Tag Archive | "Fiat"

Ford follows GM’s lead in picking insider as CEO

Via The Detroit News

Ford Motor Co.’s decision to elevate Mark Fields to chief executive marks the second time since December that a U.S. automaker has tapped a company insider as its leader. The move leaves Sergio Marchionne, CEO of Fiat SpA and Chrysler Group LLC, as the longest-tenured head of a Detroit automaker.

In December, the General Motors Co. board named a veteran of more than 30 years, Mary Barra, to become CEO. For almost five years, the Detroit automaker had been run by two CEOs who came from outside the auto industry: former AT&T CEO Ed Whitacre, who had been appointed to GM’s board by the U.S. Treasury Department, and then another Treasury appointee, Dan Akerson, a partner at private equity firm Carlyle Group.

The 2006 hiring of Alan Mulally, a long-time Boeing executive to run Ford, marked a change for the U.S. auto industry that usually tapped industry veterans who rose through the ranks.

David Cole, chairman emeritus of the Center for Automotive Research, said Mulally “redefined the culture of Ford and got rid of the fiefdoms.” He predicted even after Mulally’s departure, the culture change would remain.

Coles said Mulally “came from a big, complex manufacturing company like Boeing” that had similar challenges.

He said Whitacre and Akerson didn’t have that kind of experience. “They were really very inexperienced in manufacturing,” Cole said. “Down the road, I think you could see another Mulally-type executive, but not an Akerson or Whitacre.”

When a majority stake in Chrysler LLC was sold by Daimer AG to Cerberus Capital Management LP, the New York-based private equity firm tapped former Home Depot CEO Robert Nardelli to run the company. When the Obama administration agreed to a new bailout of Chrysler in 2009, it forced a merger with Fiat SpA and gave control of Chrysler to the Italian automaker under Marchionne.

In January, Marchionne told reporters at the North American International Auto Show he planned to stay on for another three years. The CEO, a workaholic who has on occasion made three transatlantic flights in a single week, has discouraged speculation about when he will step down.

“Trying to second-guess when that is going to happen is a tremendous waste of time,” Marchionne told reporters in January, according to CNN. “Go buy a lottery ticket. You’ll have a lot more fun and the odds of you getting it right are greater.”

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Fiat Chrysler Maps Out Another 5 Years

Via The Detroit News

On Nov. 4, 2009, Sergio Marchionne took the stage at the Chrysler Technical Center in Auburn Hills to outline his vision for the born-again automaker.

The five-year plan Marchionne and his newly assembled executive team outlined at that daylong briefing for analysts and journalists offered an unprecedented view of the future plans of an American automaker, albeit one now controlled by an Italian company. It charted a course for the new Chrysler from the gates of history’s graveyard back to the top tier of the U.S. automobile market.

Marchionne promised big things for the company that Fiat had just acquired for nothing from an Obama administration eager to unload Chrysler to anyone willing to cover the electric bill: a return of the Fiat brand — and Fiat small car technology — to the United States, a rebirth of the Chrysler brand, even an electric vehicle to feed the administration’s appetite for green technology.

In four-and-a-half years, Marchionne and his team have accomplished most — but not all — of what they promised. They went above and beyond projections in some areas, including paying back the money they borrowed from the U.S. and Canadian governments six years ahead of schedule and buying the rest of Chrysler from a United Auto Workers-run trust on Jan. 1.

Now, on May 6, the management team will hold another daylong briefing in Auburn Hills to outline a new five-year plan, not just for Chrysler but for all of the brands of the newly constituted Fiat Chrysler Automobiles NV.

“They’ve made pretty good progress, considering where they came from,” said David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor. “The next step is to more fully integrate Fiat and Chrysler. They’re really in the middle of that right now.”

Before the 2009 briefing, many observers assumed Fiat had agreed to take up the burden of the bankrupt automaker simply to get control of its coveted Jeep brand. Others, including many financial analysts, worried that Chrysler’s liabilities would soon drag down a resurgent Fiat and promptly cut its credit rating.

Instead, Chrysler became the life raft that kept a struggling Fiat afloat as the European car market sunk to depths not seen in decades. And while Jeep has in fact become the spearhead of the company’s global growth strategy, Marchionne has made big investments in Chrysler, Dodge and Ram, too.

