Marchionne’s final days leave FCA investors in dark

Tommaso Ebhardt and Gabrielle Coppola
Bloomberg News

On a warm afternoon in Rome last month, Sergio Marchionne walked alongside uniformed officers during a ceremony to hand over a Jeep Wrangler to the Carabinieri military police. Lacking his usual verve, he clasped his hands together at his chest and took halting unsteady steps.

Looking fatigued and short of breath, Marchionne took the podium on June 26 and said: “In this police corps, I find the same values that have been the basis of my education: seriousness, honesty, a sense of duty, discipline, the spirit of service.”

Investors are now questioning the disclosures around the death of the long-time chief executive officer of Fiat Chrysler Automobiles NV on July 25 in a Zurich hospital, only days after he was replaced after suffering a sudden health decline. The mystery of Marchionne’s condition in the final weeks and months of his life is casting a pall over his achievements in rescuing Fiat from the brink of collapse during his 14-year tenure running Italy’s largest manufacturer.

While it’s unclear how forthcoming Marchionne was about his condition, Fiat failed to disclose the fact that the 66-year-old was hospitalized until July 5 and then denied plans for a July 21 management meeting to redistribute Marchionne’s powers.

The fallout could have legal consequences as investors question whether they were informed in a timely manner. The stock is down 12 percent in Milan since he was replaced just days before his death.

Italy’s market regulator is making a routine check into Fiat Chrysler’s handling of communications regarding Marchionne’s illness, a spokesman said by phone on Friday. A preliminary review did not turn up elements indicating any violations, said a person familiar with the case.

Marchionne, an avid smoker before quitting about one year ago, worked almost around the clock since taking charge of Fiat in 2004. He didn’t tell anyone outside his inner circle that he was seriously ill, according to people briefed on the situation. Even Fiat Chairman John Elkann, 42, who appointed him to the post and had almost daily contact with his mentor, was out of the loop, those people said.

After the event in Rome, the Italian-Canadian executive went to Geneva, and then on to Zurich on June 28, according to data from tracking the corporate jet he used. On the trip, he was accompanied by his partner Manuela Battezzato, who works in Fiat’s press department, the people said. The two had been making plans to spend more time together after Marchionne’s planned retirement from the carmaker in 2019.

Unusually, Marchionne had stopped responding to messages and calls from some of his advisers since the end of June, according to people with direct knowledge of the situation. The family also didn’t inform the company about his condition, Battezzato said in a statement to Bloomberg.

On July 5, the Italian website Lettera 43 reported that Marchionne had undergone surgery in Switzerland. The company confirmed he was indeed hospitalized for “shoulder surgery” and was expected to return to work after a “short period of convalescence,” making the situation sound undramatic.

But speculation began to swirl, including a report that Marchionne was set to be replaced by outgoing Vodafone Group Plc CEO Vittorio Colao. Over the following two weeks, Fiat stuck to the line that its CEO would soon be back to work. The company denied on July 20 another report by Lettera 43 that Elkann planned to meet with company leaders to divide Marchionne’s responsibilities. The next day the board met to choose Jeep boss Mike Manley to succeed Marchionne.

Five days later, Marchionne died in Zurich. While lung cancer was widely speculated, the cause of death was not given. People close to Marchionne said he died from complications following the shoulder surgery, including two cardiac arrests, and not from cancer. But the true nature of his health issues remains murky after the Zurich hospital revealed he had been in treatment for undefined serious health issues for over a year.

Fiat admitted it was left in the dark, but investors may now raise questions with Italian and U.S. financial watchdogs to see if Fiat and its former CEO acted appropriately.

“The issue is very fact-specific and may never truly be known unless litigation uncovers more facts,” George Schultze, who oversees $100 million, including Fiat Chrysler shares, as founder of Schultze Asset Management, said in an email.

In his last known public address to the military police on that warm June day, Marchionne recalled his childhood in Chieti, saying he grew up in the same red band uniform of the men and women he was addressing. With that, he bid farewell to the crowd, steadying himself along the podium as he stepped down.