EoW July 2009

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EuroWire – July 2009 25
Defense Council’s climate center, told the LA Times. “It’s going
to cut carbon pollution. The drivers of these cars are going
to save money at the pump. It’s going to cut our national
oil dependence.”
Fiat and Chrysler
Will the like-minded executives
Sergio Marchionne and Bob Nardelli
take to double harness?
Fiat and Chrysler are entering an alliance in which Turin-based
Fiat will take an initial 35% stake in the troubled Detroit auto
maker, with an option to raise its ownership stake to 55% later
on. Fiat will not be required to pay any cash to Chrysler right
away. Instead, the Italian company will receive equity in Chrysler
for investments it will make in retooling a Chrysler plant to
produce Fiat models for the US market. The terms of the deal,
markedly favourable to Fiat, re ect the relative standing of
the two companies. The success of their merger depends to a
considerable extent on another combination of not-quite-equals:
Sergio Marchionne and Bob Nardelli, whose time at the head
of the European and the US auto maker, respectively, had very
di erent outcomes. Examining their lives as well as their records,
Detroit Free Press business writer John Gallagher even so found
more points of similarity than disparity. (“Two Execs Cut from the
Same Cloth,” 3rd May)
Noting that both executives “are known for tough calls,”
Mr Gallagher wrote that Mr Marchionne has proven just as
willing as Mr Nardelli to undertake a top-to-bottom remake
of a company in distress. And the Fiat chief, Italian by birth,
has deeper roots in North America than is generally realised.
Mr Marchionne, a lawyer and accountant, has spent most of his
adult life in Canada and holds his Master’s in business from the
University of Windsor, in Ontario. In the 1990s he was back in
Europe, working for a Swiss company. He joined the Fiat board
in 2003 and took over as CEO in 2004, promising – and imposing
– “radical surgery” on an “organizational structure that needs to
be snapped out of its stupor.” For his part, Mr Nardelli started
out at General Electric, then spent several years as head of the
big-box US retailer Home Depot. When, in 2007, private equity
rm Cerberus Capital Management bought a majority stake in
Chrysler from Germany’s Daimler, Mr Nardelli came in as CEO
with, according to Mr Gallagher, “a reputation for grabbing an
ailing management team and shaking it until it hurt.” It will never
be known whether the strong-arm methods would have worked
as well for Chrysler as for Fiat if only the US auto industry had
not imploded on Mr Nardelli’s watch. But implode it did, and the
rest is recent history. The Free Press summarises: “Mr Marchionne
returned Fiat to pro tability, reduced its debt, and invigorated
product development. Chrysler under Mr Nardelli has slipped
from bad to worse, although the collapse of US auto sales gets a
lot of the blame for that.”
❈ The Fiat-Chrysler merger will extend the reach of the two
auto makers, both relatively small in comparison with the
global giants General Motors, Toyota, and Renault-Nissan.
Chrysler sold about 2 million vehicles last year, most of them
in the US market. Fiat sold 2.5 million cars in 2008, mainly in
Europe and Latin America.