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updated 5/31/2004 10:55:05 AM ET 2004-05-31T14:55:05

Fiat SpA chief executive Giuseppe Morchio handed in his resignation Sunday, shortly after the auto conglomerate announced it had named Ferrari chief Luca Cordero di Montezemolo its new chairman. Morchio also had been considered a candidate for the chairman's position.

The Italian news agency ANSA said it had received a statement from Morchio attributing his resignation to "the changed conditions coming from the decisions taken today by the company's board of directors."

The statement said Morchio regretted not being able to participate in the struggling automaker's restructuring plan, which he had led and that had begun to show "its first positive results after 15 months of total dedication and intense work at the side of Umberto Agnelli," according to ANSA.

The shakeup came three days after the death of Umberto Agnelli, the last of the company's old guard. He died of cancer at age 69 on Thursday night, little more than a year after taking over Fiat Group from his elder brother Giovanni "Gianni" Agnelli, who passed away in January 2003.

Umberto took control at an ugly moment in Fiat's history, and the business had begun showing improvements. In 2002, Fiat Group's losses were 4.3 billion euros; after a year with Umberto Agnelli and Morchio, losses had dropped to 1.9 billion euros.

The Fiat board will meet Tuesday to consider what to do in the wake of Morchio's resignation.

The Turin, Italy-based automaker also said it had chosen John Elkann, a 28-year-old heir to the Agnelli empire, as vice chairman, and added Umberto Agnelli's son, Andrea, to the board.

The choice of close Agnelli ally Montezemolo — whose management of Ferrari has been a beacon of success in the family's struggling automaking empire — as well as Elkann and Andrea Agnelli showed the clan's interest in maintaining its tight grip over the company.

Montezemolo, 56, was recently elected head of the powerful Italian industrialists lobby group, Confindustria, and also chairs the Italian Federation of Newspaper Publishers, FIEG.

He studied law, but began working early with fast cars, as Ferrari team manager in the mid-1970s. Since then, he's worked for the Fiat Group, Cinzano, helped organize the 1990 World Cup in Italy, and has been president of Ferrari and Maserati since the 1990s.

While the remainder of the Agnelli auto empire has suffered billions in losses, Montezemolo has helped lead Ferrari to impressive successes, both in sales and in headline-grabbing Formula One races.

Under Umberto Agnelli, Fiat sought to focus more on the automaking business — a risky move given that cars had become the diversified company's biggest money-loser. Fiat says recent financial improvements show that the plan is working and it has pledged the group will return to profitability in 2006.

Umberto Agnelli didn't achieve this success alone. Morchio, whom Agnelli appointed shortly after taking over in 2003, devised the restructuring plan.

"We know the path is a long one, but the changes have been put in motion," Morchio told a February news conference to issue full 2003 results. "Obviously, we'll be satisfied at the end of this path."

Before joining Fiat as its fourth chief executive in less than nine months, the 56-year-old Morchio was CEO of Pirelli SpA's cables division, and for years worked as a senior executive at the Milan-based multinational's tire-making unit.

The future of Fiat and the Agnelli family's role in the company had been left unclear by Umberto's death. Elkann, Giovanni Agnelli's grandson, has been prepared for a future top role at Fiat, but was considered too young to take over immediately.

However, his position as vice chairman is still highly significant, particularly in a multibillion dollar conglomerate with more than 162,000 employees worldwide.

Elkann studied engineering in Turin, was sent to work anonymously on a Fiat assembly line in Poland, a Fiat dealership in France, and a Fiat-owned headlight factory in England. He also did a stint at General Electric's audit department, and became a member of the Fiat board of directors at 22.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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