Fiat Chief Shuffles Chrysler Exec Lineupby
Just as Chrysler is readying announcements about new product plans and brand positioning, two of the people who were recently appointed to head those brands are leaving under pressure.
The unexpected moves may reflect the dire straits facing Chrysler as it struggles to maintain market share and cash flow after emerging from a government-assisted Chapter 11 filing. But they also fit with the well-known impatience of Chrysler's new CEO, Sergio Marchionne, who has a track record at Fiat (FIA.MI) for hasty firings of executives who don't follow his direction in lockstep.
Sources who have worked for Marchionne at Fiat say he swept out many executives when he took over that company in 2004 and even fired some managers during meetings.
Chrysler said Peter Fong, who was handpicked by Marchionne out of the company's middle ranks last summer to be head of Chrysler sales as well as chief executive of the Chrysler brand, is leaving for "personal reasons." Marketing chief and Dodge brand chief Michael Accavitti is leaving to "pursue other interests." The two were appointed to those positions in a significant restructuring of the company in August. Sources close to the company say the executives were pressured to leave over differences they had with Italian managers who have moved into leadership positions since Fiat took a 20% stake in Chrysler earlier this year.
Chrysler's New Brand Chief Is Fiat Vet Olivier Francois, a Fiat veteran who recently headed up Fiat's Lancia brand, will take over at Chrysler, while Ralph Gilles, chief of product design at Chrysler, will take over the Dodge car brand. Michael Manley, head of product development and chief executive of the Jeep brand, will stay in his post.
As previously reported by BusinessWeek, Chrysler is breaking the Ram pickup out of the Dodge brand and rebranding as "Ram" its trucks, as well as future commercial-grade products. Fred Diaz Jr. has been named president and chief executive of the Ram brand.
The move to name Gilles as head of Dodge mirrors a move recently made by General Motors to name its head of North American design, Bryan Nesbitt, head of its Cadillac brand.
The timing of Fong and Accavitti's departures follows a disastrous sales month; Chrysler's September sales plunged 42%. Also, the company is trying to complete a review of ad agencies to create new advertising and marketing for Dodge and Chrysler in the fourth quarter and position those brands for the longer term.
Chrysler is in an unenviable spot. Its current products get low marks from Consumer Reports' and J.D. Power & Associates' quality rankings. The brands have been damaged by the parent's Chapter 11 filing. And new products arising from the Chrysler-Fiat alliance won't hit showrooms for more than two years.
Culture Clash Sources close to Chrysler said Fong drew fire inside the company for reducing incentive spending too much after the federal cash-for-clunkers program expired at the end of August. CEO Marchionne is due to lay out his product plan to Obama Administration officials this week and will have to explain the deep sales drop, as well as the executive churn so early in his tenure.
According to insiders at Chrysler, the early days of the Marchionne era have also been marked by some culture clash between Fiat and Chrysler executives. That might have been inevitable. Accavitti, for example, despite being head of marketing at the company, played a low-key role in a round of meetings Chrysler executives recently had with ad agencies. Instead, Giovanni Perosino, Fiat group marketing communication director, dominated the meetings. And while Marchionne will have final say about the selection of agencies and strategies, he was not present for the agency pitches. Instead, the work, screened by Perosino, will be re-presented to the CEO later this month.
The appointment of Francois to run the Chrysler brand coincides with a strategy hatched by Fiat managers to try and elevate the Chrysler brand to the same price and prestige territory as GM's Cadillac and Ford's (F) Lincoln, to launch products co-developed by Fiat and Chrysler, and to persuade buyers of entry-level cars from German and Japanese luxury brands to give Chrysler a look.
Several of Chrysler's American managers have expressed private opposition to the strategy, reasoning that the company would be foolhardy to try and quickly move Chrysler—which sells minivans and a PT Cruiser selling below $20,000—into luxury territory.
Ram Brand Questioned The decision to split off Ram as its own brand, too, strikes American executives as curious. "It is a very European perspective on the American pickup truck market," says Earl Hesterberg, CEO of Group One Automotive, one of the biggest automotive retailing companies whose operations include several Chrysler dealerships.
Chrysler has been combining its Chrysler, Dodge, and Jeep franchises into a single dealer sales network. The company plans to add the Fiat 500 under its own name to the mix in two years. So splitting off Ram as its own brand means the company will be managing five distinct brands in one network of showrooms within a few years—six brands, if you consider that a selection of Chrysler dealers will also be tapped to distribute Alfa Romeo vehicles for Fiat in the U.S.