2018/07/23

Fiat Chrysler appoints a new boss

Mike Manley has a tough act to follow
THE question of who would replace Sergio Marchionne has been in the air for a year or more, ever since the boss of Fiat Chrysler Automobiles (FCA) announced that he would step down in 2019. But the way the answer came was both shocking and sad. Complications after a routine operation around three weeks ago have had a devastating effect on the health of the 66-year-old, who was hard-working even by the standards of big-name CEOs. Not only will Mr Marchionne leave the helm of FCA earlier than planned but he will also quit as boss of Ferrari, a sportscar-maker, which he had been expected to lead until at least 2021.
A sudden deterioration in Mr Marchionne’s condition forced FCA’s board to meet on July 21st to confirm that Mike Manley, boss of the Jeep brand, would take his place. Replacing someone who is regarded as one of the all-time stars of the car industry is a tough job.
Mr Marchionne was refreshingly outspoken in an era when bosses have become ever more wary of courting controversy. Coming from outside the car industry—he trained as an accountant rather than working his way up through the ranks—helped him bring a fresh eye to its shortcomings. Profits in the mass market are slender at best, the result of too much duplicated investment under the bonnet on technologies that are indistinguishable to carbuyers. His solution was mega-mergers to share costs. This would leave the world with only a handful of vast carmakers.
Turning around ailing firms was his speciality. In his 14 years at the wheel he rescued two carmakers from bankruptcy: first Fiat, where he took over in 2004, and then Chrysler, acquired in the wake of the financial crisis in 2009. Always on the lookout for a deal (almost every large carmaker has been rumoured as a merger partner over the years) some had suggested that he had one last big transaction in the works before he stepped down.
FCA had always promised that Mr Marchionne’s successor would come from within. Mr Manley, a British former car salesman, has worked his way up through the company to head the Jeep division, one of the best-performing parts of FCA. He was heavily involved in the latest five-year plan, unveiled on June 1st, which calls for big leaps in sales and profitability.
Mr Marchionne’s achievement is that Mr Manley will not have as tough a task as he faced. Through smart management, cost-cutting and canny capital allocation, much of the drama has been taken out of FCA. Spinning off businesses such as CNH, Fiat’s industrial arm, and Ferrari, as well as getting out of making saloon cars in America in favour of SUVs and turning factories in Italy that made barely profitable small cars into plants making premium Maseratis and Jeeps, has turned FCA into what Jefferies, a bank, calls a “normal” carmaker.
That doesn’t mean Mr Manley’s job is easy. FCA relies too heavily on Jeep’s SUVs and RAM pickups, which generate two-thirds of its revenues. The latest plan calls for a big expansion of the low-selling Alfa and Maserati brands, which have for years remained tantalisingly on the verge of a comeback. And like all other car bosses Mr Manley has to negotiate a future of electric cars, mobility services and autonomous cars, which will require huge investments with uncertain outcomes.
Mr Manley’s elevation was not the only decision this weekend for John Elkann, the chairman of Exor, the Agnelli family’s investment firm which controls FCA. (Mr Elkann also sits on the board of The Economist’s parent company.) He also had to find a replacement boss for Ferrari, appointing Louis Camilleri, and a chairman for CNH, a role which will be taken by Suzanne Heywood (who is also on the board of The Economist Group).
FCA’s new leadership have some big decisions of their own, above all whether the world’s seventh-largest carmaker is big enough to thrive in an era of autonomy and electrification. The list of potential partners is dwindling. Most of the big Western carmakers already have enough on their plates to consider a mega-merger as well; China’s emergent giants lack the cash to buy FCA. Mr Marchionne’s feat is that he built a company that is strong enough to stand alone, if it has to.
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