Marchionne made good on promises to share platform technology with Chrysler and bring an electric vehicle to market in the United States. A special “Aero” version of the Dodge Dart satisfied another key demand of the Obama administration: introducing a compact that got more than 40 miles to the gallon.

But other elements of the last five-year plan have been scrapped or delayed.

Alfa Romeo has yet to make the triumphant return to the United States that Marchionne promised four years ago. The Chrysler 200 and Jeep Cherokee were introduced later than scheduled, while plans to replace the Dodge Avenger, Jeep Compass and Jeep Patriot failed to materialize. So did the new Fiat-built Dodge and Chrysler subcompacts that were supposed to be in showrooms by now.

On the other hand, Chrysler has introduced substantially upgraded versions of the Jeep Grand Cherokee and Ram 1500 pickup that were not part of the product plan in 2009.

“This is going to have an effect on your balance sheet,” said Gualberto Ranieri, vice president of communications for the company. “There have been a number of changes to the plan, but the (overall) investment has been bigger than was originally intended.”

Since emerging from bankruptcy, Chrysler has announced investments of more than $5.2 billion and added more than 13,000 hourly employees.

That has been great news for communities such as Sterling Heights, where a Chrysler assembly plant originally slated to close in 2009 has instead become a state-of-the-art manufacturing facility building the all-new Chrysler 200.

And it has not just been hourly employees that have benefited from a resurgent Chrysler.

When Ranieri showed up for his first day of work at Chrysler’s Auburn Hills headquarters, there were just 7,500 men and women working in the largest office building in the United States after the Pentagon. Today, there are 14,000 — and that is not counting the hundreds of employees who have been moved off-site to other facilities in metropolitan Detroit, including Chrysler House: the company’s new satellite headquarters downtown.

The headcount is not the only thing going up at Chrysler, either. The company’s U.S. sales have risen for 48 consecutive months. That is partly due to a rebounding U.S. car and truck market, but Cole said it also is a testament to Chrysler’s improved quality and upgraded interiors.

“It’s day and night from Nov. 4, 2009,” Ranieri said. “That business plan was labeled as wishful thinking. The question was: ‘Are you going to die in 2010 or 2011?’ Nobody thought we were going to be alive in 2012. The news today is that Chrysler is kicking and alive, when five years ago it was labeled as dead.”

Cole said he thinks there may be more news to come as Marchionne pursues his overarching goal of turning Fiat and Chrysler into a global automotive powerhouse capable of moving 7 million vehicles annually.

“They may not have the economies of scale they may ultimately need for that,” Cole said. “It wouldn’t surprise me to see another partner drop into the game. I would guess that Sergio is keeping his eye open.”

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Marchionne’s Fiat Chrysler Plan Will Defy Global Rivals

Via Forbes

Investors in Fiat Chrysler Automobiles (FCA) might be confused about where the company really lives these days, but CEO Sergio Marchionne’s new five year plan next week is likely to leave nobody with any doubts about priorities as he marches the company towards matching and beating the competition.

When Fiat completed the merger with Chrysler earlier this year with the $4.35 billion buyout of the UAW’s stake, investors were in a spin about what nationality FCA actually was. Its shares will probably be listed in New York, it will be domiciled legally in the Netherlands, and pay tax as though it was British.

But Marchionne, who has said Fiat Chrysler must raise sales to between six and seven million a year to face down the likes of Toyota of Japan, General Motors, and Germany’s Volkswagen, won’t leave any room for doubt on May 6, as he demands Chrysler’s SUV maker Jeep, Fiat’s colorful Alfa Romeo and to a lesser extent upmarket Maserati lead the charge towards more sales and higher profits.

Last year, Fiat Chrysler sold about 4.4 million vehicles.

This won’t come cheap. Reviving Alfa Romeo alone will cost upwards of $7 billion. Some experts fear that simply raising output, without taking care to improve quality, won’t help profitability.

Stefano Aversa, co-president of industry consultants Alix Partners, said analysts concur that it will cost between three and five billion euros ($4.2 billion to $6.9 billion) to make Alfa Romeo an effective competitor in the premium sector against the likes of BMW, VW’s Audi and Mercedes.

Under a previous failed plan, Alfa Romeo was supposed to reach sales of 500,000 this year, with 85,000 in America. In fact Alfa Romeo made only 75,400 cars last year, down from 92,100 in 2012, according to Automotive Industry Data. Sales of Alfa Romeos will finally get under way later this year in the U.S. with small numbers of little, high-priced 4C sports cars.

