See? A car company can turn around. Just ask Fiat
When it comes to turnarounds, Fiat serves as a case study. The Italian institution that rules over Fiat, Lancia, Alfa Romeo, Ferrari, and Maserati, trucks, agricultural equipment, construction equipment, and automobile components, lost $1 billion in 2000. Contrast that with 2006, when it posted a 35% jump in revenues year-on-year, and its operating profit was $384 million -- a far cry from the $332 million loss of 2005. Fiat's current market cap is more than that of GM and Ford combined in Europe, at $32.5 billion.
Sergio Marchionne, CEO of the Fiat Group, is the man who led the charge, beginning in 2000 when he was hired from a Swiss firm. CNN has a lengthy profile on the Italian that delves into how he did it. The story will be familiar to all of us: "The car company had the talent, knowledge and skills, but it lacked leadership." It was "a problem of culture - big offices, big waste, and nobody responsible for anything." Too many vehicle discounts. Too many platforms. Too many people doing the same thing across brands. Cars not selling enough. Models not updated. To fix it, Marchionne, an outsider to the auto industry, sheared away excess layers of management, streamlined the design process, rationalized platforms, boosted production, didn't pick fights with the unions, forged partnerships in China, India, Russia, and Turkey, and got out of the partnership with GM (for which Fiat made $2 billion).
Continues after the jump.
Thanks to everyone who sent in a tip!
[Source: CNN]
Most importantly, he picked the right people for the right jobs, and gave them the freedom to do whatever they felt they needed to -- as long as they produced. Then he focused on the Fiat brand, making sure that Fiat's models defined and conveyed what it is: a maker of affordable cars with Italian style. Finally, he also has kept his eye as much on the future as it is on the present: Fiat plans 23 new vehicles and as many facelifts by 2010, and triple the current level of net profit by 2010. "When you're fighting in an industry like this," Marchionne says, "you need to take very unorthodox approaches to the business." Good advice for all turnaround specialists.
Reader Comments (Page 1 of 1)
Harrison 9:46PM (5/09/2007)
Sounds like something GM could pull off with some extra help.
Reply
pOOma 10:00PM (5/09/2007)
What company wouldn't with the millions they sucked out of GM...
Reply
sfast 10:58PM (5/09/2007)
It is easy when GM just hands you 2 billion dollars. American Lawyers have nothing on their Italian counterparts.
Reply
Paulo Becker 11:01PM (5/09/2007)
Oh yeah, blame someone else for GM's troubles. That's just the way to start a turnaround.
Reply
Barney 11:37PM (5/09/2007)
Fiat sucked nothing out of GM and GM will be better off to follow Fiats example. 20,000 white collar workers fired for doing nothing, divisions made to work hand in hand. Sergio Marchionne could save Ford and GM but probably not Chrysler.
Reply
paolo frassanito 12:55AM (5/10/2007)
When Fiat and GM agreed to their partnership, the Italian company was progressively falling apart and it seemed clear that such agreement was just a first step toward a complete takeover. To protect the shareholders was also introduced a "Put Option." If Fiat decided to sell the remaining part of the car division that hadn't already been sold to GM, the American company couldn't object the deal. GM was to get access to many technological innovation part of the Powertrain group; Fiat, for instance, was the first company to introduce the Common-Rail diesel engines back in 1987. Three years later, GM faced the dilemma completely buying Fiat, still in terrible conditions, or par a penalty to get out of the deal. The price wouldn't have been much different, but purchasing the Italian c0ompany, GM also inherited its huge debts. And so Detroit preferred to get out of the partnership. Today, GM Europe, years after the partnership has ended, shares with the Fiat Group, platforms, engines and components, and it's probably the healthiest brunch of the GM empire. Sincerely yours, Paul.
Reply
Val 12:48AM (5/10/2007)
Fiat sucked nothing from GM, it was in the end GM's own doing, as they knew what they were signing. And for a company that has a revenue of 200 billion dollars, obiously 2 are not such a big deal, the big deal is refusing to do the layoffs and complete restructuring inside the company.
"The agreement with GM included a put option, which held that Fiat would have the right to sell GM its auto division after four years at fair market value. If GM balked, it would be forced to pay a penalty of $2 billion. When Fiat tried to sell GM the company, GM chose the penalty."
Yeah, poor GM was again beaten by the unfair competition from japanese, italian and martian evil companies that only play dirty.
Reply
TDIMeister 6:26AM (5/10/2007)
"Fiat, for instance, was the first company to introduce the Common-Rail diesel engines back in 1987."
You're off by a decade there, pal.
Reply
Onur 8:38AM (5/10/2007)
instead, GM sucked diesel technology of FIAT, this is importantissimo!
Reply
Don 4:34PM (5/10/2007)
Maybe GM should have kept their stake in Fiat?
Reply
paolo frassanito 9:18PM (5/10/2007)
To answer to TDIMeister. No, sir. You're wrong. Fiat was the first company to sell a series model with the direct injection diesel engine. It was the 1987 Croma. I'm not sure it was already called Common-Rail, but it was the same thing, later perfected with the help of Bosch of Germany. Today's Common-Rails are called Multi-jet and so on. When time came to divorce from Fiat, one of the most difficult point was dividing between the two groups the Know-how of Fiat Powertrain, and rightfully so, since GM had also poared money in the developments of such technologies. Luckly so, an agreement was found, and today both GM Europe and Fiat Group can sell models with great technological improvements, especially when it comes to engines. Sincerely yours, Paul, New York.
Reply
TDIMeister 7:18AM (5/12/2007)
#11, as if it really matters now, but your original post stated that Fiat was first to introduce common-rail -- you mentioned nothing about direct injection -- in 1987, which is false. That is the error in which I intended to point out. You are right, the Fiat Croma was the first passenger car application of direct-injection, but it was not common-rail. Common-rail came out a decade later; again, simply what I intended to point out and nothing more.
Reply
paolo frassanito 12:54PM (5/11/2007)
My apologies, TDIMeister. You do have a point there. All the best. Paul.
Reply