Howes: Marchionne forged Detroit redemption in collapse
Detroit’s Chrysler Group and its storied American brands live today because Sergio Marchionne, a poker player, gambled — and won.
As this town’s No. 3 automaker slouched toward bankruptcy nine years ago, the CEO of Italy’s Fiat SpA bet he could combine the weakest players in Europe and the United States and forge a global contender. In theory, it would generate fatter profits, carry less debt and challenge conventional wisdom.
On that score, the 66-year-old executive who died Wednesday delivered. His Fiat Chrysler Automobiles NV saved tens of thousands of jobs in Michigan and around the country. He leveraged Jeep, one of America's greatest brands, into an industry colossus whose reach is proving nothing but good for heartland cities like Toledo and Detroit.
Marchionne's impact on the global auto industry cannot be overstated. A sharp intellect, quick wit and business acumen powered a refreshing transparency with investors, employees and the media. But that apparent openness belied a fiercely guarded privacy evident in the murky details of his illness and death five days after he was replaced as CEO by Mike Manley, a 54-year-old Briton who headed Jeep and Ram, FCA's most valuable brands.
"Primarily he'll be remembered as having taken two companies that really looked like they were both headed for the grave — Chrysler already in Chapter 11 and Fiat seemingly mired in declining market share in Europe and Latin America — and he put the two of them together and made it work," Bob Lutz, a retired executive at General Motors Co., Chrysler Corp. and Ford Motor Co., said in an interview.
"And it was a stroke of genius that led him to negotiate with the Obama administration's automotive task force and manage to get Chrysler for next-to-nothing. To many people it looked like Fiat was saving Chrysler, but once the merger was complete it was really kind of the other way around."
Even more so now. Quarter after quarter, Jeep and Ram produce the bulk of the group's revenue and profits; deliver the highest margins; represent the foundation for FCA's future, as Marchionne and his team detailed last month during their five-year plan update at "Capital Markets Day" outside Milan.
He often saw things — and acted — before his rivals. He ended car production in the United States when GM and Ford kept building. He weighted the portfolio more in favor of trucks and SUVs. He summoned the courage to say what his fellow CEOs well knew: that the auto industry is a "gigantic consumer of capital" without return on investment to match.
The result: His "Confessions of a Capital Junkie," a manifesto advancing his industrial logic for consolidation. He paired it with a public wooing of GM and its new CEO, Mary Barra, a potentially stunning cross-town merger that would of course feature him — the CEO of the smaller, less profitable FCA — as the new head of the combined entity.
GM declined, repeatedly, unmoved by Marchionne's back-channel efforts to enlist the United Auto Workers' retiree health care trust (GM's largest shareholder) in a potential takeover bid. The 2009 agreement with the U.S. Treasury governing GM's exit from bankruptcy effectively made that impossible.
When Volkswagen AG, another would-be target of Marchionne's interest, became mired in its own global diesel scandal, the dream of engineering the deal to end all deals died. And when a Chinese automaker expressed interest in acquiring the Jeep brand, it took a direct denial from Marchionne to end the discussion because, well, you never know with Marchionne.
"He pursued his vision even when he was ridiculed for it," Lutz said. "He was smart enough to know what he didn't know. He promoted the right people. A brilliant, brilliant leader" — and an iconoclast.
In an industry transitioning from business suits to Silicon Valley-style jeans and jackets, Marchionne was ahead of his time. January or July, he donned a black cotton sweater and black jeans for work, for visits to Wall Street, for a meeting at the White House. Only three times in recent memory, a top aide once told me, did he don a tie:
First, when he presented a tractor to the pope. Second, when he addressed the Italian parliament, which enforced a formal dress code. And, third, at last month's Capital Markets Day, where he briefly looped a tie around his neck to mark the fact — confirmed Wednesday, in second-quarter earnings — that FCA's cash finally exceeds its industrial debt, a milestone Marchionne doggedly pursued.
"I loved Sergio," said U.S. Rep. Debbie Dingell, D-Dearborn. "He was no B.S. He had an ego, but he was willing to talk, to teach. Trump liked him. Obama liked him. He played it straight. He did his job, and told them what they needed to know."
Didn't matter if they didn't want to hear it. When he felt former UAW President Bob King reneged on terms of a tentative agreement, he banged out a blistering letter on his MacBook from the corporate jet — and instructed it be released to the news media, too.
When VW used a Detroit auto show to announce its ambition to sell 10 million cars in a single year, I asked him about it during a group interview: "We've seen that movie before, " I recall him saying. "It's called World War II."
When FCA briefly entertained the idea of building a Maserati SUV on the same production line at its Jeep Grand Cherokees in Detroit, I wondered whether it wouldn't open FCA to charges from German rivals that the new Maserati is nothing more than an expensive Jeep.
His retort: if they do that, we'll take pictures of VW and Porsche SUVs coming off the same line (now in Bratislava, Slovakia) and use them in an ad campaign. It was delicious, his moxie, his willingness to say what you just know his rival CEOs would think, too, but are too embarrassed or timid to actually say it.
Not Marchionne. Long before Ford pursued and got the 105-year-old Michigan Central Depot to anchor its mobility, autonomy and electrification efforts, Marchionne saw the value in boarding the go-to-Detroit bandwagon. The result was the 2012 announcement of Chrysler House, a rebranding of the Dime Building at the corner of Fort and Griswold.
"I went and recruited them to move here," Quicken Loans Inc. Chairman Dan Gilbert recalled in an interview Wednesday. "I sit in the office and he's lighting up cigarettes the whole time across the table from me. Incredibly charismatic and warm and funny. He stepped up early when we were down here. That was one of those early confidence boosters that helped."
Educated in Windsor, Marchionne got Detroit. He understood its grit and history. He identified opportunity in its reckoning. He ensured it would remain a vital cog in the global industry being quickly changed by the rise of China, accelerating technology and the emergence of Silicon Valley rivals.
Most of all, he made a difference. During one of Detroit's darkest chapters, he spied redemption for a company almost given up for dead — something people around here should never forget.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.