Why Marchionne Had To Go Anyway Despite Illness: The Era of Jeep Begins
We wouldn’t be having this debate about electric vehicles at this juncture of FCA history without him. There would be no FCA because Marchionne. He stepped down yesterday due to health and Michael Manley is named Fiat Chrysler's CEO.
- 2004 saved Fiat.
- 2009 saved Chrysler Parent, Dodge, Chrysler, and Jeep brands from extinction.
- Gave us Demon, Hellcat, and SRT and RAM brands thats enough alone to thank him.
- Gave us extra years with Viper.
- Saved hundreds of thousands of jobs between Fiat and Chrysler.
- In Chrysler’s case he helped save an economy by making recovery go faster.
- Increased 10 times FCA’s combined corporate net worth from $7.5 billion to nearly $72 billion USD (NYT).
- Saved Alfa Romeo and Maserati from possible extinction and combined them into one brand.
- Saved and spun off Ferrari and lustered the brand to where it is now. Working for Ferrari in Italian culture is almost like working at the Vatican its sacred.
But there were problems:
- Fiat flopped in North America.
- Alfa Romeo flopped too.
- So did Maserati as a strand alone from Ferrari.
- Quality control all divisions was always so bad and got worse it became laughing stock.
- Recall after recall after recall after recall, and then more recalls.
- Justice Dept. alleges FCA also cheated on diesel software.
- FCA only makes a substantial profit only from Jeep and Ram nowhere else.
- Missed opportunity in China, this alone could get a car CEO fired elsewhere.
- Regardless of how he leaves us, this is what probably did him in: 7 car divisions but only a handful of EV’s all compliance, nothing else, with a 5 year reactive and paltry electrification plan.
My sincere heartfelt concern reaches out to the Marchionne Family over the serious news that Don Sergio Marchionne, now former CEO of FCA Group, has taken a turn for the grave after shoulder surgery a few weeks ago. His departure, regardless how interpreted, was expedited with that emergency board meeting that elected Brit Mike Manley of Jeep/Ram Divisions as new FCA Group Head, so this announcement was surprisingly not surprising in many ways. Everyone is replaceable, no one is indispensable, but by the same token, when there’s reason for you to depart, circumstances and a board of directors will help you along.
4 Big Reasons Why This Happened
I do know this: in spite of his lackluster and way delayed plans to electrify the at least some parts of the FCA portfolio, he left behind a legacy of saving four car companies from extinction, saved thousands of American jobs, thus helped save a world economy, and for that he should be applauded. Like Henry Ford, both were men of their times, but at the end of their lives they ran into problems which underscored the need for them to step aside so that the next generation could take over and move on. And frankly, it was Don Marchionne’s time to do that. I thank him for his service. Fantastic job. But it is what it is. There were quietly in the backdrop four big reasons why Marchionne had to go.
1. FCA Alleged Diesel Cheaters
Don Marchionne was lucky to rest on his laurels. Any other car executive under any different circumstances would have found himself fired for any one of these issues, not alone four combined. He could have been fired possibly faced jail for Diesel cheating, as the Justice Department recently accused FCA Chrysler of cheating emissions tests as well. Marchionne’s VW counterpart, Martin Winterkorn, now former CEO of VW Group, came here to the US states from Germany after being indicted by a federal grand jury in May, and now faces federal charges that could wind him up in federal prison by the Justice Department for a long time. It’s not over for FCA, and God willing how long Don Marchionne is with us, how merciful the Justice Department might be with him.
2. Jeep’s Problem in China
He could have been fired for Jeep’s lackluster presence in China. This alone is another sole career ending issue for any other car exec. Not only should there be a hearty Chinese Jeep program in China, but there should be a hearty electrification program to go along with it compete with China’s native proliferation program its own car companies are undergoing. The Chinese can hardly get their hands off of Land Rover, I can only imagine what and how an American alternative of a 4x4 SUV would fare over there. According to Automotive News last May, FCA’s 2014 plan of selling a half million Jeeps in China flopped by 2018. Marchionne said, “I think . . . We overestimated the value of the American DNA of Jeep onto the Chinese market.” Huh? What’s that supposed to mean? That the Jeeps weren’t Chinese enough? Let’s hope the Grand Commander is!
3. Recall Recall Recall Its All About Recalls
Most car executives with Marchionne’s responsibility would also see career ending results with the kind of recalls GM saw with just one recall. In the 2014 GM Ignition Switch Scandal, just one recall alone, GM had to retroactively set aside $900 million for a Kenneth Feinberg BP Oil Deepwater Horizon type payout, to settle claims for a faulty ignition switch. Some say this was a factor in 4 year CEO Daniel Ackerson’s departure from GM combined with his wife’s illness, setting up the stage for the Mary Barra Era we are now under. This payout was exempted from the 2009 bankruptcy. GM announced departures of its senior Vice President in charge of global communications and public policy and senior Vice President in charge of global Human Resources, but never specified why or under what circumstances were those departures (NYT 4/14/14).
