Events That Fueled Marchionne's Success
By Richard Truesdell
Fiat Chrysler Automobiles CEO Sergio Marchionne died Wednesday at age 66 due to complications following surgery. The hard-driving executive is credited with saving both Fiat and Chrysler.
"Sergio Marchionne, man and friend, is gone," FCA Chairman John Elkann said in a statement. "My family and I will be forever grateful for what he has done."
FCA shocked the auto industry July 21 when it announced that Mike Manley, head of Jeep and Ram, would take the FCA helm due to Marchionne's unexpected illness.
In 2004 the charismatic Marchionne took the reins of a virtually bankrupt Fiat, an Italian automaker that had gone through five CEOs during the preceding two years, and returned the company to profitability, mostly on the back of an incredible work ethic involving frequently working 18 hours a day, 365 days a year.
Born in 1952 in Chieti on Italy's east coast, Marchionne was raised near Toronto. He earned accounting and law degrees. Since his death, the world's financial press has been covering the highlights of his career. Here are the bullet points:
June 2004
Marchionne is appointed CEO of Fiat, moving from a post as CEO of goods inspection with SGS SA, a Swiss company that provides inspection, verification and certification services. With zero auto industry experience, he pledges to complete a turnaround plan initiated by his predecessor to end years of losses and soon announces plans to make Fiat more efficient. This brings him into immediate conflict with Italy's powerful industrial unions.
February 2005
In what may have been the masterstroke in his effort to rescue Fiat, Marchionne extracts $2 billion from GM to end a dispute over ownership of their Fiat Auto joint venture and announces plans to terminate other alliances with the U.S. carmaker. To do so, Marchionne enforced a put option that required GM to take control of Fiat or pay a breakup fee. Variations of the small common components and systems platform co-developed with Opel during the joint venture are still used to underpin Jeep and Fiat models including the Jeep Renegade, Jeep Compass, Ram ProMaster City, Fiat 500L and Fiat 500X.
June 2009
With both GM and Chrysler in bankruptcy, the Obama administration crafts a plan for Fiat to take over management of Chrysler assets by taking operational control, granting it a 20 percent stake in the company with the rest held by the U.S. and Canadian governments along with the United Auto Workers. Marchionne pledges to reopen factories idled during Chrysler's bankruptcy. Marchionne commits no cash, instead pledging to share engineering resources and technology with the struggling U.S.-based company.
August 2010
The 2011 Jeep Grand Cherokee launches, the first vehicle from the Chrysler family of brands (Chrysler, Dodge and Jeep) to be launched under Fiat management. Co-developed with Mercedes-Benz during the DaimlerChrysler era, it has become a runaway success. Ram Truck is born.
January 2011
Fiat spins off its industrial assets as a precursor to creating a global automotive company, combining its own operations with Chrysler's.
February 2011
At a J.D. Power automotive conference in the U.S., Marchionne rebuffs an attempt by Volkswagen's Ferdinand Piech to buy Alfa Romeo from Fiat, saying, "As long as I am CEO of Chrysler and Fiat, Mr. Piech will never have Alfa Romeo. It's hands off, I told him. I will call him, and I will email him."
January-February 2014
Fiat completes the acquisition of the remaining 41.5 percent of Chrysler from the UAW, making Chrysler Group a wholly owned subsidiary. On Feb. 2, 2014, Fiat Chrysler Automobiles begins trading on the New York Stock Exchange under the ticker symbol "FCAU." Fiat spends $4.9 billion to acquire Chrysler while assuming the automaker's $5.5 billion pension liability.
October 2014
The merged Fiat Chrysler Automobiles NV, legally incorporated in the Netherlands, makes its debut on the NYSE. Shortly afterward, the company announces a spinoff of luxury brand Ferrari.
Spring 2015
Marchionne writes a presentation, "Confessions of a Capital Junkie," bemoaning the fact that the auto industry requires immense capital investment disproportionate to the potential gain for shareholders and concludes that such investment is unsustainable in the long-term.
October 2015
Ferrari NV, with Marchionne as chairman, begins trading in New York with a market value of about $10 billion. That success comes after GM rebuffs attempts by Marchionne to instigate a merger that would create the world's largest automaker. Some analysts believed that Marchionne exercising the $2 billion put option in 2005 may have led to GM turning down the offer. Others believed that there was too much product overlap, especially in the light truck sector, for the merger to be viable.
April 2017
Marchionne puts major merger attempts on hold to focus on cutting debt at FCA.
