Ten years ago, a sombre Sergio Marchionne stood in front of a crowded Turin press conference in a formal suit and dark tie to say that he would work hard to pull Fiat SpA back from the brink of bankruptcy.
Brought in by the controlling family hours after Chairman Umberto Agnelli had passed away, the chief executive officer faced losses at the automaker that had ballooned to more than €6 billion from 2001 to 2003. After returning the car giant to profit and completing the acquisition of Chrysler Group, Marchionne (61) marked his first decade as chief executive at the weekend and is again at a turning point, with some investors skeptical over his plan to boost sales 61 percent to 7 million cars in 2018.
To do so, Marchionne will have to prove that not only is he a talented dealmaker, he also knows how to build cars that will resonate with consumers. “The turnaround maestro, who saved Fiat and Chrysler helped by his financial skills, must now show, by making the right products, that he’s a ‘car guy’ too,” said Giuseppe Berta, a professor at Bocconi University in Milan who knows Marchionne personally.
Since taking over on June 1st, 2004, Marchionne has tripled revenue, operating profit and the share price. His goal now is to boost net income to about €5 billion euros in 2018 from the €904 million earned last year by selling more upscale vehicles, including new Alfa Romeo models built in Italy.
“I only have one objective: to bring that home,” Marchionne, who has long since ditched the formal suits for casual sweaters, said of the new strategic plan he announced in early last month. “It’s that simple,” he said, adding that he’d celebrate his 10th anniversary as CEO by “working”.
The Italian-born executive, who moved to Canada with his family when he was 14, is more recognised for the deals he sealed at Fiat, including a $2 billion pay-out from General Motors to exit a partnership in 2005, than for creating models. Helped by the GM deal, he managed to return Fiat to profit in 2005, his first full year as CEO.
The 500 is by far the most successful model introduction under Marchionne, with over 1.2 million sold since he brought back the iconic car in 2007. He’s also managed to boost the Maserati brand with the Quattroporte and Ghibli, which are helping the luxury brand more than double 2014 sales. Thus far, he hasn’t succeeded in rejuvenating Alfa Romeo, with models such as the Brera hatchback and the 159 failing to win over buyers.
Marchionne is now pushing the reset button on the marque, a key part of his 2018 plan, by dumping all its autos except one and starting fresh. He’s also reducing the Lancia brand to a single vehicle to be sold only in Italy, ditching the Delta hatchback and Thema and Flavia saloons.
“The industry, I don’t think, thinks of Sergio as a car guy and clearly he has had success as a turnaround leader,” said Jeff Schuster, an auto analyst with LMC Automotive. “That’s his forte: he’s a fixer. But I think he’s also maybe a closet car guy.”
By investing €55 billion through 2018, Marchionne’s goal is to boost sales and profit with more upscales models from Alfa Romeo and Jeep that will be sold globally. Fiat will invest €5 billion alone to build eight new Alfa Romeos in Italy as part of a strategy to boost the brand’s sales to 400,000 in 2018 from about 73,000 last year.
Marchionne has dismissed arguments that he’s not deeply involved in the models the automaker builds and said last week it will take time “for opinions to change” that his targets are achievable. “We are working our asses off for it,” he said. “Let me go work and I’ll try to make the guidance.”