Automotive industry headwinds and disappointing second-quarter results signal a rough ride for Fiat Chrysler’s newly minted CEO.
At an emergency meeting in Italy on July 21, Fiat Chrysler’s board of directors voted to name a successor to long-time CEO Sergio Marchionne, who had been hospitalised since late June. Mike Manley, head of the company’s successful Jeep and Ram brands, was appointed to the top executive role, effective immediately. Marchionne passed away a few days later.
Manley replaces a legendary CEO, who built the Fiat Chrysler group and served as Chief Executive for 14 years. Marchionne is credited with raising the company from the ashes following its 2009 bankruptcy and increasing Fiat Chrysler’s value more than 10-fold during his tenure. But more recently an automotive industry slowdown, competition from China and other forces have put Fiat Chrysler in a precarious position. Its stock has lost around a fifth of its value since January.
Most industry watchers have confidence in Manley, owing to his own strong track record. Under his leadership, sales of Jeep and Ram surged. Jeep has been a particularly bright spot: Global sales have nearly tripled, and Jeep models are now produced in 10 plants in six countries vs. only four plants, all in the U.S., when Manley took over the brand in 2011. In the first six months of this year, Fiat Chrysler’s sales in the U.S. rose 5% due exclusively to higher Jeep sales, the New York Times reports.
It is already clear that Manley will have to make tough decisions as CEO. Second-quarter results, released July 25, led Fiat Chrysler to cut its financial targets. Most concerning were lower sales of SUVs in China – a market integral to the company’s plan to increase its profitability. Manley described the slump as the company’s “biggest challenge” this year. “It will take the balance of the year for us to really see the progress that I’m looking for, but the good news is I think we know what” the problems are in China. “We can certainly fix them.”
Three-quarters of Fiat Chrysler’s profits currently come from North America, where the automotive industry is slowing down overall and tariff concerns are sowing uncertainty. Further, domestic competition has intensified, and rivals such as General Motors and Ford have moved ahead in electric vehicles and self-driving vehicles.
While Fiat Chrysler’s ambitious profit goals have been scrapped, Manley said he intends to carry out the five-year plan laid out by Marchionne in June. It calls for €45 billion in investment in more than two dozen new vehicles, including electric models, while slashing costs by €9 billion. The Fiat, Dodge and Chrysler brands contribute little to the company’s bottom line, and some models will likely be phased out.
Much depends on Fiat Chrysler reinvigorating its performance in China, and Jeep is still its best bet. Manley said the company is working to reposition Jeep in China and strengthen its dealer network there. The new CEO “has to grow Jeep in China,” said Tom LaSorda, a former Chrysler chief executive. “That’s the future.”