June 2018
Marchionne unveils his final five-year plan for FCA, aimed at doubling profits and restoring dividends for the first time since the 2014 merger. The company also plans to invest $11 billion electrifying its fleet through 2022. Marchionne also announced that FCA's industrial debt had been retired, that it was debt-free, again confounding critics who said such a move was impossible.
Marchionne's Legacy
While the tributes have poured in from both sides of the Atlantic, Marchionne was not without his detractors. Many include former Fiat and Chrysler executives who described him, off record, as an unrelenting task master with a reputation for being a workaholic who pushed his subordinates to work as hard as he did.
But his record of success, especially with regard to creating value for shareholders at Fiat, Chrysler and FCA, is unparalleled. From 2004 when he arrived at Fiat until to 2018 when his failing health ended his reign as CEO of FCA, Marchionne reportedly increased shareholder value by a factor 10, the bottom-line measurement of any corporate executive.
On a personal note, during more than 20 years of covering the auto industry, I had a single one-on-one conversation with Marchionne on the afternoon of the first press day at the 2010 Paris Motor Show. I found him standing alone at the Jeep exhibit, no media handlers or body guards to be seen. I introduced myself and we had an almost surreal conversation about my classic Jeep Super Wagoneer and the Grand Cherokee that had just been revealed at the show. It was the first Chrysler vehicle introduced under Fiat ownership and it has been a profit powerhouse for FCA since then.
Of the Grand Cherokee he said, "The kids did a great job." Now those kids, led by new FCA CEO Mike Manley, are on the spot to deliver on the Marchionne's legacy. You will hear the cliche that Manley has huge shoes to fill. That might be correct, but something tells me Manley and his team will be up to the task.
Want to know more about what made Marchionne unique among corporate executives? Watch this March 2012 "60 Minutes" interview.
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Comments
Definitely a genius. Squeezing GM for 2 billion AND getting the US gov to finance at least 20% of a foreign take over of Chrysler was brilliant and has kept Fiat and Chrysler staggering along. As impressive as the Jeep's present and brand success is the bottom line is EVERY company that has owned Jeep has gone broke regardless of Jeep's own performance. Jeep is also VERY vulnerable to economic down turns and increased fuel price (more so than divisions/manufacturers that offer cheaper higher MPG cars). While things are presently better for Fiat (and its divisions) there are still HUGE problems and their overall health is precarious. The lack of a balanced line of quality small and midsized cars is a tremendous blackeye and 2010 PROVED all the torgue, Hemis, Demons, Wranglers, Dodge/Ram trucks in the world couldn't stop another devaluation of the company and take over. Simply put neither Fiat nor Chrysler could stand on their own 2 feet and while Fiat has made itself (with US taxpayer financing) into something more stable with Chrysler its still on crutches and short of breath. Hence the interest in other future mergers. It would be nice to see them address these issues and achieve stability in the market and able to weather storms... but given Fiat and Chrylser's histories I very much doubt it. Like Iacocca said in his book... "2 losers can't save each other."
getting the US gov to finance at least 20% of a foreign take over of Chrysler was brilliant and has kept Fiat and Chrysler staggering along.
@Clint
Staggering?
The only part that's staggering is the incredible boom in the FCA stock price during the last 12 months. It has nearly doubled since summer 2017. It NEVER happens without great leadership.
Do you want to make money buying/selling stocks? Find out which companies have the most gifted managers and execs before everybody else does.
Great column PUTC
@clint, interesting that mentioned what I called back in 2009 the "Jeep Jinx."
https://www.thetruthaboutcars.com/2009/06/the-jeep-jinx/
But the rest of your analysis I believe is way off on the product side. Three years ago, in what was essentially deemed folly at the time, Marchionne essentially got FCA out of the small- and mid-sized car business in the US by axing the Dodge Dart and Chrysler 200. This move was followed this year by Ford and GM doing basically the same thing. Those production assets were better allocated to build more Jeep SUVs and Ram trucks.
As an example, the Jeep Renegade is nothing more than a small car masquerading as a crossover, which is fine. It's built in Italy in a plant that can't make hot-selling full-size, body-on-frame trucks efficiently. It makes perfect sense to stop building slow-selling, uncompetitive Dodge Darts and Chrysler 200s and retool to built more hot-selling, profitable Ram pickups.
Marchionne took a calculated risk in making this decision. Although fuel prices have risen a bit, with the US taking the lead in energy production, especially through fracking, it's unlike that fuel will rise appreciably. And if past is prologue, the price of a gallon of gas will need to go well above $4.00/gallon for it to have any meaningful impact on the sales of pickups and big SUVs.
