How one man managed to pull Fiat and Chrysler back from the brink
Sergio Marchionne has died at 66. We look at how he managed to pull off the seemingly impossible
In an industry that has traditionally produced its own senior executives, Sergio Marchionne was definitely an outsider. But this clearly proved no impediment as tributes poured in from both sides of the Atlantic for a man credited with rescuing two ailing car giants – Fiat and Chrysler – who died last week at the age of 66.
Words like visionary and maverick were being tossed around as people recalled a man who in many ways was the antithesis of the conventional corporate executive.
“Marchionne was not even known as a car guy. But he brought a combination of skills from finance to deal-making,” said Willy Shih, professor of management practice at Harvard Business School.
“What is really interesting when you look at the history of both Fiat and Chrysler is that they were both very weak players. There were sceptics: normally if you try to put together two weak players the whole thing ends up in a mess. But he took hold of two companies with very chequered histories and made them work.“Neither company had a global presence, but now you see Fiats in America and Jeeps on the Autobahn. It is not about cars per se, it is about organisation and what he has done has been really impressive.”
Marchionne took over as chairperson of Ferrari from Luca di Montezemolo in 2014, and was seen as instrumental in restoring the company to its former glory in Formula One. He was planning to stay at the helm of Ferrari, which became a separate listed company in 2015, even after he retired from Fiat Chrysler.
But there was little in Marchionne’s background to suggest that he would turn out to be the Svengali of the motor industry.
A clever little mouse
Born in Chieti, on Italy’s Adriatic coast, he moved to Toronto when his father took early retirement from his job as a police officer and crossed the Atlantic. Marchionne initially studied philosophy, subsequently earning a master’s degree in business administration and then a law degree before working as a tax accountant with Deloitte & Touche.
His early career took him to Algroup, the Swiss aluminium packaging company, and then to SGS, the world’s largest standards and instrument company, in Geneva.In 2004, much to everyone’s surprise, he was unveiled as the Agnelli family’s choice to rescue Fiat. The company was a basket case, losing £1.5-million a day, and its cars did not have the best of reputations.
He arrived at a time when General Motors was expected to buy Fiat. The deal collapsed and the Italian carmaker walked away with $2-billion, enough to relaunch the much-loved Fiat 500 in 2007.
The design was unashamedly retro, looking like the original Topolino (little mouse), but the engineering was emphatically modern with the biggest change being moving the engine from the rear to the front.
It proved to be an inspired move, with the car selling remarkably well. The one-millionth new-look model rolled off the production line in 2012. Fiat was transformed and the company, which had been pretty much on its deathbed, was on the cusp of becoming a global player.
Then came the financial crash, which left the US car industry on its knees, with Chrysler in the worst position of all. Badly run by Daimler and then sold to Cerberus Capital Management, the private equity house, the company was a mess, saddled with debt and making cars few wanted to buy.Marchionne seized on the opportunity, deploying the hardball negotiating style he had used when dealing with GM when he opened talks with the Obama administration.
Chrysler was facing bankruptcy, which would have thrown 54,000 employees out of work. Total job losses, when the supply chain is taken into account, would have been in the region of 300,000.
Marchionne offered to take over Chrysler as long as the company was handed over free of charge. With the American economy sliding into recession, neither the US government nor the unions had a great deal of bargaining power.
Nobody else was interested in taking on the Herculean task of resurrecting the fallen car giant.
According to Steven Rattner, the Obama administration’s “car tsar”, Marchionne was a brutally tough negotiator.The deal, in which Fiat took over Chrysler’s factories in 2009, was sealed and, a year later, the two companies merged. The fate of one of America’s iconic brands rested in the hands of a somewhat idiosyncratic workaholic chainsmoking Canadian-Italian, well known for his extensive wardrobe of black jeans and black sweaters, normally topped off with a charcoal-grey scarf.
“For you to be the only guy at the bar, there has to be some reason,” Marchionne recalled in an interview on 60 Minutes, the US television programme.
