Fiat Chrysler Taps New Chief Executive After an Unexpected Resignation
Posted July 21, 2018 7:30 p.m. EDT
Updated July 21, 2018 7:36 p.m. EDT
Sergio Marchionne, the chain-smoking, deal-making boss of Fiat Chrysler Automobiles, was an unlikely auto executive, spending much of his career in other industries. But in the last 14 years, he has been part of not one, but two turnarounds of carmakers.
On Saturday, Marchionne, 66, was abruptly replaced. Fiat Chrysler revealed that he had become gravely ill since having shoulder surgery July 5. The company named Mike Manley, 54, who is the head of the automaker’s North America operations and its Jeep and Ram truck brands, as Marchionne’s successor, effective immediately.
Fiat Chrysler declined to provide details about Marchionne’s health, but it made clear his condition had worsened significantly and suddenly.
“I am profoundly saddened to learn of Sergio’s state of health,” John Elkann, the grandson of Gianni Agnelli, the Fiat founder and chairman of the family’s investment company, Exor, a major Fiat Chrysler shareholder, said in a statement. “It is a situation that was unthinkable until a few hours ago, and one that leaves us all with a real sense of injustice. My first thoughts go to Sergio and his family.”
Marchionne had been scheduled to retire as head of Fiat Chrysler in 2019. He had planned to stay longer as chief executive of Ferrari, the maker of sports cars that was spun out of Fiat Chrysler. On Saturday, Ferrari said a board member, Louis Camilleri, would become its new chief executive.
Mike Jackson, chairman and chief executive of AutoNation, the country’s largest chain of auto dealerships, and a frequent guest of Marchionne’s at Formula One races around the world, said he was “shocked and heartbroken” to hear of Marchionne’s condition. He said he last met with Marchionne in June, and his friend appeared to be in good health. “He was excited about stepping down from Fiat Chrysler and moving on to the next chapter,” Jackson said.
Hired by the Agnellis in 2004, Marchionne revived Fiat at a time when few in the industry believed it could be saved. Then, when Chrysler was guided into a government-led bankruptcy in 2009, he offered to take control of the company. With no other option, the Treasury Department handed Chrysler to Fiat essentially for free.
“Without Sergio, Chrysler would not have survived,” Jackson said. “His negotiation with the Treasury was just masterful at a time of extreme stress. He’s a remarkable creator of value for companies, not just in the auto industry but any industry.”
When Marchionne took the helm at Fiat, the company had a market value of about $7.5 billion. Today, the combined market value of Fiat Chrysler and Ferrari, which was spun out of Fiat Chrysler, is about 10 times higher, about $71.5 billion.
The turnaround of Chrysler has had missteps, however. Marchionne’s strategy of reintroducing Fiat and Alfa Romeo cars in the United States has largely flopped. In recent years, the company has been fined and investigated for its handling of recalls. And in 2017, the Justice Department sued Fiat Chrysler, alleging the company used illegal engine software to cheat on diesel emissions tests.
In most quarters, Fiat Chrysler makes almost all of its profit from Jeep and Ram trucks, and the company is less profitable than its Detroit rivals, General Motors and Ford Motor. Fiat Chrysler also lags in developing electric vehicles and self-driving technology of its own, and in expanding in China, the world’s largest market.
Manley seems well positioned to address some of those challenges. He has extensive experience in China, having set up the Jeep sales network there, and led the expansion of Jeep to other markets around the world, said Tom LaSorda, who served as Chrysler’s chief executive while the company was part of DaimlerChrysler.
Under Manley, a soft-spoken native of Britain who joined the company in 2000, Fiat Chrysler will surely see a clear change in management style from the flamboyant Marchionne.
“He’s stepping into big shoes, but Mike’s got great support and he’s a very likable guy,” LaSorda said.
Throughout his tenure, Marchionne was a hands-on executive.
After Fiat took control of Chrysler, Marchionne moved to Michigan and personally managed the company’s recovery and later the merger of the automakers. He often sweated the engineering details of new models and earned a reputation as a fiery taskmaster. He once summarily fired two managers after Chrysler offered generous sales incentives Marchionne had not approved of.
“He’s a legend,” LaSorda said. “He’s in the very elite league of automotive CEOs.”
Other top automotive chief executives who are often compared to Marchionne for their achievements in the last 20 years include Carlos Ghosn, who created the alliance of Nissan and Renault; Alan Mulally, who turned around Ford; and Dieter Zetsche of Daimler AG.
Marchionne was born in Chieti, near Italy’s Adriatic Coast, and moved with his family to Toronto when he was 14. He later studied philosophy, accounting and law. He started his career as a tax consultant in Canada and became an executive at a Swiss metals-trading firm. He was chief executive of SGS, a trade services firm, when he was hired to turn around Fiat.
Almost immediately Marchionne proved himself to be a shrewd negotiator, forcing General Motors to pay Fiat $2 billion to exit their partnership. While running Fiat, he showed up at an analyst meeting in 2006 wearing a black sweater and black jeans. He decided he liked never having to think about his wardrobe and has stuck with that look since. He has said he keeps about 30 identical sweaters and pairs of jeans in each of his homes in Michigan; Turin, Italy; and a mountain chalet outside of Zurich.
He also likes to drive fast cars of his own. In 2007, he was uninjured in a crash on a Swiss highway while driving a Ferrari 599 GTB.
In 2015, he sent a lengthy email to Mary Barra, the chief executive of GM, proposing a merger of the companies. Barra and the GM board declined to even offer to meet with Marchionne.
Not one to be put off by rejection, Marchionne doubled down. About a month later, in a routine analyst conference call, he stunned the Wall Street analysts by devoting the discussion to his sudden and intense appeal to automakers to merge. He called his manifesto “Confessions of a Capital Junkie.”
“I think it is absolutely clear that the amount of capital waste that’s going on in this industry is something that certainly requires remedy,” he said. “A remedy in our view is through consolidation.”
Rather than rally support, Marchionne’s appeal highlighted the difficulties ahead for Fiat Chrysler.
More recently he explored the possibility of an alliance with a Chinese automaker, and pushed the company to slash its debt. In June, Fiat Chrysler revealed a five-year business plan that called for the company to develop new lines of Jeeps and electric vehicles.
One crucial detail, though, was left out of the strategy: the name of his successor.