A car company can turn around. Just ask Fiat

fiat_logo.jpgWhen 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).


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.

[Source: CNN]