The truth about Lancia and the Marshall plan.

[PG]

I was caught out by the death of Gianni Lancia while i was studying an obscure period of the history of the company. Last summer i read everywhere unfounded comments, a lot of foolishness and mistakes reported by many people. Even Nigel Trow, Donald Osborne and Jay Leno were worth considering.
As i already did in the Italian branch of this forum, now i report the result of my studies here.


Lancia and the European Recovery Program.

By Paolo Giusti©2014, paolo@viva-lancia.com

The recent discovery of Journals of the Lancia & C. Board allows a more detailed analysis of some aspects of the history of the Turin company compared to what has been written so far.

Premise
In 1942, with the introduction of the new Civil Code, the Italian companies were regulated according to a new system. Lancia & C., which until then was a S.A. (Società Anonima) corporation, turned into a shareholder company and its share capital, amounting to 50 million lire in 1941, is divided into shares with a nominal value of 10,000 lire. Because the Civil Code still guaranteed anonymity to shareholders, it is difficult to reconstruct the shareholders accurately, but we can attribute with certainty the 69% of the shares belonged to the Lancia-Miglietti family, 25% to the Vaccarossi family, and the rest to some others. The war period, while difficult and troubled, allows Lancia to establish some business assets.

In addition to the total reorganization of the company (offices, agencies and Italian branches), at this time are taken important decisions that will determine the future of the company. To do this, thanks to the efficient work done by the lawyer Jappelli, who closed the factory at Bonneuil-sur-Marne (France), the plant at Alperton (Great Britain) and the associated foreign companies. The loss of the plant in Addis Abeba is already assumed, while the opening in 1939 of the new factory in Bolzano will prove to be strategic in the course of the war. In addition, the company maintains intact its partnerships: 10% of Pinin Farina, 60% of Sabif and 80% of Fira.

At the end of the war, in 1946, the Management Board decided a recapitalization to deal with the reconstruction and the capital partners increased the share capital to 200 million lire without increasing the number of units, but enhanced values uniformly. The recapitalization happens annually until 1950, always using its own funds, when Lancia brings the share capital up to 1 billion lire, divided into 100,000 shares with a value of 10,000 lire each.

1950 is considered to be an happy year as the company not only reached a balanced budget for the first time since the end of the war, but also earnings are allocated to shareholders, possibly 900 lire dividend per share. However, transactions in the post-war period would not have been possible without adequate and appropriate lines of credit. In addition to obtaining a loan from the Cassa di Risparmio di Torino of 100 million lire in 1947, Lancia decided to turn to Ex-Im Bank (Export-Import Bank) in Washington D.C. for a loan amount of $ 1.5 million (equivalent to 937.5 million lire) required for the purchase of raw materials: coal, oil and oil products, steel. The request was made possible by the Decree Law No. 891 of 9/11/47 approved by the Italian government.

In 1945, the Ex-Im Bank was appointed by the United States Congress to grant loans to those American companies that could not or did not want to take the risk of credit due to the termination of the domestic demand for raw materials following the end of World War II. Consequently, the surplus of raw materials abroad was addressed well before the start of the ERP program. The Ex-Im bank loans granted for the purchase of commodities in all Western European countries that were occupied / annexed by Nazi Germany, Poland, Czechoslovakia and Austria included, with the exception of Britain then. The appropriation in favor of Italy, approved by the Decree Law No. 891 of 9/11/47 was 100 million dollars.

The European Recovery Program
The ERP (European Recovery Program) was a huge development plan decided by the Congress of the United States for Europe to rebuild countries, to make them work efficiently and then put back on their own autonomous economic cycle. To this end, the United States constituted the ECA (European Cooperation Administration), a government agency created to manage transactions and President Truman appointed P.G. Hoffman, former president of the Studebaker Corporation, as head of the agency. In negotiations with the European Ministers held in Paris, it was decided that every European government appoint its own agency to review the requests. The plan called for an initial coverage of $ 15 billion in the period divided in four years. The assignments were divided into grants (transfers free of charge) for commodities, such as grains, cotton, coal, oil and derivatives, steel, and loans (loans with fixed interest currency) for the purchase of equipment for various industries. For loans it was determined that the respective treasuries closet at the national central banks in an amount and a currency that loans in excess of $1 million are screened by the European OEEC (Organisation for European Economic Co-operation) at the headquarters of Paris and the American ECA in Washington D.C. before the assignment. The granting of loans assignments was contracted again to the Ex-Im Bank, while the IMI (Istituto Mobiliare Italiano) assumes the role of Italian counterpart.

The ERP plan becomes operational in April 1948 and affected all countries of Western Europe, excluding Germany. The countries of the so-called communist bloc were not to benefit, but the USSR was to have compensation in grants, calculated separately, for their fundamental contribution in obtaining the victory over Germany. For the first year it would be better to consider the period May 1948-December 1949, as the most active and effective. Italy is the fourth European country to amounts allocated by the program, both of which grants loans, behind Britain, France and West Germany, as Germany was separated in 1949 and became the western sector of law beneficiary of the ERP program.

