After dissolving its troubled five-year alliance with General Motors on February 13, Fiat group CEO Sergio Marchionne said Fiat Auto wasn't looking for another equity partner.
Instead, said Marchionne, Fiat would seek joint ventures and other business arrangements.
Since February, Marchionne has:
• Taken on the job of Fiat Auto CEO
• Sealed a third cooperation contract with PSA/Peugeot-Citroen for a new entry-level light commercial vehicle
• Approved joint development and production of a new generation of minicars with Ford of Europe
• Licensed Suzuki to build Fiat diesel engines in Asia.
Long term, Marchionne is looking for strong and structured industrial alliances with Tata Motors of India and Shanghai Automotive Industrial Corporation (SAIC) of China for all sectors in the Fiat group.
Marchionne was appointed Fiat group CEO on June 1, 2004 after the abrupt resignation of Giuseppe Morchio. Two months later, he announced a restructuring plan that should take Fiat group to a e1.4-1.8 billion net profit in 2007. Last year Fiat group made a e1.95 billion net loss.
Marchionne spoke with Automotive News Europe Luca Ciferri at Fiat group headquarters in Turin, on November 28.
Critics say: "Marchionne is a great poker player. He extracted money from the contracts that Paolo Fresco (Fiat group chairman who resigned February 2003) left him with General Motors and Italenergia, and from the mandatory convertible loan with creditor banks. But now the gambling phase is over and it is time to be an industrialist." How do you respond?
Good contracts are just an important starting point but then you have to play your cards properly. Closing any of these three deals was not a walk in the park.
For one, the separation from Fiat Auto was painful for General Motors. Then, our creditor banks had to convert the mandatory convertible loan at a premium, while, on the other hand, continue to support the Fiat group in its restructuring. And Electricite de France had to complete the transaction to buy our Italenergia stake.
On the industrial side, we announced in July 2004 a number of goals for the coming years. We will return into the black this year at Fiat group level thanks to extraordinary items. Beginning in 2006, our net profit will be generated by industrial activities. By 2007, the net income should be between e1.4 and 1.8 billion.
Quarter by quarter, we are delivering on our commitments and maintaining all our targets. We are no way at the end of the Fiat group restructuring process, but we are definitively in better shape than we were 19 months ago when many were betting Fiat group was not going be around for long.
On a scale of 0 to 100 percent, where are you in fixing the Fiat group?
At a group level, 20 percent. I mean, 20 percent done, 80 percent to be done.
The level of implementation differs from sector to sector and we are still at the beginning: 10 percent done at CNH (Case New Holland - Fiat group's agricultural and construction equipment division), which we have just restructured from a geographical organization into a brand organization, and 6 percent at Iveco heavy trucks. The Magneti Marelli component arm is at about 20-25 percent, and Comau production systems at 30 percent.
On the strategic front, we are trying to find the right role for a component supplier and for a robot maker within the Fiat group.
Will Fiat sell Magneti Marelli or Comau?
Absolutely not. We are working to develop these businesses. The engine and gearbox management systems by Magneti Marelli are strategic for the future development of our Fiat Powertrain Technologies unit.
At the same time, Automotive Lighting (a Magneti Marelli subsidiary) is a state-of-the-art lighting supplier with global reach, crucial for creating new appealing designs for our cars.
But I have still to find a similar link in the strategic development of the group for other sectors such as vehicle suspensions, exhaust systems and dashboards.
Where does Fiat Auto stand on the fixing scale?
At Fiat Auto we have done much more than it seems, but a lot has still to be done. On the structural side, I think we are at 80 percent. I am pretty confident we have now put in place a totally market-oriented organization in a company that traditionally was not market-oriented at all.
But Fiat Auto also has a legacy of some rather large faulty decisions that were made in the past - the half billion euros invested in the Lancia Thesis, just to mention one.
Today, we would have approved a totally different model range. But this is the product range we have and our daily battle is to extract as much value and sales as possible from our existing models.
Why have you reshuffled top management so often?
I never hesitate to make changes if they improve the quality of the team. I look for dedication, rigor and discipline. The issue of leadership is complex and crucial to any industrial organization, and especially for Fiat in its current state.
The complexity reduces to one simple set of traits that we look for in Fiat leaders, (called) the 4Ds - drive, develop, decide and deliver.
With so many changes, is there not a risk that inexperienced managers take over important positions?
There is a risk, but I rather prefer to position leadership over knowledge. You can build your knowledge, as I am personally doing, step by step, in the auto business. But you cannot acquire leadership as a skill.
