Meeting Sergio Marchionne

May 30, 2012
Sergio Marchionne Illustration
Fiat's corporate headquarters, across the road from the historic Lingotto factory with its famous rooftop test loop, is a meticulously restored fortress with endless corridors, tall ceilings, and numerous security checkpoints. Sergio Marchionne's dimly lit office sits halfway up the massive building block on a corner facing the street. It appears to be smaller than the bright, adjoining room where three secretaries reign supreme over a huge desk laden with monitors, keyboards, and paperwork. As I approached the master's inner sanctum, another door opened and lanky John Elkann stepped out, followed by the stooped figure of Sergio Marchionne, smoldering cigarette in hand. Talk about extreme contrasts. Wiry, with wide-awake eyes and a broad smile, Elkann, the young Fiat heir, is dressed immaculately in a blue suit, a light blue shirt, and a brightly striped tie. Slightly pudgy, chortling with laughter in response to a joke told in Italian with only a faint Canadian twang, and displaying a grayish thirty-day beard, Marchionne is a committed supporter of the Italian knitwear industry and a dedicated ambassador for sweet-smelling Muratti Privat filter cigarettes.
Marchionne sits down, leans back, extinguishes the cigarette, feels for the pack in a reflex motion, and then reaches instead for his BlackBerry to check e-mail. The CEO of Fiat SpA and Chrysler LLC answers all my questions, but despite the friendly and relaxed atmosphere, it is hard to see through the industry's most controversial mover and shaker. Hearsay is my only source of information when it comes to the private life of the public person. Apparently, Marchionne still drives frequently to Switzerland, where one of his sons attends high school and where he keeps a second or third home. During the week, he stays in an apartment in downtown Turin, but he spends most of his time in the air traveling to or from metro Detroit, where he has just purchased a nice lakefront property with a ten-car garage.
Although there is always a black Lancia Thema (a rebadged Chrysler 300) with a chauffeur on standby, the lawyer-by-trade is a keen driver. The other day, he took his Ferrari Enzo to the Balocco test track, where some frantic ad hoc rescheduling was required to make room for the boss and his toy. The morning after our interview, he arrived in a burgundy Ferrari 599 SA Aperta with Swiss plates. There are more Ferraris hiding where Marchionne keeps his other cars, allegedly a mix of European thoroughbreds and American muscle. Does that make Marchionne a hard-core car guy? Or is he perhaps only an armchair engineer, a finance expert, and not at all a visionary like Volkswagen's Ferdinand Piech? The CEO is certainly good at forecasting, with one projection chasing the other, and with almost all predictions being subject to rapid change. "The survival of the fittest" is one of Marchionne's credos. With the help of Chrysler, he is determined to keep production volumes at a profitable level. His favorite promised land is North America, followed by Latin America, then China. Europe ranks a distant fourth, a political nightmare fueled by overcapacity problems, union issues, and quality quandaries.
Pomigliano d'Arco near Naples, home of the new Panda, shows what Fiat can achieve when everything falls into place. But if Marchionne fails to find a way to build and sell next-generation Puntos and Bravos at a profit, the European production network might have to be scaled down, although he prefers a pan-European solution to the overcapacity that he sees as an industry-wide problem.
The merger with Chrysler has produced a dramatic turnaround for the American subsidiary and gives Fiat all-important economies of scale. But what about an Asian partner? There's a deal with Suzuki that has remained a project-related one-off (Fiat Sedici/Suzuki SX4); Marchionne doesn't rule out further cooperation with Suzuki but says frankly, "I am not interested in Mitsubishi." Mazda, however, clearly interests him. There has been talk of the next Miata being twinned with a new Alfa Romeo Spider, but Mazda's financial straits mean the former Ford ally probably needs a grander rescue scheme to recover, and Fiat could provide it. Honda may also present cooperation opportunities, although Marchionne acknowledges that it would be unlikely to sign up for a full merger. The tech-focused Japanese manufacturer is strong where Fiat is weak -- combining volumes might create significant synergy effects, and combining R&D and purchasing efforts could yield substantial economies of scale.
