Monday, May 25, 2009
Fiat's Marchionne driven to succeed
Remaking Chrysler may be biggest challenge yet
With his slightly rumpled appearance and casual manner, Sergio Marchionne seems more like a jovial professor than a hard-driving businessman.
But the chief executive of Fiat SpA is in fact an inexhaustible, demanding and effective corporate boss with a string of turnarounds to his credit.
Now, as Fiat prepares to take a stake in Chrysler LLC and seeks to acquire General Motors Corp.'s European and Latin American operations, Marchionne, 56, is embarking on the biggest challenge of his career.
While some industry experts say his plan to seize the opportunities presented by the global industry crisis to build a giant automaker is a brilliant ploy to secure Fiat's future, others believe Marchionne is overreaching.
Neither of Chrysler's past two owners, Daimler AG or Cerberus Capital Management LP, could fix the Auburn Hills automaker, and GM's European operations have struggled for years.
Marchionne has already encountered resistance at GM's headquarters, where some officials suspect he may be trying to take advantage of the struggling U.S. automaker.
If Marchionne can pull it off and form a new automotive giant, it won't be the first time he will have beaten enormous odds.
Turning around Fiat
Fiat's auto business seemed doomed in 2004 when the company's owners, the Agnelli family, retained Marchionne, an Italian-born, Canadian-educated businessman who was then new to the auto industry.
Fiat had gone through four CEOs in three years. No one expected Marchionne to succeed, and he doubted it himself at times. "Imagine showing up in June and being the fifth guy to try to resuscitate what appeared to most people to be a cadaver," he wrote in a recent article for the Harvard Business Review.
Marchionne moved swiftly at Fiat, flattening the organization by removing layers of management, showing dozens of senior officials the door and promoting younger ones who showed enthusiasm and shared his willingness to work hard.
"Sergio Marchionne works 24 hours a day, weekends included," said Giuseppe Volpato, a business professor at the Ca' Foscari University of Venice who wrote a book about the Fiat turnaround.
People familiar with Marchionne's habits say he sleeps only about four hours a night, frequently travels during the night and works the next day, and often holds meetings on weekends.
That tempo wore out many Fiat managers, but Marchionne had no alternative, Volpato said. "Fiat had been in trouble for a long time. That was the only way he could reorganize the company in such a short period of time."
Fiat returned to profit in 2005, a year after Marchionne took over, and the Fiat Group Automobiles division made money in 2006 and has been profitable every year since then. Last year, Fiat earned 1.72 billion euros, or $2.2 billion, on sales of $77 billion, though, like all automakers in this terrible downturn, it lost money in the first quarter.
While most executives rely on staff cuts and factory closures to restructure companies, Marchionne did not close any of Fiat's plants. He tends to view entrenched management as the problem, says Klaus Stöhlker, a Zurich-based strategic consultant who met Marchionne when he worked in Switzerland.
"He always killed the top management, at Alusuisse, at Lonza," Stöhlker said, ticking off the names of Swiss companies that Marchionne ran. "At Société Générale de Surveillance, of the 160 leading managers, I think he fired 90 percent."
But Marchionne's methods produced results that drew the notice of the Agnellis, who were shareholders in the Swiss testing and certification firm.
They brought Marchionne back to Italy, where he was born in 1952. When he was 14, his family emigrated to Canada, where his mother still lives. Marchionne attended Canadian universities, earning MBA and law degrees. He met his wife, Orie, there too.
Marchionne spent the early part of his career in Canada but was transferred to Switzerland after his employer, the Lawson Group, was acquired in 1994 by Alusuisse Lonza, a packaging company based in Zurich.
People say Marchionne seems culturally more North American than European. "Some aspects of his character are Italian, clearly," said Pierluigi Bellini, a Milan-based analyst with IHS Global Insight. "He's very passionate. But his business style is not typical Italian. His style is more informal, more brusque, less diplomatic."
Even by North American standards, Marchionne is unusually irreverent. "He's absolutely allergic to formality, to etiquette for the sake of etiquette," says one Fiat executive who spoke on condition of anonymity.
He rarely turns up in a suit and tie, preferring open-collared shirts and dark sweaters, although he did put on a suit and tie to meet Italian President Giorgio Napolitano.
Marchionne's achievements and his deceptively simple-sounding views inevitably evoke comparisons with Carlos Ghosn, the last foreign auto executive who came to Detroit with a plan to reshape the industry.
Ghosn, the CEO of France's Renault SA, tried unsuccessfully in 2006 to persuade GM to join the Renault-Nissan alliance.
Like Ghosn, Marchionne is a cosmopolitan, multilingual manager with seemingly boundless confidence and a ready answer to every question.
When Morgan Stanley analyst Adam Jonas asked Marchionne why he wasn't offering any cash for a stake in Chrysler, he shot back: "For the same reason that Morgan Stanley wouldn't lend any money to Chrysler."
Aside from governments desperate to save jobs, few are willing to invest now in carmakers struggling to raise cash.
But Marchionne sees a big opportunity in this crisis -- to create a group around Fiat's auto operations with combined annual sales of 6 million vehicles. That is the minimum, in his view, to survive in the long run. Last year, Fiat sold 2.2 million vehicles.
Instead of cash, which Fiat doesn't have, Marchionne is offering to share the Turin-based automaker's small car and engine technology and its management expertise with Chrysler.
Even though Marchionne is not an engineer, he pushed Fiat to become more efficient by challenging long-held assumptions. "You start removing a few bottlenecks this way, and pretty soon, people catch on and start ripping their own processes apart." That, he wrote in the Harvard Business Review article, is how Fiat reduced the development time for its popular Cinquecento -- or 500 -- to 18 months from 48.
The minicar, a big hit in Europe, is one of the models Fiat hopes to sell in the United States.
Once the alliance is concluded, Marchionne plans to serve as Chrysler's CEO -- which would have him, like Ghosn, managing two carmakers on different continents.
But while the two executives share many similarities, their management styles are different.
People familiar with both say Marchionne is a tougher negotiator and harder on managers than Ghosn, who relies on the executives he finds to help him fix the business.
Marchionne digs deep into the organization to find the talent. "He believes that the know-how is in the lower levels," Stöhlker said.
Marchionne spends close to 10 percent of his time interviewing promising managers and grooming them. "I'm always texting my people or calling them at odd hours to talk about the business or about their careers," he wrote.
He expects a lot in return. "As I give people more responsibility, I hold them more accountable," he said.
"Markets and economies aren't always predictable, and in an organization this size," he said, referring to Fiat, "you can always offset a failure here with a success there. But if you want to grow leaders, you can't let explanations or excuses become a way of life."
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