Instead, said Marchionne, Fiat would seek joint ventures and other business arrangements.
Since February, Marchionne has:
• Taken on the job of Fiat Auto CEO
• Sealed a third cooperation contract with PSA/Peugeot-Citroen for a new entry-level light commercial vehicle
• Approved joint development and production of a new generation of minicars with Ford of Europe
• Licensed Suzuki to build Fiat diesel engines in Asia.
Long term, Marchionne is looking for strong and structured industrial alliances with Tata Motors of India and Shanghai Automotive Industrial Corporation (SAIC) of China for all sectors in the Fiat group.
Marchionne was appointed Fiat group CEO on June 1, 2004 after the abrupt resignation of Giuseppe Morchio. Two months later, he announced a restructuring plan that should take Fiat group to a e1.4-1.8 billion net profit in 2007. Last year Fiat group made a e1.95 billion net loss.
Marchionne spoke with Automotive News Europe Luca Ciferri at Fiat group headquarters in Turin, on November 28.
Critics say: "Marchionne is a great poker player. He extracted money from the contracts that Paolo Fresco (Fiat group chairman who resigned February 2003) left him with General Motors and Italenergia, and from the mandatory convertible loan with creditor banks. But now the gambling phase is over and it is time to be an industrialist." How do you respond?
Good contracts are just an important starting point but then you have to play your cards properly. Closing any of these three deals was not a walk in the park.
For one, the separation from Fiat Auto was painful for General Motors. Then, our creditor banks had to convert the mandatory convertible loan at a premium, while, on the other hand, continue to support the Fiat group in its restructuring. And Electricite de France had to complete the transaction to buy our Italenergia stake.
On the industrial side, we announced in July 2004 a number of goals for the coming years. We will return into the black this year at Fiat group level thanks to extraordinary items. Beginning in 2006, our net profit will be generated by industrial activities. By 2007, the net income should be between e1.4 and 1.8 billion.
Quarter by quarter, we are delivering on our commitments and maintaining all our targets. We are no way at the end of the Fiat group restructuring process, but we are definitively in better shape than we were 19 months ago when many were betting Fiat group was not going be around for long.
On a scale of 0 to 100 percent, where are you in fixing the Fiat group?
At a group level, 20 percent. I mean, 20 percent done, 80 percent to be done.
The level of implementation differs from sector to sector and we are still at the beginning: 10 percent done at CNH (Case New Holland - Fiat group's agricultural and construction equipment division), which we have just restructured from a geographical organization into a brand organization, and 6 percent at Iveco heavy trucks. The Magneti Marelli component arm is at about 20-25 percent, and Comau production systems at 30 percent.
On the strategic front, we are trying to find the right role for a component supplier and for a robot maker within the Fiat group.
Will Fiat sell Magneti Marelli or Comau?
Absolutely not. We are working to develop these businesses. The engine and gearbox management systems by Magneti Marelli are strategic for the future development of our Fiat Powertrain Technologies unit.
At the same time, Automotive Lighting (a Magneti Marelli subsidiary) is a state-of-the-art lighting supplier with global reach, crucial for creating new appealing designs for our cars.
But I have still to find a similar link in the strategic development of the group for other sectors such as vehicle suspensions, exhaust systems and dashboards.
Where does Fiat Auto stand on the fixing scale?
At Fiat Auto we have done much more than it seems, but a lot has still to be done. On the structural side, I think we are at 80 percent. I am pretty confident we have now put in place a totally market-oriented organization in a company that traditionally was not market-oriented at all.
But Fiat Auto also has a legacy of some rather large faulty decisions that were made in the past - the half billion euros invested in the Lancia Thesis, just to mention one.
Today, we would have approved a totally different model range. But this is the product range we have and our daily battle is to extract as much value and sales as possible from our existing models.
Why have you reshuffled top management so often?
I never hesitate to make changes if they improve the quality of the team. I look for dedication, rigor and discipline. The issue of leadership is complex and crucial to any industrial organization, and especially for Fiat in its current state.
The complexity reduces to one simple set of traits that we look for in Fiat leaders, (called) the 4Ds - drive, develop, decide and deliver.
With so many changes, is there not a risk that inexperienced managers take over important positions?
There is a risk, but I rather prefer to position leadership over knowledge. You can build your knowledge, as I am personally doing, step by step, in the auto business. But you cannot acquire leadership as a skill.