The Performance of Sergio Marchionne as CEO at Fiat Chrysler Was, Undeniably Conflicted

It is apt that accolades for the Italian-Canadian executive are still pouring in from various parts of the globe following his passing in Zurich; Marchionne possessed the traits of an international, dynamic, traditional leader, which are increasingly rare in an industry replete with uninspiring, formally-attired executives reciting scripts. In the aftermath of Marchionne’s demise, it is understandable to encounter sentimental portrayals. Nevertheless, creating hagiographies benefits no one, particularly when they emanate from industry and Wall Street analysts, or journalists entrusted with providing an impartial appraisal of Marchionne’s and FCA’s achievements. Objective evaluations, including flaws, have been noticeably scarce. Let this serve as a correction.

To avoid misunderstanding: Marchionne’s reputation for miraculous corporate turnarounds is unquestionable. However, it remains imperative to maintain honesty concerning the company, which—following Chrysler’s distinct style—could be heading towards another period of volatility.

On the positive side: The globe-trotting Marchionne was an extremely perceptive and charismatic executive. The chain-smoking, espresso-loving executive was famously driven, compelling FCA employees to match his dedication, sometimes at the expense of their personal and familial lives. He insisted on executives being available around the clock, except while airborne. The hard work and accountability paid dividends: Marchionne steered the former Chrysler LLC from chaos to a merged Italian-American entity that recorded $4.4 billion in pre-tax earnings last year. Jeep’s global sales have more than doubled since 2013. As a Detroit native, whose sibling retains a skilled labor position at FCA partly due to Marchionne’s efforts, I am quick to express my gratitude.

However, some analysts describe Marchionne’s leadership at Chrysler as nothing short of a “miracle.” Yes, I have indeed heard that term used. Yet the situation was far from miraculous, unless we are referring to predestined success: FCA enjoyed favorable conditions provided by the U.S. government, a beneficial agreement, and exceptionally fortuitous timing.

Let’s delve into this further: With Chrysler LLC viewed as the ultimate underdog—no other suitors were in sight—Fiat, under Marchionne’s direction, boldly offered to become Chrysler’s primary stakeholder in 2009 without any financial outlay. The Treasury Department conceded, largely to protect up to a million industry jobs (including those at General Motors and other automotive companies and suppliers) imperiled by the global financial crisis. So, Fiat and Marchionne inherited Chrysler along with its assets, albeit troubled—brands, factories, headquarters, engineering, design, a dealer network—without incurring any expenses, following a government-assisted transfer through bankruptcy court. And not just “free,” but free of a multitude of secured debts, pension liabilities, and a quarter of its cumbersome dealer network. Marchionne’s deal-making put even Trump to shame.

With their newfound marriage, Fiat Chrysler’s substantial dowry included $12.5 billion in federal aid loans, sending a clear message to Wall Street investors that FCA was destined for success. If one failed to perceive this declaration, President Obama was eager to deliver it; the White House officially announced the deal and urged Chrysler to accept Fiat’s conditions. (Chrysler had previously received a $4.5-billion bailout courtesy of President George W. Bush.) FCA made its debut on the New York Stock Exchange at a mere $9 per share. Subsequently, the industry entered an exhilarating era characterized by six consecutive years of escalating and ultimately unprecedented sales figures, a feat unprecedented in the sector’s century-long history. These remarkable sales figures were propelled by two major windfalls, particularly beneficial for this predominantly truck-centric Detroit automaker: Plummeting fuel prices and a substantial consumer shift towards SUVs. (Subaru, with its comparable AWD lineup to Jeep’s, observed a more than twofold increase in U.S. sales despite introducing only one new vehicle during this remarkable surge.)

