July 21, 2018 / 6:57 PM / 3 months ago

Breakingviews - Sergio Marchionne leaves a giant sweater to fill

By Antony Currie and Lisa Jucca

Sergio Marchionne, CEO of Fiat Chrysler, speaks at the North American International Auto Show in Detroit, Michigan January 11, 2016. REUTERS/Rebecca Cook

NEW YORK/MILAN (Reuters Breakingviews) - Sergio Marchionne leaves a massive sweater to fill. Fiat Chrysler’s board replaced him as chief executive on Saturday after complications from recent surgery caused his health to deteriorate. His successor, Mike Manley, runs Jeep – the Italian-American automaker’s most profitable brand that’s also at the core of Fiat’s new five-year plan. That ought to provide continuity. But without Marchionne at the wheel, 30 billion-euro Fiat may be a more attractive takeover target.

Marchionne, who was due to retire early next year, rescued Fiat from the brink of collapse in 2004. He then took over Chrysler after its taxpayer-funded quick-rinse bankruptcy in 2009 and confounded industry observers by turning it into the earnings engine for the entire group. That allowed him, just last month, to announce FCA’s balance sheet was about to switch from having net debt to net cash, an occasion he marked by briefly swapping his trademark black jumper for a necktie.

It’s fitting, then, that the board is replacing him with the man behind much of the company’s progress. Manley, a Brit, led a quadrupling of Jeep sales since taking over in 2009. And at last month’s capital-markets day to unveil the company’s plans up to the end of 2022, Marchionne said he wants Jeep to account for one in every 12 utility vehicles sold by the industry. Taking a “wild guess,” it would mean doubling sales.

Jeep’s crucial role at FCA became clear last year when news swirled that Chinese automaker Great Wall was interested in buying the brand. Selling Jeep, Marchionne said, would leave just a “stump” behind that “cannot run.” A new five-year plan is meant to address that by reducing the number of small cars on offer, and increasing sales of Jeeps and other SUVs in both Europe and China.

Those will be big challenges for Manley. Fiat Chrysler has missed its own China targets. And Europeans are not as wowed by SUVs as Americans. Manley also needs to find a way to get FCA up to speed on both electric- and autonomous-vehicle development.

The new strategy, with which Manley would’ve been intimately involved, laid out Marchionne’s vision for keeping FCA independent. That was after his public overtures in 2015 for a merger partner fell on deaf ears. Perversely, losing such a charismatic and blunt boss may end up making the firm he saved a more attractive target in the future.

Breakingviews

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