More interesting, as a postscript to Marchionne's passing, is this story that appeared today on Bloomberg.com. It underlines Marchionne's impact.
https://www.bloomberg.com/news/articles/2018-07-25/sergio-marchionne-ceo-who-steered-fiat-chrysler-dead-at-66
He left both Fiat and Chrysler better than he found them. That will be his enduring legacy.
very sad! Way to young to be leaving the world! He did a great job for Fiat/Chrysler. He will be missed
While things are presently better for Fiat (and its divisions) there are still HUGE problems and their overall health is precarious. The lack of a balanced line of quality small and midsized cars is a tremendous blackeye...
Posted by: Clint | Jul 27, 2018 2:25:52 PM
While I agree that FCA's lineup is very unbalanced,the same could be said for Ford's current situation. Truck heavy, a very aged SUV lineup, and a car lineup that's currently being ended. The president's trade wars have also hurt its bottom line disproportionately.
@RICHARD TRUESDELL
excellent points and especially insightful regarding fuels (and future availability and prices).
Here in the US we have vast amounts of natural gas and other fossil fuels that can be used to produce synthetic fuels, lubricants and highly refined products that nobody outside a laboratory was thinking about 15-20 years ago.
It's not hard to imagine buying inexpensive pump fuels at retail in the near future that are much cleaner and have higher octane than today's. This all bodes well for those of us who own a small business or want to, or simply enjoy owning and driving performance cars/trucks.
I'm not crazy about using GDP as a yardstick but I confess to being excited about today's news on the economy. This stuff was not envisioned by many of the so called smart guys just a few years ago.
He was a genius and visionary. We will all miss him.
The company said it now holds $533 million in net cash compared with net industrial debt of $1.53 billion on March 31.
He saved Fiat and Chrysler , invested billions, moved production from Mexico and created thousands of new jobs in here.
Rest in peace sir. You deserved much more credit, than showed by many and this article is nice memory of that.
test
You know of any succesful business man who is not?
" an unrelenting task master with a reputation for being a workaholic who pushed his subordinates to work as hard as he did."
You know of any succesful business man who is not?
" an unrelenting task master with a reputation for being a workaholic who pushed his subordinates to work as hard as he did."
You know of any succesful business man who is not?
" an unrelenting task master with a reputation for being a workaholic who pushed his subordinates to work as hard as he did."
The server at PUTC is sick.
Sad, but he left at the top of his game. Nice summary.
Can't help but feel proud being 100% Italian myself and knowing that he grew up 200miles north of my parents home town. It seems that there really is no substitute for hard work, as much as we all prefer to find shortcuts to becoming better off. Something my parents instilled in me with responsibility of a paper route at age 8.
With respect to alternate fuels, the aviation industry has an initiative to find alternative's to 100Octane Low Lead (100LL), which is predominant here in the USA. The rest of the world is using a form of diesel fuel in General Aviation. Which is already 3x the cost of what 100LL costs (~$5). Anyway, OSHKOSH airshow mentioned this this week, and they are still moving forward with alternate fuels, but it is a very slow process as far as general aviation industry goes. Some diesel engines have been in development, and one notable one seemed to find a balance between weight and compactness. We'll see if it gains traction. https://www.eaa.org/en/airventure/eaa-airventure-news-and-multimedia/eaa-airventure-news/eaa-airventure-oshkosh/07-24-2018-deltahawk-showcases-diesel-engine
Sorry for the off topic, but engine buffs might find this quite interesting:
https://www.experimentalaircraft.info/homebuilt-aircraft/aircraft-engines-deltahawk.php
The president's trade wars have also hurt its bottom line disproportionately...Posted by: HD RamKing | Jul 27, 2018
@HD
Chrysler stock has tripled in value since November 2016. You cannot be serious. Hurt the bottom line? Whose?
@ HD RamKing--Still remains to be seen about the President's trade wars. If we come to an agreement then there will not be too much change. Ignore papajim and his comments he is looking for an argument.
Marchionne has done a lot for Fiat and Chrysler especially when you consider what both were like when he took over.
@the FAKE Jeff S
there is no argument to be made.
The robust economic performance of the last 18 months cannot be ignored, except by the likes of CNN and NPR. Firms like 3M, FCA and John Deere are having some of their best numbers in many years.
RAM will take over the 2nd spot in the truck market next year. Ford will fall to 3rd place lmbo!!!!!!
Jeff S is uniparty. It shines through and through in every one of his posts.
Ignore Jeff S.
@papajim
Firms due to the Tax cut are having a great time, but ironically for the three Automotive producers not so good.
Ford has problems so has GM. FCA has had a huge drop in Jeep Numbers in China.