“I remember when I came here in 2009. There is nothing worse for a leader than to see the fear in people’s faces. They were afraid of not being here, it’s that simple. This was really a question of existence. There is nothing worse in life than being a victim of a process that is not under your control.“This place was run by the chairman’s office,” he said. An early change saw the office, on the top floor of the corporate headquarters in Auburn Hills, Michigan, left empty, as Marchionne chose to work on the same floor as the engineers.
Aided by a $6-billion high-interest loan from the Obama administration, Marchionne transformed the company. He also ripped through the labyrinthine Chrysler management structure, combing through the company to find 26 young, rising stars who would report directly to him.
One of them was John Bozella, who was the company’s head of external affairs.
“He was brilliant. He didn’t suffer fools kindly. He demanded a lot, not only from colleagues and subordinates, but also himself,” Bozella recalled. “Sergio used to say he was an old metal bender, but he was a lot more than that. He was a great operations man and a great marketing guy.“What also really impressed me was how he understood the political dynamics. He got the nuances, he knew who was who and what was what.”
He upgraded 16 existing models in 18 months and brought in state-of-the-art machinery to improve quality, as well as integrating Fiat and Chrysler’s operations.
Chrysler was best known for its larger cars such as the Jeep, while Fiat worked at the other end of the market with small, fuel-efficient models.
In the US, Marchionne introduced the Dodge Dart – a car based on the Alfa Giulietta – which was manufactured in Belvedere, Illinois.With petrol prices falling, the car did not sell and the figures for the Chrysler 200 were equally grim, so he killed off both models, betting big on the Jeep.
Meanwhile, the Fiat 500, which disappeared from the US market, returned to US roads in 2011 and has proved remarkably popular.
The move was a characteristically ruthless decision by Marchionne, said Jeff Schuster, president of LMC Automotive and a leading industry analyst.
“It was all about the numbers. If it didn’t work, he didn’t do it. He made some tough, tough decisions. But he had the knack of cutting through the noise, having a vision and executing it.
“Execution is the most difficult. Many executives talk a good game but don’t deliver. Sergio delivered. Execution is the third prong and that is the hardest thing to deliver. Most people could not do it, but he could.
“Are things perfect at Fiat Chrysler? No, they are not. He did not invest as much in electric cars, because he couldn’t justify the investment given the expected return.
“Marchionne was one of a kind. He was a hard-driving chief executive who pursued his objectives relentlessly, but with a human side.
“He was a real presence. When you met him it was like meeting a celebrity, he had a larger-than-life persona.”
A vision that ‘changed people’s lives’
Somehow, Marchionne managed to control two companies more than 6,400km apart, aided in part by the five cellphones he was said to carry with him in a backpack.
Rising at 3.30am when in North America, he would deal with Turin first before tackling the challenges presented by Chrysler. In as much as he had time for interests, Marchionne loved jazz and opera. His penchant for driving fast cars, however, was curtailed in Italy because the government required that he travel in bulletproof vehicles accompanied by armed security.
As tough as he was, Marchionne won the respect of union bosses with whom he negotiated. “He was as straightforward as they get. In any discussion you were never in any doubt about what was on his mind,” said Jerry Dias, president of Unifor, the Canadian union for car workers.
“Sergio had a confidence, which gave others confidence. He turned over a lot to the workers, he was a great believer in employee engagement.“He believed if you want to get to the crux of the problem you ask the guys on the line who are doing the work.
“I remember bargaining with him in a one-on-one meeting and it got very hot and heavy. He reached into his bag, pulled out his Canadian passport and slammed it down on the table, saying: ‘Do you think I am going to screw Canadian workers?’ ”
Cindy Estrada represented members of the United Automobile Workers at Fiat Chrysler. “We may have had some tussles along the way at the bargaining table,” she said.“For our members, the success of his vision changed people’s lives. That is a rich legacy.”
“Marchionne’s death has left a huge gap at the top of the company,” said John Quelch, dean of the Miami Business School.
“Sergio was a uniquely low-key Italian. His leadership style was anything but flamboyant. Taking on the impossible task of revitalising not one but two ailing brands, Sergio’s turnaround was truly magical.
“He leaves impossible shoes to fill. I would not count on the company surviving a break-up over the next five years.”
– © The Sunday Telegraph