Jeep and Dodge had been manufacturing trucks for numerous years before Marchionne’s tenure, and the surging sales naturally fell into FCA’s lap. In this environment, even the most incompetent auto CEO could have amassed substantial wealth. And that is precisely what transpired. Every major global automaker recorded record-breaking sales and profits. While their triumph was not guaranteed, Chrysler (along with GM) had the best starting point, with their debts largely absolved, the United Auto Workers appeased, and their next-generation products financed through government support. (And this acknowledgment comes from someone who fully supported the bailout.)

Hence, with their lucrative arrangement and assorted government interventions, there was an abundance of easily attainable advantages for FCA. When Marchionne aimed higher, the outcomes were varied. This is exemplified by Marchionne’s misguided rejuvenation efforts for Fiat and Alfa Romeo in the United States, a diversion that has further debilitated the once prestigious Chrysler and…Avoiding Dodge labels, and generating minimal fresh revenue. Marchionne and team reassured us that Fiat and Alfa could eventually vend hundreds of thousands of vehicles annually in this market—a forecast that appeared delusional even then. The current scenario unfolds differently: Fiat and Alfa Romeo collectively are set to vend only about 40,000 automobiles in the U.S. this year, with a struggling Maserati possibly contributing an additional 10,000 units. Despite the criticism faced, the now-defunct Dodge Dart sedan moved close to 88,000 units at its peak in 2015. It’s evident that Americans still prefer purchasing a Dodge or Chrysler over an Italian vehicle. When a striking Dodge Dart can surpass the sales of two entire Italian brands (including seven models) by more than double, how can one argue otherwise? Just envisage if FCA invested as heavily in developing new, more competitive Dodge and Chrysler models as it has invested in these Italian brands, encompassing Fiat/Alfa marketing and advertising and establishing sales-and-service networks from scratch.

Rendered from the original, but with a twist: It was somewhat challenging to pinpoint genuine innovation during Marchionne’s tenure. Electric cars? Not so much. Marchionne was predominantly known for lamenting about the losses incurred on every Fiat 500 EV. Groundbreaking nameplates leading their segments or captivating the public’s attention? Just one comes to mind—the Dodge Hellcat-Demon offspring derived from the Challenger lineage. These traditional muscle cars do not signify any significant advancements in design or technology. As the era transitions from Marchionne to Mike Manley, the British-born executive who had been overseeing FCA’s prized possessions—the aforementioned Jeep and Ram lines—hopefully, the heirs of Marchionne exhibit the courage and foresight to execute a substantial long-term strategy.

Another way of thinking suggests that if customers begin to show interest in automobiles and fuel efficiency, FCA (or Ford) could easily transition back to manufacturing cars. However, the process is not that straightforward. While a Honda or Toyota might momentarily step back from the passenger-car sector (although why would they?), and then re-enter, Chrysler faces a different scenario. Historically, Chrysler’s vehicles struggled to stay competitive and were not often the top choice among consumers. It’s not feasible to withdraw from the market and abruptly announce, “We’re making a comeback!”, expecting a warm reception from consumers. Just ask Cadillac or Lincoln about their experiences in the luxury car realm.

In essence, unless FCA commits to revitalizing itself as a comprehensive, varied automaker, its main allure might be as an acquisition target. Essentially, the valuable Jeep and Ram brands would probably be acquired, while most other brands would likely disappear. Marchionne himself suspected this outcome; he believed that only a few major global automakers were sufficiently robust to survive, with FCA probably not making the cut. This seasoned corporate executive had one unfulfilled aspiration: to engineer another corporate merger for FCA, which had undergone previous transitions under various owners—from a voracious New York private equity firm to a preoccupied Daimler—before being taken over by Fiat. Nonetheless, Marchionne anticipated a future merger for FCA: he flirted with GM (despite the questionable choice of suitor, almost bordering on Detroit insider trading) only to face public rejection in 2015.

On the whole, Marchionne and his leadership at FCA deserve a resounding round of applause, perhaps even a few tears. However, with the absence of this remarkable individual at the helm, it remains to be seen what FCA will deliver next.