Luckily the European have not enforced tariffs like 25% on European owned but exported SUV's from the US
@Jeff
Sergio had been the standout CEO of a NA company.The others?
Not that great. After parting with Opel or OPELL, a hopeless case in GM terms. PSA has managed to turn it around and make 900million Euroes after GM had 20yrs of losses.
Jim Hacket is struggling as CEO of Ford, it's profit is minimal
Sorry Robert but your remarks sound silly. American companies like American Express and BOA returned over 35% to shareholders in the last 12 months. Wild numbers.
Even commodity-heavy American industrial stocks like 3M and US Steel roared!
I failed to grasp your reference to the Europeans, because without the US economy dragging them into the 21st Century they'd be still dragging butt like they did for most of the last 25 years. Without Germany the EU would be like Arkansas.
@papajim
It is the EU, not Germany. Europeans dominate your Luxury cars . Own 80% of your heavy trucking industry, produce all of your new Vans.
Japanese and Koreans dominate other parts of the US Automotive industry.
I actually said the US in general was thriving with th exception of the automotive industry which is in the doldrums and in many ways struggling
I actually said the US in general was thriving with th exception of the automotive industry which is in the doldrums and in many ways struggling...Posted by: Robert Ryan | Jul 30, 2018
@Robert
You cannot have it both ways. You clearly said that the US economic growth was due to a tax cut (liberal media narrative), and said that the auto industry is in the doldrums which cannot be explained next to FCA stock going up 3x in value in less than two years. This isn't a hot dog stand, but a major global company we're talking about. For Chrysler to bounce like that in such a short time is even more significant viewed in context of other industrials like 3M, CAT and John Deere doing so well.
The fact that Chrysler hasn't been able to stand on its own 2 feet for decades now (remember when Diamler took them over in the 90s?), and that Jeep never has, and both continuously find themselves as nonstarring dance partners in various arrangements and basically at this point willing and needing to join with anyone under just about any circumstances hasn't changed. Fiat worked a sweetheart of a deal to take what nobody else would and honestly only did it because they got the Fed Gov to fund it nearly risk free for them. The fact that Chrysler (formerly of the big 3) has an unbalanced line and consistently poor quality small and midsized cars is not unique to them and also a huge factor in why GM went under and Ford almost did. The fact that Chrysler cannot hack it alone, and does it the worst of those 3 (with GM being 2nd worst and Ford being 3rd worst) is just the reality. And why all 3 are typically an economic slow down or gas rise or 2 away from being in trouble... AGAIN... They trade long term strategy/safety/security provided by consistently excellent small and midsized cars in mass at a small profit per model for selling larger more exciting vehicles at a high profit per unit and only sell small cars at all (at a loss) to meet CAFE so they can sell larger high profit units. This "stratagey" works GREAT until the economy stops growing, or fuel prices rise and then they wonder why they are in trouble yet again... it happens nearly every decade since the 70s. And they (the big 3 minus 1) are lining up to do it again... with the current larger vehicle/crossover/SUV/Truck craze underway. I'm not saying they shouldn't compete in those arenas or that they aren't good at them... but when the money gets tight small and midsized cars sell... and small and midsize car buyers get bigger cars and trucks later when they can... and everyone in Detroit laughed when the first rinky dinky jap cars showed up 40ish years ago... and now Toy is bigger than GM... All is not well at Fiat... Better than it was and that was a miracle by largely this man but when your talking about a company that is hopping from miracle to miracle its just another perilous step.
@Clint, your comment that "tight money" favors small cars is LOL funny. Did you look at that before you pressed "post"?
@papajim
Stockmarket does not guarantee, Good health in the Automotive sector. We have had a booming Stockmarket and a declining Automotive sales.
That is happening now in the US. What effect a Automotive trade war will have is a good question.
PUTC server is not publishing my reply.
Jeff S
there is no argument to be made.
The robust economic performance of the last 18 months cannot be ignored, except by the likes of CNN and NPR. Firms like 3M, FCA and John Deere are having some of their best numbers in many years.
Posted by: papajim | Jul 29, 2018 10:30:47 AM
Jeff S. has some of the most out of touch political insights of anyone I know.
Jeff S
there is no argument to be made.
The robust economic performance of the last 18 months cannot be ignored, except by the likes of CNN and NPR. Firms like 3M, FCA and John Deere are having some of their best numbers in many years.
Posted by: papajim | Jul 29, 2018 10:30:47 AM
Jeff S. has some of the most out of touch political insights of anyone I know.
PUTC server is not publishing my reply.
Posted by: papajim | Jul 30, 2018 4:58:17 PM
It's double posting mine.
meant prophet not profit.
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