Fiat CEO Will Apply Lessons From Former 'Laughingstock'
01 Mai 2009 - 12:53AM
Dow Jones News
Fiat SpA (F.MI) Chief Executive Sergio Marchionne's game plan
for the Chrysler LLC turnaround will start simply.
Marchionne will "visit, visit, visit - visit the facilities, the
plants, and the people," a Fiat spokesman said by phone from Turin,
Italy. "The scope of this exercise is to create a management team
that works together, that meets each other, that mingles."
Fiat's own turnaround was based on Marchionne's recognition that
the Italian auto maker's senior management was holding the company
back by shirking responsibility and not empowering lower-level
employees. Through endless staff meetings, Marchionne identified
high-potential employees and promoted them.
When Marchionne took over at Fiat in 2004, the company had gone
through four CEOs in three years, was losing money and was crippled
by strikes. The patriarch of its controlling shareholder, Gianni
Agnelli of the Agnelli family, had just passed away. The company
was too big for the Italian state or a private investor to save -
assuming there had been any takers.
Now, Fiat's revamped model lineup has been heralded as one of
the most environmentally friendly in Europe, and Marchionne is seen
as one of the world's sharpest auto executives. Prior to the first
quarter of this year, Fiat was turning a profit.
Marchionne must prove that he has the mettle to revive Chrysler
in much the same way. The Auburn Hills, Mich., auto maker filed for
bankruptcy protection Thursday in a plan that will pave the way for
Fiat to eventually become majority owner.
Marchionne said Thursday in a statement he will spend "a great
deal of time in the coming months" meeting with Chrysler employees
and touring its facilities, though Fiat couldn't immediately
provide a date for his first visit.
Italian by birth but raised in Canada, Marchionne is reputed to
be a tough and demanding boss in terms of setting targets, but with
a good eye for spotting talent. He agrees with this assessment.
"My job as CEO is not to make decisions about the business but
to set stretch objectives and help our managers work out how to
reach them," Marchionne wrote in Harvard Business Review's December
2008 issue, saying Fiat had become a "laughingstock" before he took
over.
For example, he cut the time it takes from the drawing board to
dealer's showroom for the Fiat 500 - a compact "city car" along the
lines of BMW AG's Mini that he calls "Fiat's iPod" - from four
years to 18 months. He did it simply by "challenging assumptions"
that engineers had about the design and production process, he told
Harvard Business Review.
His plan for Chrysler "will be a Xerox" of what he did at Fiat
and at Fiat's tractor unit CNH, the Fiat spokesman said. It is
still too soon to talk specifics about board nominations,
management changes, product launches and the rest, the spokesman
added.
Chrysler CEO Bob Nardelli says he'll step down once the
bankruptcy reorganization is complete, and Chrysler President Tom
LaSorda said he'll depart before that. If Marchionne's track record
is any indication, he will replace a lot of Chrysler's
management.
"At CNH, Marchionne went through the ranks and got rid of any
manager he decided was not up to snuff," said a person at CNH who
declined to be identified because he was not authorized to speak.
"He has a clear idea of what he wants to do, and he's pretty
ruthless about doing it."
Another part of Marchionne's cure for Fiat and CNH was to bring
a sharper focus to the groups' brands. That is likely to happen at
Chrysler as well.
"I call his technique 'management by stress,' because he sets
high goals and his colleagues suffer from a lot of anxiety as they
try to meet them," said Giuseppe Volpato, professor of economics
and business administration at Venice's Ca' Foscari University and
author of "Fiat: A Phoenix In The World Auto Industry."
At Fiat, Marchionne didn't bring in management consultants or
outside executives who were his friends. In addition, he didn't
fire workers or close plants.
Instead, he poached managers from competitors, boosted the
company's marketing department and overhauled its dealer network,
according to Volpato's 2008 book on Fiat's turnaround.
Fiat will start out with a 20% stake in Chrysler when the U.S.
auto maker emerges from bankruptcy protection. Fiat will get
another 15% if it meets certain metrics, including introducing a
vehicle produced at a Chrysler factory in the U.S. that performs at
40 miles per gallon, providing Chrysler with a foreign distribution
network and manufacturing next-generation engines at a U.S.
Chrysler facility.
In addition, Fiat has an option to acquire a further 16%,
bringing its stake to 51%, once Chrysler pays off its debts to the
U.S. government. Fiat can exercise that option from Jan. 1, 2013,
to June 30, 2016.
-By Jennifer Clark, Dow Jones Newswires; 312 750 4135;
jennifer.clark@dowjones.com