MOTORSNEWS FIAT AUTO:An unorthodox leader has brought remarkable success to a once-troubled firm, writes PADDY AGNEWin Rome
IF THE NEGOTIATIONS are to work out well this month, we might have to change the name of Fiat. Why? Well, people of a certain age know only too well that Fiat (Fabbrica Italiana Automobili Torino) colloquially used to stand for “Fix It Again, Tony”.
There was a time when motorists, perhaps unfairly, perceived Fiats as not always 100 per cent reliable. If current negotiations between Fiat, Opel and the German government come to fruition, then the Turin-based car-maker may be transformed into a new European giant, comprising Fiat and Opel – not to mention Chrysler.
Industry analysts estimate that the new company would guarantee revenues of €80 billion and sales of six to seven million cars, making it second only to Toyota on a world scale and putting it ahead of both Renault-Nissan and Ford.
The Opel negotiations, too, come just days after Fiat agreed a deal with Chrysler which saw it take an initial 20 per cent stake in the crisis-ridden US carmaker. This, too, was a deal that had the blessing of none other than US president Barack Obama. Little wonder, then, that some of us feel that Fiat ought to consider changing its name to “Fias” (Fix It Again, Sergio).
The Sergio in question, of course, is Fiat Auto chief executive, 56-year-old Sergio Marchionne, the man responsible for what analysts consider to be one of the most remarkable turnarounds in the auto industry.
When Marchionne arrived in Italy to take over at Fiat in the summer of 2004, things were not looking good. Sales were down, with Fiat's share of the European market having shrunk from 9.4 per cent in 2000 to 5.8 per cent. Morale was not good. In a recent article for the Harvard Business Review, Marchionne himself describes the moment vividly:
“Imagine showing up in June 2004 and being the fifth guy to try to resuscitate what appeared to most people to be a cadaver. And just imagine what management thought. These poor fellows saw this executive (almost a foreigner – I’d left Italy in 1966) coming from outside the car industry to be their new leader.
“They all sat there thinking: ‘Here we go again. We’re going to have to teach this guy what the business is about, and if he ends up being like last time, we’re screwed.’ I could see it written all over their faces. I would have felt exactly the same, had I been in their shoes.”
Of course, this guy did not screw up. Even if the Fiat group two weeks ago announced a net first quarter loss of €410 million (compared with a €405 million net profit in the first quarter of 2008), the auto company is still doing a lot better than its main rivals. March’s figures showed that Fiat sales are up 14.3 per cent on the same period last year, while the company’s share of the European market has climbed back to 9.1 per cent, close to the levels of 2000.
Marchionne likes to point out that Fiat Auto ended 2008 with a $1 billion (€747 million) profit from the sales of 2.2 million cars, more than General Motors made from the sale of eight million cars. (For the record, Fiat Auto comprises Fiat, Alfa Romeo and Lancia, while the Fiat Group also includes Ferrari, Maserati, truck-maker Iveco, agricultural machines producer CNH, Fiat Powertrain Technologies and Magneti Marelli. The current negotiations with Opel are based on the premise that Fiat Auto would be separated from the Fiat Group.)
The thing about Sergio Marchionne is that he is not a “suit”. He turns up for work most days in a sweater and open-necked shirt. In a conservative country like Italy and in a stuffy old work environment like Fiat’s, he might as well turn up naked.
That sartorial informality obviously reflects his Italo-Canadian background, because although he was born in Chieti, central Italy, the son of a policeman, he emigrated to Canada in 1966 at the age of 14, returning to Europe some 27 years later.
To this day, he “works and thinks” in English, with Italian business reporters often having to wait for the Italian translation of his English-language press communiqués.
Yet Marchionne’s sartorial and linguistic flexibility proved to be just the tip of his revolutionary iceberg.
In a short period of time in Turin, he turned the company upside down. He threw out what he has called the “Great Man” model of leadership, in which senior executives took no real decisions but waited for the boss man (for a long time Gianni Agnelli) to decide.
He reshaped management, laying off people “who had too many of the old habits ingrained in them” and appointed younger executives who might not necessarily come from an engineering or car-building background. He points out proudly that the Alfa Romeo and Fiat divisions are now run by men aged 40 and 42 respectively.
He also claims that he has given his senior management more responsibility, while simultaneously holding them more accountable.
“If you want to grow leaders, you can’t let explanations and excuses become a way of life. That’s a characteristic of the old Fiat we’ve left far behind.”
The net result, of course, is that these days he is seen as something of a hero in the automobile industry.
New cars such as the Lancia coupé, the new Bravo, the Grande Punto, the Panda and, above all, the new, retro 500 are selling like hot cakes. It is true, of course, that in the current climate the Fiat low price range/small car range will always prove attractive.
Yet Fiat’s turnaround came before the recession. Marchionne’s business performance won him at least one important admirer in Barack Obama, who has gone on record to say that Fiat has “achieved what no one could do in Detroit”, namely to turn “a company on the verge of collapse and make it profitable”.
The basic theory behind the Chrysler deal is the hope that the US car-maker can be rejuvenated by a marriage to Fiat that would see it adopt the Italian car-maker’s expertise and know-how in the production of smaller, fuel-efficient cars. In return, and for no cash injection into Chrysler, Fiat gets a valuable foothold in the US marketplace, via both Chrysler plants and the company’s nationwide dealership network.
The basic theory behind the Opel deal is Marchionne’s long-held view that, on its own, Fiat could not survive. He has predicted that in two years’ time, there will be only six global car-makers still standing.
"The need to achieve large economies of scale – to share the huge investments in product and market development – will result in a new round of aggregations," he said in an interview with the Washington Postlast month.
The remarkable thing, too, is that the “new round of aggregations” comes at a moment of industry crisis which has not only prompted state involvement in the sector but has also persuaded GM and Chrysler to pass on valuable assets to Fiat, essentially for free. As we said, they really should consider changing that name. Fix It Again, Sergio.