Legends of wheels Part I:Sergio Marchionne

When it comes to a successful company, two people are usually given credit in the books of history. Those who founded the company and then those who directed the company. We did cover the most successful car company founders here  http://boyracer.blogspot.com/2011/01/car-founders-and-their-car-brands.html

It has taken me sometime to write a new article thanks to the responsibilities of personal life. Also, It took me time to shape the 'Legends of wheels' series. These people have played a more important part in shaping what the current automobile industry is.

The first part is dedicated to Sergio Marchionne. 

To better understand the feats achieved by Mr. Sergio Marchionne, We need to understand the man first. 

Sergio Marchionne is 59 years old. He currently holds the following positions. 

C.E.O., FIAT S.P.A. (Fiat, Ferrari, Maserati, Alfa Romeo, Lancia and Abarth)

Chairman and C.E.O., Chrysler Group LLC (Dodge, Chrysler, Jeep, Ram, SRT, MOPAR)

Chairman, of FIAT Industrial SPA

Chairman, CNH Global N.V.

Chairman, European Automobile Manufacturers Association

Chairman, SGS

Board of Director, Philip Morris International 

Ex Board of Director, UBS

The need to go through this list at the beginning of the article is important to justify the fact that this man keeps six blackberry phones with him. Unlike many he justifies using the company aircraft by shifting between Detroit, USA and Turin, Italy. He holds dual citizenship of Italy and Canada.  His qualifications go something like this.

Canadian Certified General Accountant

Barrister

Bachelor of Commerce

Masters in Business Administration

Bachelor of Law

Mr. Marchionne is also Justifiably the first person to be covered in the series for he holds the record of turning around two Giant behemoths to profitability namely FIAT and Chrysler.

Marchionne was elected as an independent member of the Board of Directors of Fiat S.p.A. in May 2003, until being appointed CEO in 2004.  Just like every large company, things at FIAT were also in archaic mode. Communications within the company took forever as executives didn't talk directly. With the arrival of Marchionne, things changed. All messages in the company are now direct and precise.  The things were so bad, FIAT was considering offloading its car business. His main achievement has been reduction of the levels of hierarchy at the company which usually bog down performance at corporations. These major changes in the company helped FIAT put out newer, more efficient and reliable cars in the market faster than competition. 

In late 2004 Fiat as a last resort put its car business on the table for General Motors. GM, the world's leading car maker, laughed off the challenge. Losses of €2 billion ($2.5 billion) in cars (which account for just under half the company's €49 billion sales) dragged the whole group into a 1.6 billion loss. Today, Fiat is the owner of a major GM competitor, Chrysler. But profitability started improving from the first quarter Marchinne took over. Fiat saw its first profit in more than 4 years in 2006 with a profit of 196 million Euros. Marchionne was instrumental in reducing the manufacturing costs on the Third generation Fiat Punto when he joined hands with General Motors in 2005. Other cars based on the same Fiat-GM small car platform were Opel Corsa, Fiat Fiorino, Alfa Romeo MITO, Fiat Linea, Fiat Doblo, Opel Meriva, Opel Combo and Fiat 500. The platform sharing was obviously a virtue brought over by General Motors. 

With the success of Fiat Grande Punto especially in the developing markets, Fiat went on to win the masses again with the launch of Fiat Bravo which also was a run away success for the company. Looking at the success of Mini Cooper for BMW and the Beetle for Volkswagen, Marchionne pushed for the launch of a new Fiat 500. The car comes with about 500,000 customization options. The car has seen numerous limited edition options including a Ferrari version, Gucci version and a Barbie version. The 500 has won more than 20 awards since and has went on to be another iconic  car in the history of the company as well as the industry. Now every Fiat is the epitome of Italian Style and has its own personality.

