Fiat Chrysler Prepares for Future Without CEO Who Saved Company
(Bloomberg) -- Fiat Chrysler Automobiles NV is preparing for the premature end of the Sergio Marchionne era.
The 66-year-old native of Chieti, Italy, out on medical leave for the past several weeks, won’t return to his CEO roles at the Italian-American automaker or at race car manufacturer Ferrari NV, according to people familiar with the matter. The boards of both companies are preparing to name replacements for him on Saturday, said the people, who asked not to be named discussing confidential matters.
Marchionne’s health condition, which the company hasn’t discussed in detail, speeds up the timeline for a succession decision by early next year that was already seen as a crossroads for the company. Marchionne turned around an ailing Fiat when he took over a more than a decade ago, and he’s been closely tied to the company’s success. Who to run the company is just the first of a number of pivotal choices -- like whether to remain independent -- facing Chairman John Elkann.
Elkann, heir of the founding Agnelli family, has said an internal candidate will replace Marchionne at Fiat Chrysler. Chief Financial Officer Richard Palmer, Europe chief Alfredo Altavilla and the head of the Jeep and Ram brands Mike Manley are the top candidates, according to people familiar with the matter. Meetings took place in Turin on Friday to choose his successor, the people said.
Marchionne, known for his rumpled sweaters and nonstop work habits, is one of the longest serving CEOs in the auto industry. He was appointed in 2004 as the fifth Fiat chief in a two-year period. He managed to return the carmaker, which had lost more than 6 billion euros in 2003, to profit in 2005 by cutting costs and laying off workers, and then looked for a partner.
With the acquisition of Chrysler in 2014, completing a five-year process, he gave Fiat the global scale needed to survive. Still, as the world’s seventh-largest automaker, the company may lack the size it needs to compete in an industry being reinvented by the emergence of autonomous driving and electrification.
Fiat Chrysler has been facing questions about Marchionne’s health for almost a month -- his last public appearance was June 26, when he spoke at an event in Rome. The company said on July 5 that the CEO underwent an operation on his right shoulder and was expected to require “a short period of convalescence.”
The three groups controlled by the Agnelli family are set to name internal successors for Marchionne’s jobs. Louis Camilleri, a former Philip Morris International Inc. chairman and a member of Ferrari’s board, will be named CEO, with Elkann taking the chairman role, the people said. Truck and tractor maker CNH Industrial NV is set to name one of its existing board members as chairman, they said.
At Fiat Chrysler, Elkann will likely split Marchionne’s duties between his closest aides, with one taking the CEO role, the people said. Marchionne was also head of Fiat Chrysler’s North American unit.
Filling his shoes won’t be easy. The executive is seen as one of the industry’s most skilled turnaround artists, not only saving Fiat from potential collapse, but later engineering its acquisition of Chrysler, which likely wouldn’t have received U.S. government backing for its 2009 bankruptcy without the involvement of its Italian partner.
Marchionne is known for seldom taking a break, often sleeping on the couch of his private jet while traveling overnight between Turin, Detroit and London, the three homes of the automotive group. Weekend meetings were an ordinary routine for the executive, who favored black
sweaters to elegant suits so he didn’t have to waste time in the morning deciding what to wear. He drank volumes of espressos daily and was a chain smoker before quitting both about a year ago.
In recent months, he was preparing to slow down but wanted first to complete the five year plan to rid the carmaker of industrial debt, making it financially stronger and able to survive the next downturn. "I am a fixer. Until something is definitively fixed, I can’t stop," he has said.
Shaking Things Up
Marchionne has continued to shake up the industry with controversial moves that haven’t always endeared him to his counterparts. Chrysler stopped making most passenger cars 2016 to focus on SUVs, a decision that has since been followed by Ford Motor Co. and General Motors Co. In Europe, Marchionne has moved away from mass-car production, transforming the Turin plant that churned out some 500,000 cars a year in the 1960s to what will now be a niche producer of Alfa Romeo and Maserati SUVs.
As recently as March, at the Geneva car show, Marchionne was among the executives who refused to go along with a proposal by German rivals to issue a statement reiterating the industry’s commitment to diesel technology. “They didn’t get support from the others and were left by themselves,” he said then.
He’s also focused on brand building, spinning off Ferrari into a separate trading company, a move that’s built enormous value for the Agnelli family and other shareholders. Jeep, which produced about 300,000 cars in 2009, is now a global brand that will sell about 2 million vehicles this year after expanding in Europe, China, India and South America.
Fiat Chrysler and Ferrari share a controlling shareholder in Exor NV, the holding company run by Elkann. Exor also controls CNH Industrial NV, the truck and tractor maker where Marchionne is chairman.
CNH Industrial’s board is also expected to meet Saturday to name a replacement for Marchionne, the people said. Representatives for Fiat Chrysler and Ferrari declined to comment, while a representative for CNH Industrial wasn’t immediately available.
Ferrari will name Louis Camilleri, a board member and former chairman of Philip Morris International Inc., its CEO, Automotive News reported on Friday, citing a source familiar with the decision.
The Italian-American automaker is scheduled to report second-quarter earnings on July 25. Palmer -- seen by some investors as the top contender for the CEO job -- probably will lead the conference call, people familiar with the matter said earlier.
Marchionne has been vocal for years on the industry’s need for more consolidation. His plan to create with General Motors the world biggest carmaker was rebuffed in 2015. Since then, He and Elkann decided to concentrate on the more lucrative SUVs and higher-margin brands.
“This business, if you really want to do it well, is all-consuming,” the CEO said in an interview with Bloomberg News in Detroit in January. “I am tired. I want to do something else.”
On June 1, Marchionne presented his last plan for the carmaker. His closing remarks were directed to his successor.
“The origins of FCA are a group of people from Fiat and Chrysler who faced the most difficult situations in the last 10 to 15 years. They confronted the threat of losing their dignity by losing their work," Marchionne said. "Can Marchionne leave a script or instruction? The answer is that there is no script or instruction. FCA is a culture of leaders and employees that were born out of adversity and who operate without sheet music,
that is the only way we know.”
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