Italy's Fiat SpA, the once struggling car maker in a country notorious for strikes and political disruptions, has certainly woken up the industry and the media with its acquisition of Chrysler LLC By Jagdeep Worah
Italy's Fiat SpA, the once struggling car maker in a country notorious for strikes and political disruptions, has certainly woken up the industry and the media with its acquisition of Chrysler LLC. As it eyes the European operations of General Motors Inc, the other ailing US auto giant, to become the world's second largest car maker, all eyes are on Sergio Marchionne, Fiat's chief executive who will also head Chrysler operations.
Not so long ago, the Turin-based company was one of the world's sickest car manufacturers, with its bankers debating how to keep it afloat. In 2005, GM actually backed out of a deal to buy Fiat that it had signed earlier, saying that Fiat was in too hopeless a condition. GM paid Fiat $2 billion to get out of the deal. Ironically, it is now Fiat that is likely to buy at least a part of GM.
The man who agreed to let GM out of the deal was Marchionne. A financial expert, he had taken the helm of Fiat in 2004, when it was on the verge of bankruptcy.
Marchionne had never even worked at an auto company, let alone run one.
By 2007, just two years after GM walked away, Fiat was profitable. Now Marchionne is not only taking over Chrysler, but looking at buying GM's Opel division as well, which would make it second only to Japan's Toyota in terms of volume. Till recently deemed completely worthless, Fiat now has a market value of about $12 billion.
Italian Prime Minister Silvio Berlusconi has said that Fiat's dealing is "a dream ... for all Italians." But few Americans have given Fiat much thought since at least the 1980s, when the Italian automaker last did business in North America before pulling up its stakes and returning to Italy, its reputation for quality in tatters, giving fresh life to the joke that Fiat stood for 'Fix it again, Tony'.
In his five years with Fiat, the 56-year-old Marchionne has engineered a stunning comeback. The year after taking over, he posted Fiat's first net profit in five years, streamlined management, burnished the Fiat brand with an award-winning update of the much-loved Fiat 500 and entered a series of strategic alliances to share costs and enter new markets.
A citizen of Italy and Canada, Marchionne has focused on bringing out the best of Fiat's Italian 'DNA', that sense of style that made several of its products a raging success. But returning to the US confronts him with one of the world's toughest and most varied markets. Fiat's earlier forays were hampered by lack of dealership networks, inability to meet service requirements and pollution control standards, and competition from Japanese models.
But now, Marchionne has also made Fiat one of the most environmentally fit automakers - one of the qualities that won the attention of US President Barack Obama, whose auto task force underlined the importance of Fiat's clean small-car technology to Chrysler's SUV and minivan-heavy line-up.
Marchionne was born in central Italy, raised in Canada from age 14 and educated there, returning in his early 40s to Europe where he secured his reputation as a turnaround expert in Switzerland. Many hope that this intercontinental background can help bridge the differences in market requirements.
Fiat's well-remembered failures aside, Italy boasts high-quality engineering in autos, including Ferrari and Maserati, both owned by Fiat, and Lamborghini, owned by Volkswagen, as well as such design firms as Pininfarina, known primarily for its Ferrari and Alfa Romeo designs.
As an Italian newspaper commented - "A heresy, an impossibility, a cultural revolution. To imagine 'America in a (Fiat) 500' seems absurd, an oxymoron, just as not so long ago a black American president would have been unthinkable ... therefore it can happen."