Posted on July 21, 2018.
The following article by Chester Dawson appeared on the Wall Street Journal website:
Fiat Chrysler Automobiles appointed a new chief executive on Saturday in an unexpected move to replace the ailing Sergio Marchionne, who engineered the merger of Fiat and Chrysler and led the combined company for nearly a decade.
Mike Manley, the head of Fiat Chrysler’s Jeep brand, will now helm the Italian-American auto maker. The company’s board said Mr. Marchionne wouldn’t be able to return after suffering complications from surgery earlier this month. The move comes months ahead of Mr. Marchionne’s planned departure and just weeks after he announced a strategy through 2022 to boost the company’s global sales volume and profitability.
Mr. Manley, 54, joined predecessor firm DaimlerChrysler AG in 2000 and has led Jeep since Chrysler LLC exited bankruptcy nine years later under the deal with Fiat. The iconic sports utility brand has been one of Fiat Chrysler’s strongest performers, helping underwrite a steady recovery in profitability.
The new CEO will take over at a time when Fiat Chrysler boasts a strong balance sheet but is nursing a reputation tarnished by regulatory crises involving safety lapses, suspected emissions cheating and bribery allegations. The accelerated succession may also rekindle speculation the auto maker may seek to sell off all or part of itself. Mr. Marchionne once sought such a deal but, more recently, had abandoned the idea.
Chairman John Elkann, a scion of the founding Agnelli family that owns nearly 43% of Fiat Chrysler’s voting rights, said the management change was “unthinkable until a few hours ago” but would provide stability.
“The succession plans we have just announced, even if not without pain from a personal point of view, mean we can guarantee the maximum possible continuity, preserving our companies’ unique cultures,” Mr. Elkann said.
Mr. Marchionne, who is 66 years old, had said he planned to step down as CEO early next year but continue to serve as chairman and CEO of Ferrari NV, which was spun off from Fiat Chrysler in 2016.
Ferrari said separately that Mr. Elkann would take over Mr. Marchionne’s role as chairman at the luxury sports car maker. Fellow board member Louis Camilleri, chairman of Philip Morris International, would succeed Mr. Marchionne as Ferrari CEO.
Mr. Manley hasn’t made a statement, but a company spokesman said he would be on a call with financial analysts next week after Fiat Chrysler releases its earnings report for the second quarter.
The British-born executive recently pledged to grow Jeep’s share of the global sport-utility-vehicle market from nearly 6% of 8 million vehicles currently sold annually to more than 8% of an estimated 9 million vehicles by 2022. New products from the Jeep and the Ram pickup truck brands have powered the company’s recent sales growth in the U.S.
Fiat Chrysler hasn’t specified the nature of Mr. Marchionne’s illness but said earlier this month that he had an operation on his right shoulder. Company officials have said privately that he has been absent from his day-to-day role at the company for weeks.
A workaholic known for making blunt comments and wearing black sweaters instead of formal business attire, Mr. Marchionne has been an outsize presence in the auto industry. Under his watch, Fiat Chrysler confounded critics on Wall Street and elsewhere by meeting most debt-reduction and profit targets.
Fiat Chrysler largely delivered on profit goals outlined in its last strategic plan, which dates back to 2014, with profits far exceeding some analysts’ expectations. The company’s stock price has nearly quadrupled in that time and its 6% profit margin is higher than Ford Motor Co.’s 5.2% margin and is approaching General Motors Co.’s 7.2%.
The company’s successful turnaround has been clouded by an ongoing series of regulatory issues. Fiat Chrysler so far this year has recalled more than six million cars and trucks in the U.S., spanning nearly two dozen campaigns, according to government data. In each of the past three years, Fiat Chrysler has recalled more vehicles than any other U.S. auto maker, with 5.4 million in 2017, 8.8 million in 2016 and 11.5 million in 2015.
The auto maker also faces charges of subverting environmental and labor laws. U.S. regulators last year accused the company of rigging diesel-powered vehicles to cheat on U.S. emissions tests, and federal prosecutors have alleged it conspired with the United Auto Workers union on illegal payments to influence labor negotiations.
Fiat Chrysler has denied using illegal software to dupe emissions tests, and Mr. Marchionne and UAW officials have both denied that they knew of the alleged labor-related misconduct.