Alfa Romeo has been a long-term money loser for Fiat, with losses of between $250 million and $500 million for the first 10 years of this century. Yet such is the perceived power of the Alfa Romeo brand that mighty Volkswagen has made no secret of its desire to buy the company. This is hard to believe when you consider Alfa Romeo’s distant sporting history has long been overtaken by models that were a nightmare of style over substance, exciting buyers with their fabulous looks, inspirational engine noises and driveability, but then disappointing with poor quality and plunging second hand values.

Aversa said products are likely to be at the forefront of the new plan that is about to be unveiled and will be the first for the new integrated FCA.

“Sergio Marchionne is likely to be much more centered on product and push forward premium vehicles from Alfa Romeo and Maserati, and I think he will continue to focus on the north American market with Chrysler doing well and on exploiting the brand Jeep globally.”

“On the emerging market side, Marchionne will certainly try to protect and leverage its leadership position in South America, which is still a market with unique opportunities, and to accelerate the development of China, which now seems to be on the right track, but still with a long way to go,” Aversa said.

Aversa describes India as an “unfulfilled promise” for most western manufacturers, including Fiat, but too important in the long term to skip.

Fiat is thought by some analysts to be dangerously over-borrowed, but Aversa doesn’t think it’s a big problem.

Any large manufacturer will need to make big investments on electrification, hybrids, aluminum and alternative materials to meet tough fuel consumption standards. For FCA, Aversa expects Marchionne to further leverage so-called mega platforms, which allow multiple vehicles to be made with the maximum amount of commonality and therefore reduce capital expenditures.

Aversa reckons Marchionne will announce plans for a new cheap car.

“I expect to see plans for a low-cost car. Almost all the big manufacturers are looking at this market segment. If done right it can be profitable and Fiat has the capabilities to address these low cost cars and make money,” he said.

International Strategy and Investment also expects Marchionne to give Jeep and Alfa a key role in the plan, and likes reports that suggest the plans for Alfa Romeo include it becoming a standalone entity, separately reporting its profits and sales.

“Indeed, the separation of Maserati has enabled the investment community to immediately recognize the brand’s progress, with revenues of 776 million euros ($1.1 billion) during the fourth quarter as shipments increased four times helping Maserati to a 10.3 per cent margin for the full year,” the investment bank said.

“Of course more important than reporting semantics next week will be the credibility of the plans for Alfa Romeo and Jeep themselves,” it said.

Some experts suggested that for FCA to make it big, it would also have to merge to create more volume and economies of scale. Companies like Mazda, Mitsubishi, Subaru, and Suzuki of Japan are said to be candidates. Even British based and India owned Jaguar Land Rover has been cited as a possible partner.

Others suggest that Fiat’s Ferrari supercar subsidiary might be on the auction block to cut debt.

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Car-Industry Insiders Ready to Retake Steering Wheel

Via The Wall Street Journal

Detroit car makers were rescued last decade by a group of outsiders with scant auto industry experience. Now the insiders are retaking the wheel.

Later this year, Ford Motor Co. Chief Executive Alan Mulally will pass the keys to Mark Fields, a 25-year veteran of the U.S. auto maker and its affiliates. General Motors Co. this year named Mary Barra, who started at the company as a college intern, to replace private-equity executive Daniel Akerson.

Within a few years, Fiat Chrysler Automobiles NV CEO Sergio Marchionne, the Italian-Canadian accountant and lawyer who took over Fiat in 2004, is expected to step down and name a replacement most likely from within its existing ranks.

The departure of the outsiders in many ways reflects the auto industry’s return to health. Directors in the last decade threw out their old playbooks—and in many cases were themselves tossed out—as executives failed to anticipate severe downturns. Bosses tied to the old ways were too plodding and trapped by earlier decisions to break the mold as the landscape changed.

“When things are going well, insiders are a natural place to look. When you are in trouble and needing a turnaround, you go to the outside,” said Sydney Finkelstein, a management professor at Dartmouth College’s Tuck School of Business.

Mr. Finkelstein cautions there is no evidence that outsiders do better, only that they are preferred when directors conclude big changes are necessary.

Outsiders with little ties to the industry orthodoxy, such as former AT&T Inc. Chairman Edward Whitacre, and later Carlyle Group’s Akerson and Boeing Co.’s Mulally, were recruited to bring fresh perspective and their records of success. Mr. Marchionne had successfully run a Swiss conglomerate in metals, packaging and chemicals before joining Fiat.

