Fiat’s Sergio Marchionne leaves a legacy worth remembering

Many CEOs know how to soar, but few know how to land the plane. One exception was Sergio Marchionne. The Canadian-Italian leader was one of those dynamic, old school executives who was grounded and anchored in reality, a rarity in the contemporary world. He died on July 25 at the age of 66.

Marchionne first saved FIAT and then did the same thing five years later when FIAT took control of Chrysler from the United States government and turned the combination into a profit generator.

He took the driver’s seat at a battered and indebted FIAT in June 2004, an accountant and tax specialist who described himself as a corporate fixer. He had no previous automobile industry experience and was FIAT’s fifth CEO in less than two years.

Thus began his first remarkable turnaround. FIAT was near death when Marchionne became CEO. It was heavily indebted, had suffered huge losses, and was running out of cash. He took dramatic measures to get FIAT off its knees and return it to financial health, including shuttering factories, laying off thousands of employees, and cutting the time it took to bring new models to market from four years to just 18 months.

A key issue for FIAT was its relationship with General Motors. In 2001, the two had entered into a partnership that gave FIAT a put option to sell the 80 percent of the company it still owned to GM. Sergio Marchionne decided to play hardball, persuading GM to pay $2 billion to sever its ties and end its troubled alliance with FIAT. General Motors paid that huge sum not to buy FIAT.

Equally important, he dismantled the bureaucracy and focused on developing leaders, promoting high-potential young managers to senior positions, creating a flat organizational structure, and linking and leveraging information and knowledge throughout the firm. He constantly reminded the organization that he could not make all the decisions and created an entrepreneurial environment. By 2005, FIAT had returned to profitability.

In 2008, the global automotive industry was in a deep crisis. The following year, Mr. Marchionne found himself in a familiar situation. FIAT struck a deal with the United States government to take on the ailing Chrysler group and save several hundred thousand jobs in exchange for providing small-car technology. There was much skepticism about his ability to turn the firm around and grow the combined FIAT Chrysler into a profitable global automaker.

Marchionne chose an office in the industrial engineering department on the fourth floor of Chrysler’s headquarters, sending a clear message that he was accessible and wanted to be where the action was. He understood that Fiat Chrysler Automobiles was too large and complicated for one person to lead, and that human capital is a scarce strategic resource.

Just as he had done at FIAT, Marchionne fired most of the top management at Chrysler in 2009 and installed a dozen newcomers. By the end of the year, almost no one from the previous senior leadership team remained.

As he explained, “It is not a matter of how good they are at their jobs; it is a matter of change. I can spend 12 months arguing with them about what and how to change, but this won’t work and will take a lot of time. I look for the youngster. They don’t have seniority, they don’t play the corporate habits; they’re pure.”

The chain-smoking, espresso drinking CEO was direct and demanding, requiring his senior managers to be available 24/7 to match his own commitment. Like other successful executives he focused on setting stretch goals, developing a clear strategy, constantly communicating it, and ensuring proper execution of the strategy – all while managing to stay cool.

The combined Fiat Chrysler Automobiles group’s stock price nearly quadrupled over the past four years of his stewardship. Last year, the firm posted $4.4 billion in pre-tax profits.

Grazie mille.

Originally Published: August 18, 2018