EoW July 2009

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,” 3 rd 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.

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EuroWire – July 2009