Often, management experts say, it is the speed of decision making that becomes critical during a crisis.

“The insider knows every reason why [they need] to move slowly, but it is really important in many instances to move quickly,” said Joseph Bower, a Harvard Business School management professor and expert on succession planning. “Companies really do have to reinvent their relationships to the markets and there is a terrible tendency for insiders to take too much time.”

Today, Ford, GM and Fiat Chrysler are profitable, having undergone major restructuring efforts to cut costs and, they hope, the old ways that brought them to their knees, such as keeping factories running to optimize production while being forced to heavily discount the excess output.

So why go back? Mr. Bower says directors look inward once the crisis has passed and choose insiders who have navigated the transition for greater responsibilities. “It turns out that insiders have the great virtue that they know how the place works. They know where real talent is and isn’t, they know how the communication works and how to get things done,” he said.

At Ford, Mr. Fields brings expertise in the auto maker’s global businesses. He has run operations in Asia, Europe and South America. Later, he tackled restructuring at its big North American car-making unit, and has been operating chief for more than a year. Mr. Mulally said in an interview last week that he has full faith in Mr. Fields to continue to execute the company’s business plan.

“I think most companies in the auto industry and their boards today know that what’s really important isn’t whether management is ‘insider’ or ‘outsider,’ but whether management is effective,” said John Hoffecker, co-president of the Americas at AlixPartners LLP, which managed GM’s restructuring during its bankruptcy. “Given the market and competition today, long gone are the days when anything else really matters.”

At GM, Ms. Barra is a veteran at a time when questions about whether the auto giant has changed enough since its prebankruptcy days. Now dealing with a troubled recall of small cars linked to 13 deaths, she is arguing the “old GM” that stumbled into bankruptcy has been replaced, even though most of its leaders are longtime GM employees.

With Ms. Barra taking charge in January, only Dan Ammann, a former Morgan Stanley investment banker who joined GM in 2010, later became CFO, remains with the company as its president. Gone are Steve Girsky, a former Morgan Stanley auto analyst and deal maker, who left after being passed over for the top job, and Chris Liddell, who joined from Microsoft Corp., and whose brash, high-tech style clashed with its executive team.

A changeover at Fiat Chrysler is a few years off, but Mr. Marchionne has signaled he expects an executive at the auto maker will replace him. Soon after taking over Chrysler, Mr. Marchionne assembled an executive council of 20 managers who oversee aspects of the company’s operations.

Harald Wester, who runs Alfa Romeo and Maserati sports car businesses, and Alfredo Altavilla, chief of its Europe, Middle East and Africa operations, are among the contenders, said people close to the company.

“The thing I’m most proud of, in addition to the cars we make, is the quality of leadership I was able to put together,” Mr. Marchionne said in January at the Detroit auto show. “I’m hopeful that with time they’ll mature into superb leaders and that one of them will eventually take my place.”

But guessing when the hand off might take place is the “biggest waste of time,” Mr. Marchionne said. “Buy a lottery ticket, you’ll have more fun,” he added.

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Fiat-Chrysler Rebrands as Fiat Chrysler Automobiles

Turin, Italy – The Board of Directors of Fiat S.p.A. (Fiat) approved a corporate reorganization and the formation of Fiat Chrysler Automobiles (FCA) as a fully-integrated global automaker. Along with the new name, the group also announced a new logo and branding materials.

Following Fiat’s acquisition of the minority equity interest in Chrysler Group LLC, previously held by the VEBA Trust, the Fiat Board of Directors reviewed options for the most appropriate governance and corporate structure. In order to establish a true peer to the major global automotive groups, in both scale and capital market appeal, the board decided to establish Fiat Chrysler Automobiles N.V., organized in the Netherlands, as the parent company of the Group. FCA’s common shares will be listed in New York and Milan.

“A new chapter of our story begins with the creation of Fiat Chrysler Automobiles. A journey that started over a decade ago, as Fiat sought to ensure its place in an increasingly complex marketplace, has brought together two organizations each with a great history in the automotive industry and different but complementary geographic strengths. FCA allows us to face the future with a renewed sense of purpose and vigor,” said John Elkann, chairman, Fiat.

