Is There A Leadership Style That Works For Every Project Project Failures From the Top Down – Can Marchionne Save Chrysler

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Project Failures From the Top Down – Can Marchionne Save Chrysler

When Chrysler merged with Fiat on June 10, 2009, there was reason for hope and optimism. After an endless stream of bad news, maybe the auto industry isn’t dead yet.

On paper, it looked like a win-win. Fiat will return to the American market and sell its popular 500 (Cinquecentro), Chrysler will acquire a line of cars that consumers could buy, and tens of thousands of workers will keep their jobs.

But the real prize may be Sergio Marchionne, CEO of Fiat and now CEO of FiatChrysler.

When he first became CEO of Fiat in 2004, Marchionne inherited a company on the brink of bankruptcy. It produced a lackluster product line and suffered losses of more than $12 billion over the previous five years.

To transform the company, he initiated several strategic and operational projects. He fired senior executives, dismantled a bloated bureaucracy and brought in a team of aggressive young managers. He then went through all the projects and killed those that didn’t pass the market test. And he hired new designers and demanded a portfolio of exciting designs that would bring customers back to dealerships.

In less than three years, he managed to make one of the most impressive turns in the history of the automobile industry.

Now, as part of his plan to turn Fiat into a global competitor, he has taken on Chrysler. But can he work his magic again? Will he be able to save yet another company whose circumstances are in many ways, but not all, strikingly similar to those faced by Fiat just five years ago? Can his management style, as well as the Fiat 500, be successfully exported to this side of the Atlantic?

If we look at Marchionne’s record on its own, it’s not only impressive, but it shows that he could be the right man at the right time. But before we can reach that conclusion, its ability to succeed must be seen in the context of what has happened to Chrysler over the past decade. In this case, success may not be guaranteed.

Daimler Chrysler

In May 1998, Daimler-Benz merged with Chrysler. Jürgen Schrempp, CEO of Daimler-Benz, called it a “merger of equals.” Robert Eaton, CEO of Chrysler, promised that “within five years we will be among the Big Three car companies in the world.” Even the merger of two companies from Europe and the USA was not considered an obstacle; Robert A. Lutz, vice president of Chrysler, claimed that “there was definitely no clash of cultures here.”

But behind this display of public enthusiasm and corporate affinity, Schrempp took full control, and his actions made it clear that this was indeed no “merger of equals.” Eaton responded by obeying Schremp, often secluding himself in his office in Auburn Hills; its top executives responded by moving to Ford and General Motors. Soon, Chrysler was left without a rudder, the designs were lackluster, and within just a few years there were problems not only with the product line, but also with the merger. Although there were many reasons for its failure, one of them was often cited as a clash of corporate cultures.

Cerberus

In 2007, DaimlerChrysler sold Chrysler to Cerberus Capital Management, a private equity firm with no automotive experience. Bob Nardelli, the former CEO of Home Depot, was chosen as the head of the company. It was clear to many that the deal was purely financial, and few believed that Cerberus was looking to create a competitive company in an increasingly competitive and underpowered automotive industry.

Nardelli was a “tough as nails” CEO. Business Week said in August 2007 that he had “alienated … virtually all the leadership he inherited”. While many thought its military style was exactly what Chrysler needed, it didn’t work. In that Business Week article, University of Michigan professor Gerald Meyers said Cerberus had the right idea, but Nardelli was “the wrong guy.”

Then Chrysler was caught in a perfect storm. The price of oil rose to over $140 a barrel, the economy went into a tailspin, and Chrysler found itself in a product line dominated by gas guzzlers no one wanted to buy.

Marchionne’s challenge

It was in this context that Fiat acquired a 20 percent stake in Chrysler. Marchionne inherited an organization ravaged by the aloof but dominant style of Schremp and the hard-as-nails style of Nardelli. He inherits a workforce that has experienced job losses, wage cuts, deteriorating benefits and the anxiety of an uncertain future. But above all, he inherits a workplace that suffered from one lackluster project after another, and a project culture that failed to emphasize markets over methodologies.

Here’s the problem; his management style, characterized by the rapid and disruptive changes he implemented five years ago, may not be very different from the management style practiced by his two predecessors at Chrysler.

But it must be different if it is to succeed in making lasting change.

Is he flexible enough to be the transformational leader Chrysler so desperately needs, or will he ignore Chrysler’s hard-driving past decade, take the reins of power, ignore cultural differences, and simply repeat history? Can he be tough on problem solving, but at the same time restore morale and create a project environment that motivates rather than alienates his project teams?

Or will he become the third in a string of hard-nosed CEOs and continue to lash out until morale at Chrysler improves?

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