Marchionne also followed the old saying 'If you can win em', join em.' where the need was felt. Fiat has been languishing badly in the Indian market (fastest growing market in the world) and Chinese market (Largest market in the world). Marchionne tied up with TATA (owner of Jaguar and Land Rover) for distribution and manufacturing in India and with Chery in China. Fiat also re-entered the markets of Australia and Mexico where it had exited previously due to weak performance. From a loss making Fiat of 2004, Marchionne turned Fiat into one of the largest profit making corporations in the world. Marchionne was also instrumental in Fiat re-entering the US and Canadian markets which the company had long dreamt of since its exit decades ago.

Alfa Romeo is Fiat's sporty brand, but its models are more famous in journals and magazines and less so on the sale floor, bursting on the scene to rave reviews and then fading fast. BMW sells about 200,000 Minis with one model, while Alfa sells many fewer with a handful of models. From now on, all new Alfas will be made from the same basic platform, to reap economies of scale. Likewise Maserati will be repositioned at the top end of the Alfa range and will also share components to cut costs. This is product planning and production in the manner of Toyota, the car company most admired by Mr Marchionne.

For too long, Fiat has pinned its hopes on the next new model. “Always counting on the next horse out of the gate,” says Mr Marchionne. “But you need to learn to breed lots of winning horses.” The Lancia brand, which has been in a state of apparent death for years, will get eight new models, six of them based on Chrysler products. How will Fiat pay for all of this? Platform and power train synergies certainly will help keep costs down.

Lancia will be twinned with Chrysler in an effort to revive the ailing up-market Italian nameplate and Marchionne's product-starved American flagship at the same time based on economies of scale. 

GM's Opel/ Vauxhall partnership is said to be the role model for the collaboration between Chrysler and Lancia. Chrysler would be phased out of the European market-it's models used to fill the gaps in Lancia's lineup overseas-and here in North America Lancia products would be used to expand Chrysler's limited range.

Imagine what would happen if a Ferrari designer blessed Chrysler models with some style? Fiat SpA, which now owns a controlling stake in Chrysler Group LLC is counting on Lorenzo Ramaciotti, the designer of the Ferrari 612 Scaglietti, to make Chrysler models appear at home in Detroit and Milan. 63-year old Ramaciotti has a goal to create a common styling for Chrysler and its Italian sibling Lancia in a bid to save/cut costs and double sales of each brand by 2014. Marchionne is aiming to increase sales of the group to 5.9 million vehicles by 2012.Critics have been skeptical about the success of the Union of Chrysler LLC and Fiat since the initial talks began. It has hardly been six years since Fiat itself came out of hard times. Chrysler on the other hand has been saved from Bankruptcy once before. Their sales were at an all time low. Being the smallest of the three, there was a big chance the government would concentrate only on Ford and GM. Also, the quality of their cars was sitting at the bottom of all quality charts. No new products were in the pipeline. Whatever chance might have been there was lost when Dieter Zietche of Diamler Benz announced their separation from the newly acquired Chrysler LLC. The whole industry had prepared their R.I.P speeches for Chrysler. Today Chrysler is amongst the most improved companies of 2012.

In 1998, Chrysler and its subsidiaries entered into a partnership dubbed a "merger of equals" with German-based Daimler-Benz AG, creating the combined entity DaimlerChrysler AG. To the surprise of many stockholders, Daimler subsequently acquired Chrysler in a stock swap, after the retirement of Chrysler CEO Bob Eaton. Under DaimlerChrysler, the company was named DaimlerChrysler Motors Company LLC, with its U.S. operations generally called the "Chrysler Group". On May 14, 2007, DaimlerChrysler announced the sale of 80.1% of Chrysler Group to American private equity firmCerberus Capital Management, L.P., thereafter known as Chrysler LLC, although Daimler (renamed as Daimler AG) continued to hold a 19.9% stake.  The deal was finalized on August 3, 2007.On April 27, 2009, Daimler AG signed a binding agreement to give up its remaining 19.9% stake in Chrysler LLC to Cerberus Capital Management and pay as much as $600 million into the automaker's pension fund.