In this period of time, due to some difficulties in the interpretation of the rules and in the formulation of requests, the Italian companies in the engineering sector in face of 119 loan applications, they will see 30 only accepted, benefiting a total of $ 26 million of loans in the first year of the program. A figure that represents 16% of the amounts paid.

Lancia decided to adhere to the ERP like many other Italian industries and made an initial request in 1948 for a total of $ 500,000 (312.5 million lire), necessitating aluminum alloys and specialty materials; the second in 1949 for an amount of $ 800,000 (equal to 500 million lire) and the third in 1950 in the amount of $ 320,000 (equal to 200 million lire at the time), requiring equipment and machinery. In these two years the company had already completed the post-war reconstruction of the establishments and had confronted the heavy national crisis in the trucking industry caused the liquidation of the trucks by ARAR. It should be remembered that then 34% of the production Lancia was represented by the Esatau and that the sale of chassis-cabs was much more profitable than the two cars Aprilia and Ardea.

Meanwhile, the American government, given the weak economic performance of some European countries, had planned to extend the period of the ERP program to all 1952 and to allocate more aid and loans. However, at that time the US Government had a majority of Republicans in the Congress, and the outbreak of the Korean War, with the consequent risk of a Third World War, put an end to the ERP program in the spring of 1951. Even so, the Italian industrial insisted with the Secretary of the Treasury Pella, through the president of Confindustria Angelo Costa, in obtaining an extension and still prepared requests, but everyone, including Fiat, received a negative response. The actual duration of the ERP program was 3 years and three months, and the amount invested was approximately 12.8 billion dollars in total, 1.2 billion of which were assigned to Italy.

Conclusions
For a long time there has been talk of a fourth request for loans on the part of Lancia which would be carried out in January 1951. Of this last request there isn’t any trace in the book of records of the Board administration, not even on the agenda and this has probably contributed to the creation of legends by the side of somebody, but it would have been impossible for the company, according to the statutes, not to mention in the minutes. But we can say that even if the intention was, it was not completed and most likely because there wasn’t much time between January and 1st April 1951 to submit an application and obtain financing. It should be noted that the request for that amount had to pass the scrutiny of the OEEC and the ECA before IMI distributes a loan, and any deposit in the Treasury of the equivalent in foreign currency at the Bank of Italy.

However, many have taken for granted that the application was submitted and then rejected for various reasons that have contributed to deliberately paint with bleak affair. In the first place it is said that CIA agents at the USA embassy in Rome had announced in Paris that Gianni Lancia had joined the PCI (Italian Communist Party) after the war. This does not appear correct, rather completely absurd as the eldest son of one of the 5 most important families of Turin had no reason to take the PCI card and in any case because neither was it documented in 1945, the year in which Gianni Lancia came of age, nor in 1946, as enrolled in the lists of the PCI in Turin. We already knew that Adele Lancia helped the CLN (National Liberation Committee) group, originated inside the Turin factory by the workers, with money, food, gasoline and a truck, to defend the plants by the German requisitions during the five days battle for the liberation of Turin. She did this without having any party card, of course.
Later it was said that Lancia had tried to sell or buy steel in East Germany, an episode without credibility because East Germany was part of the communist bloc and therefore there was no possibility of taking or receiving something in return: neither money nor goods to the value. Besides Lancia didn’t need that money, they had already obtained it from the banks and ERP, nor for materials because it could easily find sheet metal steel hot stamped on the national territory and steels with high carbon content from the USA, as had already occurred on a regular basis. Finally, it is also said that the Lancia family and members quarreled about what to do, a plausible event, but again without evidence in the minutes of the Board and unlikely, however, in the light of the positive results of the financial statements of both the 1950s and especially the 1951, when it reached 2.6 billion lire of profit, equal to almost double the previous year. But if there was a trace of this fourth request, it can only be found in the archives of IMI. To this end the IMI archive confirmed the requests, the endorsements, the contracts and the loan assignments in the same amounts reported before.
Eventually, a further and recent analysis of the company documents revealed that, during the Fidanza-Pesenti management period, the company paid back for the first Ex-Im bank loan in late 1958 and the last instalment of the other three IMI loans in late 1959, relieving the new Board from this obligation.

We thank for their cooperation:
Fiat archive, Turin; Historical Institute of the Resistance in Piedmont, Turin; Antonio Gramsci Piedmont Institute Foundation, Turin; Luigi Einaudi Foundation, Turin; Centre for the study Piero Gobetti, Turin; IMI archive, Rome.

