Announcing the death of Fiat
Chrysler Automobiles’ (FCA) charismatic CEO on July 25, its Chairman, John
Elkann, who had earlier asked his 236,000 employees to prepare for the worst as
the health of its veteran chief executive was fast deteriorating, said, “Unfortunately
what we feared has come to pass”, and this speaks volumes about the role the
chain-smoking, espresso-fueled Sergio Marchionne played in rescuing Fiat!
This Italian-born Canadian—a
chartered accountant and a barrister who had just succeeded in turning around
SGS, a service group, headquartered in Geneva—being spotted by Umberto Angelli,
the scion of the Fiat Empire, who was desperately looking for a leader who
could rescue Fiat, joined its Board in 2003, and a year later became its CEO.
When Marchionne took over its
reins, Fiat was in great crisis: had posted losses for three successive years,
the loss posted for 2003 stood at €6 bn, and a dizzying succession of four CEOs
in a span of three years could not generate any hope of turnaround. Marchionne,
who was known for his wit and sarcasm, said that what he had inherited was a
“laughing stock”—a ‘cadaver’, perhaps.
Despite being an outsider to car
industry, Marchionne, with his charismatic personality, challenging the
assumptions of the industry with his razor sharp mind, including his rejection
of suits in favor of dark round-neck jumpers and button-down shirts that he
claimed to have saved his time in the mornings, made himself available to the
employees 24x7 believing that his round-the-clock zeal would become contagious
in the company. It is reported that he seldom sat in the corner room; instead spend most of his time in the engineering Dept., where cars were visualized and eventually made. He had broken down the barriers between senior management and employees for ensuring effective communication. With the trust thus created by asking more of himself than he
did of those around him, he could be extremely tough and extremely
demanding.
And the results are there to
vouchsafe for his leadership: he first succeeded in breaking Fiat’s alliance
with General Motors in 2005 to pursue his own destiny independently and also
getting a payment of $2 bn from it for breaking the partnership. By 2006, he
had turned the company to profitability, and by 2008—well before the global
economic crisis—he had put Fiat’s bottom line solidly in the black.
Marchionne’s remarkable performance spreads across six domains: financially
speaking, it moved away from a loss of €1.6 bn in 2004 to a profit of €1.6 bn
per annum by 2008; in terms of market share, during 2008-09, its share in
European market had increased by 10%; in terms of market capitalization, its
share value tripled during 2004-07, and after global downturn and drop in share
value across the market, it bounced back to an annual doubling in 2008 and
2009; in terms of customer satisfaction levels, it went up by almost 25%
between 2005 and 2006; and in terms of awards and honors, its Cinquecento model
was honored as the European car of 2008, while its Linea won the Autobest award
for 2008.
It is the fusion of complex
qualities such as ambitious hopes and bold dreams that extended beyond the
immediate crisis—Marchionne wanted Fiat to become one of the five or six
best-quality auto manufacturers in Europe within five to six years, using the
best of the past for building a better future, pursuing the hopes and dreams
from the most unlikely starting points and in the face of improbable odds and
seemingly insuperable challenges—reducing the design-to-production process from
the current four years to barely 18 months and then to 15 months without, of
course, sacrificing safety and its determination to impose small cars on the
market using the move towards energy efficiency as their opportunity and ally,
and pursuing all this not without the fear of failure but handling it with
immense acts of personal courage, fortitude and ability to shift and flex as
the organization evolved and circumstances required, that cumulatively helped
Marchionne to put Fiat back in profits.
Indeed, it is this ability of
Marchionne to fuse varied leadership styles and components together into an
integrated and self-assured whole that connected employees of Fiat to something
greater than they had hitherto attempted and endeared Fiat and Marchionne to
the US Obama administration, which handed over 20% stake in Chrysler to prevent
it going bust in 2009. At that time, many wondered if Fiat was taking a
terrible risk, but Marchionne was clear that he had no choice but to take the
risk for growing bigger. Finally, it is to the credit of his deal making
ability that in 2014 Fiat could acquire its full control by making Chrysler pay
for its acquisition €4.35 bn via a special dividend. And today, Chrysler
generates most of Chrysler-Fiat profits.
From then on, he turned his
attention to build brands: he made Jeep into a global marque brand. He hived
off Ferrari as an independent brand at a valuation of €10 bn. And to cap his
performance, in June, he announced that Fiat Chrysler was debt-free.
Realizing that car-industry is a
guzzler of investor’s capital, for it has to constantly introduce
new-generation models and also perceiving the likely threat that might emanate
from the introduction of electric and self-driven cars, Marchionne, thinking that
it would be futile for each company to make such huge investments required to
manage these challenges, that too, to play in that same fragmented market, he
explored the scope for merger of Fiat with GM. Although the move failed, it is
nevertheless the idea merits critical examination by the industry as a
whole. This becomes more compelling for
western car companies for facing the challenge posed by the Asian car
makers.
His legendary exploits speak
volumes about Marchionne’s leadership model that was driven by high energy, intelligence
and the will to hold himself accountable always, which saved two companies from
going bust. Car industry will be missing him sorely.
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