Marchionne has identified Alfa Romeo and Jeep as the Fiat Group's only global brands. It won't take much to prepare Jeep for the world market, but Alfa in its present form is not particularly presentable. That's why the chief ordered a major brand overhaul -- which delays the relaunch from 2012 to 2014. Interestingly, he sees North America as the more fertile ground for the brand's relaunch than Europe. Deleted from the future product program are the MiTo, the large SUV, and the full-size sedan. Still tentative are the rear-wheel-drive Spider and its GTV coupe sidekick. Marchionne insists that the brand can be rebuilt on a foundation of front- and all-wheel-drive sport sedans in the subcompact, compact, and mid-size segments. A story published in Italy's Quattroruote magazine proposes a U.S.-built, small rear-wheel-drive Alfa that shares its architecture with the reborn (SRT?) Barracuda. But which platform would these cars use? Options include a brand-new components set, a variant of the existing large rear-wheel-drive matrix, and an architecture to be shared with a still-nameless competitor.
While Alfa, Jeep, and Maserati can draw from strong brand values and an increasingly competitive product portfolio, Fiat and Lancia are much more likely to fight an uphill battle. Right now, Fiat's role seems to be to sell a colorful potpourri of Pandas and Cinquecentos. Above and beyond these two microcars, however, the company that once held a 55 percent share of its domestic market is struggling to deliver. The CEO does not seem to care much about Lancia. At this point, half of Italian-market Lancias are rebadged Chryslers, and this risky strategy continues with the Flavia-badged Chrysler 200 convertible. True, the Delta will be replaced next year with a bespoke model, but the all-new Flavia due in 2014 is again a mildly modified Chrysler 200. What Lancia needs is its own coupe, its own halo car, and a clear-cut brand identity. What Lancia may get instead is a tombstone, a few kind parting words, and a glut of Chrysler models to feed the dealers.
At Chrysler and Dodge, Sergio Marchionne will keep the number of offerings low -- no more than five models per brand. Perhaps the biggest challenge is to redefine, re-create, and reposition the minivan. Contrary to earlier reports, Dodge will be home to the minivan going forward, although the new model will be sportier, more emotional, and less utilitarian than the current vehicle. Chrysler will retain the premium Town & Country moniker, but instead of a boxy me-too people mover with even more wood and leather and chrome, product planning is looking for a Mercedes-Benz R-class that works. Think wagon/MPV blend, long-wheelbase sport van, low-roof and less bulky Pacifica, and proportions that would also be accepted by Audi and BMW customers. This approach involves an innovative architecture that could serve front-, rear-, or all-wheel-drive applications and will one day replace the ancient Mercedes E-class underpinnings used for the 300, Charger, and Challenger. At the other end of the scale, Chrysler is readying the all-new entry-level 100, which must not be a Cadillac Cimarron from Auburn Hills but more like Detroit's answer to the Audi A3. Apparently, there is also work afoot on a new Barracuda that could eventually replace the Challenger and may be sold under the SRT banner (sorry, Plymouth fans -- your favorite brand won't make a comeback anytime soon). If this car gets the nod, it might form the basis for a U.S.-built Alfa Romeo Nuova Duetto. Doomed are the Durango, the Avenger, and the Caliber, which is being replaced by the new Dart.
Ninety minutes are definitely not enough to get to know a person, to find out what makes him tick, to see through the jokes, and to decipher the casual cross-references. There's no doubt that the man is highly quotable and not afraid to go on record about future products. In addition, Marchionne is surprisingly funny, a very quick thinker, and a highly opinionated manager. If Ferdinand Piech is the auto industry's R&D wizard, then Sergio Marchionne is the mergers-and-acquisitions magician. What unites the two men is a deep understanding of the business they are shaping, an uncanny ability to build empires, and a thinly veiled lust for entrepreneurial success.

