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In Memory of Sergio Marchionne

VAROL KARSLIOĞLU

 

Sergio Marchionne came into the auto industry 15 years ago as an outsider, a middle-aged accountant-turned- corporate strategist with no experience about the automotive industry.
When he died on July 25th at the age of 66, he had become one the industry’s great leaders matured in the difficult years of early 21st Century. His long, sleepless hours and intercontinental travels filled with smoking and espresso took its toll.
The Italian-Canadian guy pulled Fiat and Chrysler from the brink of failure and made them work together globally. On June 1, he had said he expected Fiat Chrysler Automobiles to at least double its adjusted earnings from 2017 through 2022.
Born into postwar Italy, where family members had been killed by soldiers or partisan unrest, Marchionne grew up on Italy’s Adriatic coast. His family moved to Toronto when he was 14, and he later studied philosophy and other subjects at Canadian colleges, receiving business and law degrees before becoming an accountant. He rose through management ranks at several businesses in Canada and then Switzerland, becoming a tax specialist, attorney and corporate fix-it man.
His success at the Swiss quality-inspection company, SGS, made him known and respected by the Agnelli Family, one of the biggest shareholders. And shortly after this, he was a board member of the Agnellis’ primary business, Fiat.
As he took over Fiat as CEO, the Italian automobile conglomerate had lost $2.5 billion from its car operations in 2004. He provided a significant cash injection by negotiating a payment of more than $2 billion by General Motors to settle past contractual obligations with Fiat. He closed inefficient factories and restructured debt, then focused on expanding Fiat’s product line, investing €10 billion to develop 20 new models in four years.
The turnaround made Fiat an independent, cash-rich player by the end of the decade, just as the economic crash of 2008 hit the U.S. and battered the auto industry.
And in 2009 he dared to acquire for Fiat a 20 percent stake in the financially disastrous Chrysler.
With this strategic and transcontinental move, the man in black sweaters became a star of the automotive world: Although dressing the same everyday, he had multiple hats: Chairman and CEO of FCA, chairman and CEO of Ferrari, chairman of Maserati, chairman of SGS and chairman of CNH Industrial, a European producer of trucks, buses, tractors and construction vehicles.
He later sized up his challenge at Chrysler as rebuilding its product line.
Marchionne’s strategy for returning Chrysler to profitability was to invest in new products, with Fiat and Chrysler sharing vehicles, engines and factories.
Ram was spun off from Dodge. Younger Chrysler executives replaced veterans and were handed ambitious sales and financial targets but with autonomy to reach them. The Jeep lineup was nourished and expanded globally. Chrysler’s American roots were played up in advertising — most famously with the tag line “Imported from Detroit” — that drew plaudits from dealers, employees and many consumers.
By May 2011, the company was healthy enough to enter the private capital markets and shed its high-interest government debt.
By 2014, Fiat had gained full ownership of Chrysler, but Marchionne’s original plan to expand products and restore profits at Fiat Chrysler was thwarted by changing consumer preferences. The small and cute Fiat 500’s were not so popular as the consumer preferences moved to  pickups, SUV’s and crossovers in the recovering US economy.
Not his every action served the interests of FCA: In the final days of the Obama administration, when the EPA alleged that FCA had undeclared emissions software on diesel Ram pickups and Jeep Grand Cherokee SUVs, Marchionne angrily protested. His steadfast denials likely factored into delayed certification of the 2017 Ram 1500 EcoDiesel and difficulty earning certification on other vehicles.
Marchionne also surprised the auto industry three years ago with his provocative vision for the global business in a presentation called “Confessions of a Capital Junkie.” He complained that the auto industry generates a low return on capital in large part because each automaker incurs the same high expenses to develop the same products and technologies, so they can achieve the same results.
In calling for more industry consolidation, Marchionne even proposed that FCA should merge or be acquired. That appeal was roundly rebuffed by his two chief domestic competitors, Ford Motor Co. and General Motors.
Adapted from Lindsay Chappell’s article in Automotive News with contributions from Larry P. Vellequette and Reuters.