Merely four years ago, the future of Italian automaker Fiat S.p.A. looked in doubt. The company was ringing up losses and faced quality and image problems amidst stiff competition not only in Europe, but also on its home turf Italy.
Fiats operations were so troubling that the worlds largest automaker, General Motors Corp., paid Fiat $2 billion to discontinue its partnership with the company.
Today, the tables have turned. Chief Executive Sergio Marchionne was hired in 2004 to replace retiring longtime chairman Gianni Agnelli and immediately scripted one of the most successful turnarounds in corporate history.
Fiat has a huge stake in Chrysler LLC, and is negotiating with GM to acquire its German brand Opel and British brand Vauxhall. Fiat is also reportedly looking into an investment into Swedish automaker Saab. Fiat could conceivably become the third largest car company in the world.
Remarkable Turnaround
The closest comparison to Marchionne is probably Renault-Nissans iconic CEO Carlos Ghosn.
Marchionne, an accountant from Canada, holds dual citizenship in Canada and Italy. He received his MBA from the University of Windsor in Ontario, a stones throw away from automobile hotbed Detroit.
Marchionne did away with Fiats vast bureaucracy and hired fresh talent. Soon, those quarterly losses turned into profits and Fiat—which makes cars under the brands Fiat, Alpha Romeo, Maserati, and Ferrari—returned its luster.
Like Ghosn, Marchionne speaks several languages and holds several passports. And its not unimaginable to see him follow the footsteps of Ghosn, who turned around the fortunes of French automaker Renault and Japan’s Nissan.
“This transaction (with Chrysler) represents a constructive and important solution to the problems that have plagued not just Chrysler in recent years, but the global automotive industry as a whole, Marchionne said in a statement following the Chrysler deal.
Win—Win for Fiat
Fiat’s deal with Chrysler comes at minimal cost to the company, but the reward could be outstanding as the company gets access to Chrysler’s extensive North American dealership network.
“Bringing together Fiat’s world-class technology, platforms and power-trains for small and medium sized cars, and its extensive distribution network in Latin America and Europe with Chrysler’s rich heritage, strong North American presence and talented and dedicated workforce will create a powerful new automotive company, while helping preserve jobs and a manufacturing industry that is critically important to the U.S. and Canadian economies,” Marchionne said.
The two companies would share distribution, supplier, and dealership networks, as well as allow Chrysler to use Fiat auto platforms and technologies. This allows Fiat to bring its popular small urban vehicles to North American shores.
The partnership required no cash investment from Fiat.
Opel, Vauxhall on the Horizon
Fiat is also in the running to take majority stakes in GM's European operations Opel and Vauxhall. Fiat and Canadian auto parts maker Magna are currently the leading candidates to take over the European automakers.
Opel and Vauxhall’s network of dealers in Europe said over the weekend that it is prepared to offer 500 million euros ($670 million) for a 15 percent stake as well as a board seat in any transaction.
“Its clearly not an easy time and its a very intense process,” GM Europe President Carl Peter Forster said in an interview with Bloomberg. “Some people are nervous. People should also be proud theres good strong interest in the middle of the deepest crisis for our business.”
