’s taking a little longer,” says Cova. He expects it to be signed in half an hour, though in the end it takes several hours. Last week the company sold its insurance arm. This week it’s aviation and next week there is a e1.8bn (£1.2bn) rights issue. Fiat’s nightmare has created a punishing schedule.

“I feel about 20 years older,” jokes Cova when talking of the company’s struggles. “Professionally, it’s been a very exciting period. It is, of course, very frustrating when you don’t have time to build up the legal function. And you have to ask more and more from your people without significant reward. To keep morale up is difficult. We have to be more creative.”

It is this creativity that earned Fiat the European In-house Team of the Year at the The Lawyer Awards 2003. The team has had to cope with severe budgetary constraints and staff cuts to usher through a series of essential transactions. “I have to thank The Lawyer. The award was very well received by my people. They felt that it was some recognition of their hard work. No substitute for a payrise, perhaps, but it helps,” says Cova.

Although Fiat has 150 lawyers across the globe, most are based in the different business units of what is a highly diversified group. Every business unit, be it the publishing group or Ferrari, has its own legal department with a general counsel who reports in to Cova and their own chief executive officer.

Cova’s core team at Fiat’s HQ in Turin has just six lawyers and the head of corporate affairs, (otherwise known as company secretary). It is this small team, which has had to deal with a multitude of restructuring plans and the attendant flood of strategic transactions, that aims to keep the company afloat.

Cova has four M&A lawyers, one IT and intellectual property (IP) lawyer and a competition specialist who advises on these transactions. Certainly, the group has had its hands full. In June 2002, Fiat sold 34 per cent of Ferrari to Italian merchant bank Mediobanca; it disposed of its aluminium business last year; it sold 51 per cent of Fidis, a consumer finance company, to Italian banks Capitalia, Banca Intesa, Sanpaolo-IMI and UniCredito; it has just sold its insurance arm Toro Assicurazioni for e2.4bn (£1.7bn), which is Italy’s third largest; and aviation business Fiat Avio has now gone for e1.5bn (£1bn).

In addition to the disposals, the team has had to turn its attentions to a series of financial transactions. The capital increase of January 2002 was followed by another last week of e1.84bn (£1.27bn). There has been an exchangeable bond issued on Fiat’s shares in General Motors, a convertible bond and the securitisation of Italenergia shares.

This, of course, is too much work for a team of seven. “The only one that was done completely in-house was the capital increase of January 2002,” explains Cova. “But obviously with this scale of transactions, we’ve used outside counsel, but we’ve been careful to retain the leadership.”
Turin firm Grande Stevens is the biggest provider of legal services to Fiat. The firm has a historical relationship with the Agnelli family, Fiat’s largest shareholders, which has matured into an institutional relationship with Fiat. “Gianni Agnelli was known as ‘The Avvocato’. Mr Grande Stevens became known as ‘The Lawyer of the Avvocato’ – the lawyer of the lawyer,” says Cova.

Allen & Overy partners Roberto Casati and Guido Brosio (the founders of legacy Italian firm Brosio Casati e Associati) are advising on the complicated sale of Fiat Avio.
Cleary Gottlieb Steen & Hamilton has a good relationship with Fiat. It advised on the proposed initial public offering of Ferrari, which was cancelled when Mediobanca stepped in to buy a share, as well as the securitisation of Italenergia shares. It also advises Fiat, which is listed on the New York Stock Exchange (NYSE), on its Securities and Exchange Commission requirements. Outside the US, Cova deals mainly with the Rome and Frankfurt offices.

“Outside Italy our key jurisdiction is the US,” says Cova. Although 22 per cent of Fiat’s 150 lawyers are based in the US, Cova’s team manages the General Motors master agreement and Shearman & Sterling assists with that key relationship.

With Fiat listed on the NYSE, the Sarbanes-Oxley Act has reared its ugly head. The company is also listed in Paris and Frankfurt, and the Italian Corporate Governance Code has been reformed, “so we had to review all of our corporate governance, which we’ve done quickly and well,” says Cova.

Sarbanes-Oxley was passed on 30 July 2002, and by the beginning of that September Cova had recommended an action plan to the board. The following January it was adopted. Cova took this particular responsibility on his own shoulders. “We quickly came to the conclusion that, nowadays, corporate governance is the essence of a corporation,” he says. “There-fore, it had to be, number one, a core competency of the legal department; number two, we felt that rather than get some standard document prepared by a law firm, we should carve something for the specific requirements of Fiat.”

Cova is thankful that the personnel department handles employment issues. Italy has a system of collective national agreements between the trade unions, the government and industry. There have been thousands of redundancies over the last year and it is a complex process.
“Whenever we touch employment there are issues at a political level,” says Cova. “We’re very much at the centre of political debate. Fiat is a rather unique case, because I don’t think there’s any other country in the world where one company represents about 4.5 per cent of GDP.”

The legal department only gets involved in employment issues when the issue is a point of policy or it is a senior manager leaving. The upheaval at the Italian icon has claimed four chief executives (Cova’s boss) in the last year. “It’s like changing jobs every few months,” says Cova of his own job, rather than that of his boss. “It’s difficult, but it’s also exciting. It trains you for change.”
Bruno Cova
General Counsel
Organisation: Fiat
Sector: Automotive and others
Turnover: e56bn (£38.8bn)
Employees: 177,490
Legal capability: 150 worldwide
Legal spend: e20m-e25m (£13.86m-£17.32m)
General counsel: Bruno Cova
Reporting to: Chief executive officer Giuseppe Morchio
Main law firms: Allen & Overy, Cleary Gottlieb Steen & Hamilton, Grande Stevens and Shearman & Sterling