It was obvious the company was dying when Daimler Benz had left Chrysler LLC to fend for itself.   No other carmaker wanted to join hands with a company which Diamler Benz could not lift. Marchionne, now chief executive of Fiat and Chrysler, has become America's darling since taking Obama's bailout loans for the US car industry in 2009 and saving Chrysler- in which Fiat has taken a controlling 58% stake. On May 24, 2011 Chrysler boosted sales by 24% and paid back the $7.6 billion loan six years ahead of schedule. This week it announced US March sales up 34% - its best month in four years. As it it were not enough, Marchionne declined to take any pay or bonus from Chrysler for 2011.

Ram Trucks was established as a subsidiary of Chrysler in 2009, as a spinoff from Dodge, using the name of the popular Dodge Ram line of pickups that is now sold under the Ram banner. The Ram brand was created following Chrysler's alliance with Italian automaker Fiat, and the plans called for Dodge switching to an exclusively car-based lineup with all pickup and future heavy-duty trucks by Chrysler being sold under the Ram brand. There is a strong possibility of adopting Fiat's Iveco Daily commercial van to fill the gap of the Sprinter which Mercedes ended the production of in 2008. Further collabrations similar to Lancia and Chrysler are also a strong possibility fusing the Italian stallion with American blood. 

Executives at Chrysler have stated their intention to compete in the semi-trailer truck category with Ram, a possibility that is aided by Fiat's ownership of Iveco and an already available network of Dodge dealers. Dodge cars are the, sporty fun to drive cars of Chrysler. Rumors from those around Marchionne have stated a strong possibility of fusing Dodge cars with Alfa Romeo. Alfa is also planning a rear-drive Spider based on a shortened Challenger platform for early 2014. Alfa Romeo has been a white elephant for FIAT. Volkswagen has been consistently persuing FIAT to sell the Alfa Romeo brand unsuccessfully. The brand which has been known as garage showpieces might now finally see more use with increase in reliability after they are based on Dodge cars. Dodge itself has seen a renewed enthusiasm from the youth after cars such as Dodge Challenger, Dodge Charger and the newly launched Fiat based Dodge Dart. 

The new 2013 Dart from Dodge built on the platform of the hot Italian Giulietta is attracting much interest, especially since it will be offered in the compact car entry level segment. The North American version of Giulietta, which is also the first  joint-venture vehicle produced by Fiat-Chrysler alliance had already made its appearances at the 2012 Detroit AutoShow and is on its way to showrooms, as the 2013 Italian-bread replacement for the Caliber.

Jeep has been the star of Chrysler LLC all along. Even when Dodge and Chrysler were not making a profit, Jeep was instrumental in keeping the company alive and kicking. Jeep was also one of the major reasons Diamler Benz gave consideration to Chrysler LLC. Even during the bankruptcy proceedings, many suitors had come forward to buy Jeep separately. Only Marchionne showed the courage to take the corporations as a whole and turn it around. 

Marchionne believed that only Jeep was the only established global brand in both Fiat and Chrysler portfolios. Chrysler's new partner Fiat SpA disbanded the ENVI division in November 2009, and removed the three ENVI models from its 5-year plan for Chrysler. There have been no announced plans to continue with the electric version. It was also announced that both the Patriot and Compass would get modifications for 2010, but will be discontinued by 2012, to be replaced by a single Fiat-based model. 

Marchionne has also recently signed a deal to build Jeeps in Russia for the global markets.  The reason for this is because currently Russia is the best market to be on the European continent which has been embroiled in recession. The Jeep Wrangler is as much of an American Icon as the Ford Mustang and Chevrolet Corvette. Various brands worldwide have imitated the famous signature grille in an attempt to gain sales. 

Fiat chief executive Sergio Marchionne said the automaker and US partner Chrysler aim to sell a combined 4.1m-4.4m vehicles this year, up slightly from the 4m sold in 2011. As an Italian newspaper commented - "A heresy, an impossibility, a cultural revolution. To imagine 'America in a (Fiat) 500' seems absurd, an oxymoron, just as not so long ago a black American president would have been unthinkable ... therefore it can happen."PS: Here's an excerpt from 60 minutes interview of Sergio Marchionne.