Leading From Hell and Back :: Video
Fiat and Chrysler Group CEO Sergio Marchionne reveals his leadership style and how he led two auto industry comebacks.
ANN ARBOR, Mich.—In 2009, with the U.S. auto industry reeling amid a severe recession and General Motors Corp. and Chrysler seeking government loans to survive, some questioned whether Chrysler was worth saving.
But Chrysler Group CEO Sergio Marchionne had seen that show before, and he was not surprised by the public sentencing an ailing automaker to death. In 2004 he'd taken the reins of Italian automaker Fiat, which at the time was the subject of premature obituaries. Four years later Fiat posted the largest trading profit in its then-109-year history.
Marchionne, who shared leadership lessons with Ross students on Jan. 12, saw value in Chrysler circa 2009, just as he had in Fiat years before.
Both companies relied on a new generation of leaders to turn their companies around. In both cases Marchionne promoted emerging leaders from the ranks, flattened the organizations, and changed the culture.
It helps explain why an executive born in Italy, raised in Canada, and running an Italian company was able to build a team that turned around an American car maker in just two-and-a-half years. Chrysler Group will record an operating profit of $2 billion for 2011, and made huge gains in sales, market share, and perception. Chrysler also paid back loans to the U.S. and Canadian governments six years ahead of schedule.
"The people of Fiat and Chrysler come from very different paths and different parts of the world but they have one thing in common," Marchionne told a packed Blau Auditorium. "Both have been to hell and back.
"Survivors are very different people," he continued. "They're special people. My colleagues and I are survivors. We don't shy away from making tough decisions. The decisions we make at Fiat and Chrysler today are informed by the experience of near-extinction."
Chrysler emerged from an orderly Chapter 11 in 2009 thanks to government loans, Fiat's ownership stake, and sacrifices made by employees, creditors, and lenders.
But the speed and depth of Chrysler's turnaround surprised nearly everyone. That's partly due to the tools Fiat provided Chrysler via the merger, such as technology and quality small-car architectures. It's also due in part to Chrysler’s new senior leadership team. Most of the new senior leaders came from Chrysler's ranks.
"It took a fearless team to bring about such a remarkable result," Marchionne said.
He told Ross students he doesn't see leadership as a theoretical idea. He judges leaders on the company's core principles— integrity, transparency, embracing competition, acting quickly and decisively, delivering on promises, leading people, leading change, crafting creative ability, and constantly rethinking one's approach.
Within that framework, he gives talented executives some room to stretch and learn from mistakes.
"When you surround yourself with incredibly talented people, you have to give them rope to go out there and explore," Marchionne said. "That's going to have hits and misses. You have to let them miss."
Upon taking control of Chrysler, Marchionne concentrated on identifying high-potential talent who matched the leadership qualities he desired in a executive new team.
One of those rising leaders, Barbara Pilarski, MBA '88, who joined Marchionne in addressing Ross students, was named vice president of business development for Chrysler in June 2009. A company veteran, she chose to stay when Chrysler offered buyouts to employees.
"They were willing to pay us to leave, but I didn't want to leave," she said. "I felt I could make a difference."
Pilarski said Chrysler's flat, leaner executive organization means her voice is heard, her span of responsibility is wide, and she can direct action.
"That's rare," she said.
Some results of the cultural shift became apparent when Chrysler aired a two-minute Super Bowl ad in February 2011, featuring rap artist Eminem and the new Chrysler 200. The commercial established Chrysler's "Imported from Detroit" tagline and announced the company was back and ready to fight.
But the ad was a risk, Marchionne said. It was expensive and Chrysler had accepted government assistance. Detroiter Eminem, though popular, is a controversial figure and doesn't fit the profile of a mainstream product spokesman. Nobody had done a two-minute ad during the Super Bowl and the company had to ask the NFL and the network to delay the game's restart by 30 seconds.
The ad, which celebrated Detroit as much as Chrysler and its new model, dominated post-game talk of Super Bowl commercials. The clip recently surpassed 21 million views on YouTube. Both edgy and uplifting, the ad showed Chrysler's team was "free from cliché and conventions" and embodied the concept of creative collaboration, Marchionne said.
On the product side, Chrysler recently introduced the Dodge Dart at the North American International Auto show in Detroit. With the Dart, the automaker finally has a competitive entry in the critical compact sedan segment.
The Dart's underpinnings come from Fiat's Alpha Romeo Giulietta, while the body and interior features are born of American designs. It's an example of how the Fiat and Chrysler teams listen and learn from each other without trying to dominate, Marchionne said.
Launching a competitive vehicle with good fuel economy like the Dart 31 months after emerging from Chapter 11 wouldn't have been possible unless Chrysler was able to use tools from Fiat, he said. Although Chrysler benefits from this relationship, Marchionne is careful not to impose an Italian view of car making on Chrysler. But the technology and platform-sharing is a huge boost for both sides of the alliance.
"Everything Fiat has has been made instantly accessible to Chrysler," he said. "There was no attempt at domination."
Marchionne's view of leadership also extends beyond the company. He said business leaders have a moral responsibility to help create a better future.
"Contributing to the well-being of society as a whole is a responsibility that cannot be left to others," he said. "Those running global enterprises have a responsibility to look beyond their walls and office windows."
Right now, Marchionne is trying to temper expectations for Chrysler in 2012. Much went right for the automaker in 2011, and the year-over-year gains it saw will be difficult to replicate.
He's also concerned about Europe, which is being dragged down by the heavy debt of countries such as Greece, Italy, Ireland, Spain, and Portugal. Many of those countries have taken or are mulling austerity measures. There's also pressure on countries like Germany and France to step in to help save the euro.
All of that creates social tension and it will "require a lot of courage" to stem the economic crisis. Marchionne said he's not seeing the same willingness to sacrifice for the greater good in Europe that he saw during the U.S. recession and auto industry crisis.
"Europe has not embraced that," he said.
Marchionne and other Chrysler executives were invited to Ross by the Ross Leadership Initiative and the Master of Supply Chain Management Program.
— Terry Kosdrosky
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Terry Kosdrosky, (734) 936-2502, firstname.lastname@example.org