Sources:
Journal of the Lancia & C. Board 1942-1960
Book of the Lancia & C. inventories 1947-1960
Index of the ERP/IMI loans register 1948-51
Official Gazette of the Italian Republic, series 1947
Acts of the Constituent Assembly 1947-48
Chamber of Deputies, the historic section-talk:
Min.Sforza: Italian foreign policy after the ratification of the Treaty of Peace 1947
Hon. Scoccimarro: The streets of the financial recovery in 1947
Min. Tremelloni: The fund lire, using ERP, 1948-49
Hon. Malagodi: The Marshall Plan halfway, 1949
Min. Togni: The Marshall Plan and the Italian trade with foreign countries, 1949
Uff.Stampa CNCCG: ERP Italy: features of implementation, 1948
Uff.stampa MSA: Loans ERP, technique and procedure, 1948
Uff.stampa MSA: The ERP in Italy, 1952
ISE: Documents on the Marshall Plan, 1948
ISE: Documents on the Marshall Plan in the first year of implementation, 1949
Confindustria: letters of the President Angelo Costa, 1951
Amatori and various authors- La Storia della Lancia 1992
Various Authors- Le Carte Scoperte , 1990
Bottiglieri- ANFIA history, 1992
Romero- The United States in Italy: the Marshall Plan and the Atlantic Pact, 1994
Spagnolo- The Marshall Plan in Italy, an unfinished stabilization , 2001
Fauri- The Marshall Plan and Italy, 2010

[Ed Levin]

Paolo, thanks--fascinating.

[PG]

I polished some words not very effective in English now.

Well, it cost me a year of work. Fortunately, there are a lot of sources here in Turin and the original documents are still available. Nobody studied definitively this short period of the company until today. I don't understand why, probably because Amatori and the others saw the sources twice only, without considering the legislative system around the ERP, which is clear from the US side, but not so clear from the European side.

[Geoff]

Nicely done Paolo. If you can list the documents where you found the information, that would be great.

Good research regardless! Put an old myth to rest!

Geoff

[PG]

I already did it. However i report them here again:

Sources:
Journal of the Lancia & C. Board 1942-1960
Book of the Lancia & C. inventories 1947-1960
Index of the ERP/IMI loans register 1948-51
Official Gazette of the Italian Republic, series 1947
Acts of the Constituent Assembly 1947-48
Chamber of Deputies, the historic section-talk:
Min.Sforza: Italian foreign policy after the ratification of the Treaty of Peace 1947
Hon. Scoccimarro: The streets of the financial recovery in 1947
Min. Tremelloni: The fund lire, using ERP, 1948-49
Hon. Malagodi: The Marshall Plan halfway, 1949
Min. Togni: The Marshall Plan and the Italian trade with foreign countries, 1949
Uff.Stampa CNCCG: ERP Italy: features of implementation, 1948
Uff.stampa MSA: Loans ERP, technique and procedure, 1948
Uff.stampa MSA: The ERP in Italy, 1952
ISE: Documents on the Marshall Plan, 1948
ISE: Documents on the Marshall Plan in the first year of implementation, 1949
Confindustria: letters of the President Angelo Costa, 1951
Amatori and various authors- La Storia della Lancia 1992
Various Authors- Le Carte Scoperte , 1990
Bottiglieri- ANFIA history, 1992
Romero- The United States in Italy: the Marshall Plan and the Atlantic Pact, 1994
Spagnolo- The Marshall Plan in Italy, an unfinished stabilization , 2001
Fauri- The Marshall Plan and Italy, 2010

[Geoff]

That's an impressive list, and very interesting. You also found this information (detail on the loans) in the company documents - I think the minutes, yes? It would be nice to know which years you were able to find this information in. It might be in the first three sources you noted - but perhaps you can tell which years had which info?

Thanks!!!

[PG]

Of course.
The minutes of the Board meetings are very detailed about this decision, we have to consider that it was the biggest ever made by the company since the death of the founder.

The discussion about the loan requests is on the agenda of the Board meetings in January 30,1948; March 11,1948; February 15,1949; April 29,1949; February 6,1950. The item return of the debt to Ex-Im bank/IMI is present in every annual balance sheet from 1949 to 1959.
The settlement of the debt is mentioned by the minutes in December 12,1958; March 2,1959; December 7, 1959; March 3,1960. The 03/02/59 and 03/03/60 meetings have been announced for the approval of the annual balance sheet. After 1955, the Italian Civil code forced the shareholders companies (SpA=Società per Azioni) to present the annual balance sheet by the end of the fiscal year and to approve it in the first meeting of the consecutive fiscal year.

From the IMI point of view, the agreements are the n°2352 (2 requests at the same time), n°3312 and n°4213 of their inventories. The total amount of the loans corresponds: 1,5 million $ to Ex-Im bank and 1.62 million $ to IMI.

[Geoff]

Fantastic! Lovely detail. Thank you very much for this!

[Ed Levin]

Paolo,
This is remarkable documentation. Thank you.

[Niels Jonassen]

Extremely interesting. The first thorough analysis I have seen.