That was one. According to CNBC, in Chrysler’s case in 2015, FCA had to pay out $105 million to settle nearly two dozen recall campaigns. This resulted in a 3 year consent degree that FCA had to sign with the US Department of Transportation and monitoring by Secretary Rodney Slater. This is the equivalent of a US local police department having so many police brutality complaints, that the chief executive of the jurisdiction, usually a mayor or county executive, or the police chief or police commissioner, has to sign a consent decree to have the US Justice Department monitor its department’s police practices to ensure the cops are doing their job ad not roughing people up.
This doesn’t include FCA’s latest recall back on Memorial Day weekend this year, of 5.3 million vehicles with stuck cruise control switches, not enabling drivers to deactivate their cruise controls. Don Marchionne, at least for now unless criminal charges are preferred, escapes all of that.
4. Marchionne v. Electric Cars
Let’s get to the electric vehicles. Or the lack thereof. This is what inflamed most investors about Marchionne, especially at the investors meeting in Italy a few weeks ago, that some insisted on him having some plan to electrify some part of the portfolio in a concise timeline. Paltry. And in that paltriness Marchionne was sending a message loud and clear, and perhaps in that clarity of silence the reverberations were echoing that he had to go. I said it myself when I reported the conference:
“Let’s be clear, FCA Chrysler did not intend to electrify. It didn’t want to electrify, and they’re only electrifying because they had to. That’s why they procrastinated for so long. Everyone else has something in the showroom to show where they’ve been spending money and effort on for some kind of in-the-future development, thank God Chrysler has the cash cow Pacifica van hooked with Alphabet’s Waymo’s AV equipment.” Me, 7/11/18
He put his personal feelings about electric vehicles into the equation at the expense of the bottom line for FCA Group. And in the end it was FCA who lost big time. FCA has 7 divisions of cars and trucks, seven, and yet only a handful of some kind of electric type vehicle, all soon to be phased out eventually PHEVs, only 1 BEV, the Fiat 500e that he boasted he didn’t want anyone to buy because he spent too much in development. It became clear that Don Marchionne clearly thought that EVs were a passing phase, and that demand would quickly walk away from them. He clearly denied the tsunami that’s currently happening in China with their EV proliferation alone, Marchionne believed that electrics would just quietly go away, apparently. As great a man he is, he is so wrong about this, history will prove him wrong, and sadly, he will be remembered for that and not his accomplishments that allowed us to even have the debate about electric cars in his company.
The Jeep Era Begins
So, with the passage of the Marchionne Years, come British Mike Manley of Ram and Jeep for the new Jeep Era. By the board electing him interim CEO of the Group, the message is loud and clear: the Italian Brands will take the back seat as the American trucks take over, with a Brit at the head. In as much as we shall see GM take a dominant position in the world car industry between an eventual autonomous and all electric portfolio, expect Jeep and Ram to bring it on with all the truck might they can. And Google Alphabet will be there with Waymo behind them: thanks to Mr. Marchionne.
Expect Jeep to go global and have a wide range in their portfolio from third world to even an SUV to compete with Rolls Royce. Rolls Royce you say? Yes I say Rolls Royce. Don’t do the VW v. Mercedes thing people were doing with Volkswagen Phaeton years ago with Jeep and Land Rover. YOU may not want to spend $100,000 on a VW but the rest of the world does without batting an eye. People may not want a $100,000 Jeep in North America, not yet, until they see one, as I would want one, but I bet the Chinese do, and if they do eventually if not right away we would too, and if Jeep does it right, they might not need a luxury brand to help them like GM needed Hummer. It ain’t all about America in the global car market, and people from other parts look at brands differently. If Land Rover can go upmarket with a $400,000 leather lined Range Rover not to be outdone by Bentley or Rolls, Jeep is now in a position to expand their entire model range like Land Rover. They are both equal competitors. And ironically it was Don Sergio who said it himself that the biggest mistake Jeep ever did was pull the Grand Wagoneer from the market, as that was Range Rover’s only competitor back then. Land Rover never looked back. Like Tesla is now doing with that electric Porsche, watch out!
Thank You Don Sergio
So L'era di Don Marchionne abruptly ends, and sadly, and I chose to remember the resurrection of Viper, the vintage years of Hellcat, Demon, and SRT, one of my most favorite cars that I wanted to own but never got around to buying one, the Chrysler 300, and from Chrysler’s legacy my first car I ever owned, ironically a car my cop father gave me, he bought used out of a lease in 1973, that’s used as a police car back then, a 1972 Plymouth Fury III, to his one day soon to be, cop son, a foreshadowing of what was to come later in my life. God, I am so grateful to be living in these times, to see these changes and so quickly. I shall ever forget those times I raced up and down the interstate chasing speeders in a Chrysler product, sitting on the side of the road in 100º weather with Chrysler Airtemp, best car a/c in the world! There will always be a special place in my heart for Chrysler, and Don Sergio Marchionne is now definitely a reason why. I disagreed with him on some car issues, but I deeply DEEPLY respect the man for what he’s done for the industry. I tip my hat, and send my deepest condolences to the Marchionne Family, to hope he is not suffering to go peacefully.
What do you think of Sergio Marchionne and the legacy he left at Fiat Chrysler? Let us know in the comments section.