These were just some of the news outlets’ headlines on July 25th 2018 – the day that saw a true visionary, Mr. Sergio Marchionne, die at the age of 66 following complications from a shoulder surgery. To an uninformed spectator, it seems that the man was greatly respected by his peers and that his death will be a great loss to the automotive industry. But what did he do to earn this rock star status?
Born in Italy June 17th 1952, Sergio moved to Toronto, Canada with his family when he was 13, thus gaining dual Italian-Canadian citizenship. He was fluent in English, French and Italian and was a Canadian certified general accountant (FCGA), barrister and a fellow of the Certified General Accountants of Ontario – all the qualifications that served him well even after leaving the respective fields.
Mr. Marchionne entered the auto industry in 2004 as an outsider when he left SGS S.A., a health inspection firm, to head Italian automaker Fiat that had lost $7 billion the previous year. In Marchionne’s early days at Fiat, he cut middle management jobs, reduced wages, pared back production levels to meet demand and eliminated some slow-selling models – all to help lessen the company’s enormous losses. Soon afterwards, he took advantage of an existing deal between General Motors and Fiat to attempt to force G.M. to buy the Italian carmaker – a move G.M. had no desire to make. In a high-stakes game of corporate poker, Mr. Marchionne compelled G.M. to pay Fiat $2 billion to end their alliance and used the money to develop new models, including the Fiat 500, a modern reworking of the original 1950’s small car that, like its predecessor, became a hit in Europe.
Hence, it isn’t that surprising that about two years after Mr. Marchionne took over, Fiat turned its first profit in five years.
“We spit blood to clean up and restart Fiat,” he was quoted saying about the turnaround.
During his tenure, he boosted Fiat’s share value by more than 10 times, which was helped by the spin-offs of trucks and tractor maker CNH Industrial and supercar maker Ferrari. The financial analyst Massimo Vecchio, of the Italian investment bank Mediobanca, commented:
“He’s got a lot of American in his management style. The only thing that matters to him is results. If you don’t deliver, you are out.”
But far from it that Mr. Marchionne was immune to the plight of his employees. He pulled Fiat out of Confindustria, Italy’s top business group, determined to negotiate directly with unions rather than pursue national wage bargaining.
“Without him there would have been no future for this company,” said Giuseppe Tavano, an FCA transmission worker.
However, his crowning achievement may have been his decision to drive a hard bargain for Chrysler in 2009. As the Treasury Department in Washington hastened to prevent the collapse of much of the United States auto industry in the wake of the financial crisis, Mr. Marchionne stepped forward with an audacious offer – Fiat would take control of Chrysler, the sickest of Detroit’s Big Three automakers and provide cars and technology to revive it. This came with a catch, however – the government would have to hand Chrysler over to Fiat free of charge.
It was a hardball offer typical of Mr. Marchionne. But he knew that the Treasury, as well as Chrysler’s creditors and its labor union, had little room to negotiate. As the American economy was slipping deeper into recession, the collapse of Chrysler would have meant the loss of tens of thousands of jobs and no other company was willing to come to its rescue. So, on April 30th 2009, Chrysler filed for bankruptcy. On June 10th, Fiat and Chrysler announced the merger of the two companies, with Mr. Marchionne emerging as CEO and, in the eyes of many, the savior of one of Motor City’s legacy companies – Fiat Chrysler Automobiles.
It was the beginning of one of the most remarkable rescues in the auto industry. The initial terms gave Fiat a 20% stake in Chrysler, the United Auto Workers Union 55% and the US and Canadian governments held the rest. But the Italian carmaker could claim more equity if it met two requirements:
- The company would have to assemble in North America a small car that would be fuel-efficient at a time of rising gasoline prices.
- It would have to build a small, fuel-efficient engine on US soil.
In exchange, Fiat would get control of Chrysler, free from liability, without paying a dime.
Once that happened, Mr. Marchionne, having found the key ingredients to the relaunch of an automotive giant, got down to work – restructuring of the business.
He separated the pickup trucks from the Dodge brand and formed an entirely new pickup line called RAM, whose trucks were marketed for size, engine strength and fast acceleration. That brand, along with the Dodge line, which he successfully reimagined as the maker of a new American muscle car, took off in the US. The Jeep brand also thrived under his helm, with international sales giving Fiat Chrysler a footprint in China, the world’s biggest auto market. And again, it took only two years for FCA to turn profit.
He also changed the management structure at Chrysler – a signature tactic he had used throughout his career – and refused to sit in the chairman’s office on the top floor.
“I’m on the floor with all the engineers,” he told 60 Minutes. “I can build a car with all the guys on this floor. That’s all I care about.”
In 2017, FCA sold 2 million vehicles in the United States (more than double its sales in the dark days of 2009), while globally FCA sold 4.7 million cars last year. The company is 3rd in US sales and 8th globally. FCA has also trailed its competitors in adopting electric vehicle and self-driving technology, which many deem the industry’s inevitable future.
“It’s highly unlikely that Chrysler would exist today had he not taken that gamble,” Autotrader.com analyst Michelle Krebs, told AP. “The company was in such bad shape, being stripped of any kind of resources by the previous owners.”
So it seems that the automobile industry landscape would look very different had it not been for the quirky Italian-Canadian who liked joking and hated wearing ties and losing time on choosing clothes every day – he stuck with wearing black sweaters over checkered shirts and black jeans ever since that one day in 2006 when he just showed up at a meeting in the ensemble and decided it worked for him.
Though he cut a somewhat nondescript figure in his unchanging uniform of black sweater and jeans in a sea of suits and ties, Mr. Marchionne was a driven and energetic figure. He was fueled on strong espresso coffee (he drank as many as 26 a day) and endless packs of Muratti cigarettes, whiled away the time on his numerous transatlantic flights with intense sessions of poker and set a ferocious professional pace with which his employees and partners were expected to keep up. He liked to let off steam by driving his stable of Ferraris round the company’s Maranello test track.
“When you’re pissed off, there’s nothing better than this,” he said.
In his last public appearance on June 26th, Mr. Marchionne appeared fatigued and out of breath as he presented a Jeep Wrangler to Italy’s paramilitary police, the Carabinieri, at a ceremony in Rome. He then noted that his father had been a Carabiniere and praised the group’s “values that were at the basis of my education: seriousness, honesty, sense of duty, discipline and the spirit of service.”
Days later, he went to Switzerland to undergo what FCA described as a shoulder operation. It was not said what happened after he left the operating room, except that he suffered complications that suddenly worsened shortly thereafter.
In an emergency board meeting during the weekend prior to Mr. Marchionne’s death, FCA chose the head of its Jeep division, Mike Manley, as his successor. On Wednesday, FCA Chairman John Elkann announced that the longtime CEO had passed away, saying: “Sergio Marchionne, man and friend, is gone.”
The impact he’s had on the community was apparent in the many tributes paid in the days after. The message was clear – Sergio Marchionne was the best among them and he will be missed.
Here at CRS Automotive, we share the sentiment.