10 QUESTIONS

1. You have about [euro] 50,000 to spend on a car. Which one?
Dodge Charger SRT8.
2. What talent would you like to have?
Playing music. I'd love to be able to do that.
3. Where do you buy your clothes?
On the Internet, mostly. Except for leather goods, which I buy in incredibly expensive shops in Europe.
4. On June 17, you turn sixty. Which present would make you really angry?
A cake that says 60. I certainly don't want sixty candles! I don't want to see a six or a zero. I don't want to be reminded. I won't even be in the office that day.
5. What film would you have loved to star in?
You won't like the answer. Sophie's Choice. With Meryl Streep. She has to choose. I like that movie-triangle thing...
6. Somebody gives you [euro]2500 spending money. On what do you spend it?
Either movies or music. Or some type of audio equipment.
7. Name a person you'd rather never have met.
Some politicians -- who shall remain nameless.
8. What would you like to be reborn as?
A musical conductor.
9. Which drug are you addicted to?
Nicotine. (Lights his ninth Muratti Privat in seventy-five minutes)
10. You can time travel. Where to?
I would love to go back to the early 1900s and listen to one of Albert Einstein's lectures.

True or False

1. Chrysler should reinvent the minivan.
False. The owner of the minivan is Dodge. Chrysler needs a different type of vehicle in this segment.
2. Dodge should reinvent the muscle car.
False. No need to reinvent. What Dodge needs is the Charger and the Challenger in an evolved state.
3. SRT is the new home for high-performance Detroit iron from the Chrysler Group.
True. The Viper needs to be in that category, and the Grand Cherokee SRT8, and more. There is more to come from SRT!
4. Lancia should create affordable premium with a twist of italianita.
True. Except that italianita only works outside Italy. Sadly.
5. Alfa Romeo should push eco-friendly sportiness.
False.I'll give you eco-friendliness as an option. But Alfa's main mission is to be a premium sports car brand.
6. Ram should be tough and functional and very American.
True.Except that Ram is a funny brand because it caters [both] to the buyer who uses his vehicle as a tool and for the person who is more after the light-duty aspect. Guts and glory, that's what Ram is all about.
7. Jeep should fuse adventure and mobility.
True. As long as the product is trail rated. That almost killed the brand. In the future, everything Jeep makes will have at least one version that is trail rated.
8. Maserati stands for style, substance, and solidity.
Not Quite. Outstanding style with leading-edge performance is a better description.
9 Ferrari is cutting-edge, in every respect.
True. Very true.
On his own motivations:
SM: I don't do things for ego. My ego's not big enough to require that kind of feed.
On Alfa Romeo:
SM: Our best shot at bringing Alfa back is the U.S. It certainly has the DNA to be respectable. Whether it did everything in the past to be respectable or not is a question mark. It may have been a sinner. But I don't think it was a mortal sin.
On Ferdinand Piech:
SM: I think he's one of the all-time greats in the car industry. Do I like him as a human being? The answer is no.
On Jeep:
SM: The Liberty successor that you will see next year in Detroit is a Giulietta offspring. It's trail rated. I told you -- we're not as thick as we appear. It may take us a lot of catching up, but eventually we get it right. And by the way, that's the same architecture that's under the Dodge Dart. It's the same architecture that's going to host the Chrysler 200.
On electric mobility:
GK: At the Geneva show, it was all electric mobility. But everybody is shy about putting electric cars into production, except Nissan.
SM: You're not looking at a guy who's as scared as the rest of them. I'm not scared, I just won't do it. I just will not do it. I think we're smoking illegal materials if we think we're going to make those [profitably]. It just won't work.
On alliances:
GK: The one area where you could do with an alliance is Japan. So, Mitsubishi? Mazda? Honda? Suzuki?
SM: I have no interest in Mitsubishi. Mazda is potentially interesting. You would never do an omnibus solution with Honda; you would do development deals with them on particular things. But what I keep repeating every stupid time I get asked the question, "Who are you talking to?" The answer is, I'm talking to everybody. On this issue I am absolutely promiscuous.
More on Alfa:
SM: We need to reestablish the credibility of Alfa through cars. I need C- and D-segment [compact and mid-size] cars that will actually compete in their segments as being premium Italian sports cars. I haven't got a hope in hell of selling Alfa against BMW or Audi or any of the premium brands in the United States with something that is not truly Alfa. As you well know, there are limitations associated with front-wheel drive. Part of that has to do with front overhang. We will have to live with slightly longer overhangs, which we need to make up for in terms of performance and weight distribution, but we think we can get there. I'll tell you one thing: I understand that we've been threatening the world with an Alfa comeback now for a long time. So the car needs to be perfect. If it can't be perfect, it can't get launched. And if I can't build the perfect vehicle, I won't make it.

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