Sergio Marchionne, CEO, Fiat and chairman/CEO, Chrysler Group said, “Today is one of the most important days in my career at Fiat and Chrysler. Five years ago we began to cultivate a vision that went beyond industrial cooperation to include full cultural integration at all levels. We have worked tenaciously and single-mindedly to transform differences into strengths and break down barriers of nationalistic or cultural resistance. Today we can say that we have succeeded in creating solid foundations for a global automaker with a mix of experience and know-how on a level with the best of our competitors. An international governance structure and listings will complete this vision and improve the Group’s access to global markets bringing obvious financial benefits.”

Under the proposal, Fiat shareholders will receive one FCA common share for each Fiat share they hold and the FCA common shares will be listed on the New York Stock Exchange (NYSE) with an additional listing on the Mercato Telematico Azionario (MTA) in Milan. FCA is expected to be resident for tax purposes in the United Kingdom, but this is not expected to affect the taxes payable by group companies in the jurisdictions in which their activities are carried out.

In order to foster the development and continued involvement of a core base of long-term shareholders, FCA will adopt a loyalty voting structure, under which Fiat shareholders who are present or represented by proxy at the Fiat shareholder meeting called to vote on the proposal and who continue to hold their shares until the closing, regardless of how they vote, are eligible to receive special voting shares equivalent in number to the newly-issued FCA common shares they receive. The special voting shares will be subject to specific terms and conditions.

The transaction is expected to be completed by the end of the year. The Group will present a long-term business plan to the financial community at the beginning of May 2014.

A New Look to Go With a New Name
Following an initial phase with the two corporate logos appearing side-by-side, both FCA now requires a new corporate identity representative of an organization that is much more than the sum of its two component parts, based on strong core values that represents a unique corporate culture, a common vision and a group with an international reach.

Created by RobilantAssociati, this branding project began with definition of a distinct strategic concept that served as the basis for creation of the name, logo, house style and entire corporate identity, whose universal and essential forms are strongly expressive and evocative.

Use of an acronym helps create a transition from the past, without severing the roots, while at the same time reflecting the global scope of the Group’s activities. Easy to understand, pronounce and remember, it is a name well suited to a modern, international marketplace.

The three letters in the logo are grouped in a geometric configuration inspired by the essential shapes used in automobile design: the F, derived from a square, symbolizes concreteness and solidity; the C, derived from a circle, representing wheels and movement, symbolizes harmony and continuity; and finally, the A, derived from a triangle, indicates energy and a perennial state of evolution.

The logo’s design lends itself to an extraordinary range of symbolic interpretations. It uses a versatile, modern language capable of expressing continuous change without losing its core identity.

The new logo will be adopted by Fiat and Chrysler as soon as practicable and before completion of the reorganization of the new group.

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Moody’s Considers Fiat Downgrade After Chrysler Purchase

Milan – Moody’s placed the Ba3 rating of Fiat under review for a possible downgrade to reflect the impact on the Italian car maker’s cash position of its plans to take full control of Chrysler Group LLC.

“The announced acquisition will materially weaken Fiat’s liquidity position at a time when the company is still free cash flow negative,” credit ratings agency Moody’s senior vice president and lead Fiat analyst Falk Frey said in a statement.

On Jan. 1 Fiat struck a $4.35 billion deal to buy the 41.46 percent stake in Chrysler it does not already own from a retiree healthcare trust affiliated with the United Auto Workers union. The deal, which is expected to close on or before Jan. 20, will facilitate further integration of the financial and operating strategies of the two car groups, Moody’s said.

With European car sales suffering, Chrysler is a source of profit for Fiat but the two companies currently are forced to manage their finances separately. But Moody’s said Fiat’s remaining cash, its unused credit facilities and its operating cash flow should be enough to meet its cash needs this year.

Fiat issued a statement saying Moody’s had put its rating under review for a possible downgrade. When called by Reuters, a Fiat spokesman declined to comment further.

Moody’s also said it would be looking at the impact of rising challenges in Latin America on the Italian carmaker’s ability to generate cash.

Fiat’s performance in Brazil, its most profitable foreign market, has worsened considerably since 2011 due to increased competition. “Fiat’s ability to compensate for the sluggish demand in Italy has diminished further,” it said.

On Thursday Fitch Ratings said the deal to buy the Chrysler stake had no immediate impact on Fiat’s ratings, adding that a full rating review would be conducted in early 2014.

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