In 1962, while in Moscow to attend an Italian trade exhibition, then Fiat president Gianni Agnelli was introduced to the Secretary General of the Soviet Communist Party, Nikita Khruschev. Legend has it that the feisty little Soviet No. 1 paid Agnelli particular attention, taking him aside to tell him:

"I want to talk to you because you will always have power. These others (nodding towards a group of Italian politicians) will always come and go."

Mr Khruschev was right. For most of the last 50 years, Agnelli and Fiat have been a fixed centre of economic, industrial and political power in an otherwise ever-changing Italian landscape. That could all be about to change, since the Fiat-General Motors deal approved yesterday would seem to signal the end of an era for the Agnelli dynasty.

When Fiat celebrated its centenary last July, the company claimed that it could confidently survive on its own resources. That claim, however, sounded overly ambitious, since business analysts had long argued that an alliance with a bigger foreign partner was essential for Fiat's long-term survival.

Analysts based that conclusion on the trends of a worldwide automobile industry caught up in a tidal wave of globalisation.

The General Motors deal is not the first but clearly the most significant sign of the changing times for Fiat, a company and a dynasty for so long accustomed to calling many of the shots. At one stage, the Fiat empire, involving significant shareholdings in banking, insurance, munitions companies, chemical companies, publishing, newspapers, aerospace companies and much else besides, accounted for 25 per cent of all Italian stock market quoted companies.

Nowadays, the entire Fiat group's stock market value of approximately $12 billion dollars is less than the market capitalisation of a small number of upstart Internet and telecommunications companies, none of which is more than five years old.

At one stage, Fiat was Europe's No. 1 car seller but in the past decade it has dropped to seventh in the European league, with a 10 per cent market share. Even in Italy, where Fiat has a virtual monopoly of the Italian car industry since it controls Ferrari, Lancia, Alfa Romeo and Maserati, the Turin-based company has seen its market share decline from a one-time all-dominant 60 per cent to a current 39 per cent.

However, Fiat was and is more than just the proud flagship of Italian industry. It was part of the national fabric, a company whose president, Gianni Agnelli, was nothing less than Italy's uncrowned king, revered by many but also loathed by much of the labour movement who clashed, sometimes violently, with Fiat during the 1970s.

For a generation of Italians who grew up in the harsh climate of post-war economic recovery, the Agnellis and Fiat represented a vehicle through which to live out vicariously their fantasies of wealth, fame, power and sex. Even today, the Italian media remain obsessed with "L'Avvocato Agnelli".

In recent times, however, it has become clear that the Fiat no longer has the same hold over either the Italian political classes or Italian public opinion. In last summer's mega-takeover by Olivetti of Telecom Italia, Fiat lost out, having backed Telecom. Last year, too, the Fiat group experienced a reverse when the Turin-based Sao PaoloIMI banking group failed in an attempt to buy out the Banca di Roma.

Commentators even interpreted the fact that Confindustria, the Italian employers' confederation, last week opted to appoint Antonio D'Amato, rather than the Agnellibacked candidate, as its chairman as a sign that Fiat's power is on the wane.

In comments made yesterday on the General Motors-Fiat alliance, 79-year-old Gianni Agnelli stressed the fact that Turin would, as he put it, remain the number three automobile industry centre in the world, behind Detroit and Stuttgart.

Mr Agnelli had probably hoped that the task of plotting Fiat's way into the new millennium would have fallen to his talented nephew, Giovanni Alberto Agnelli. But his sadly premature death from cancer two years ago may even have influenced this week's alliance. What is sure is that the next time a Fiat delegation goes to Moscow, the Russian President of the day will find it much harder to work out who exactly is the man with power.