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How do you follow Sergio Marchionne?



Sergio Marchionne cites a clear passage from Lewis Carroll's Through the Looking Glass

The Red Queen tells a frustrated and exhausted Alice, at the end of a today's famous presentation blaming the auto industry for its wasteful ways who in her world "needs everything you can do to stay in the same place, if you want to go elsewhere, you have to walk at least twice as fast!"

Without Marchionne, on Saturday after a sudden deterioration in his state of health was replaced as CEO of Fiat Chrysler Automobiles NV, the Italian and the US, too, he would probably have run out of their accumulated debt.

Thanks to the wild gait that Marchionne has endured for 1

4 years under difficult conditions, Fiat has not only survived but thrived. His departure leaves a gap that will fill his successor Mike Manley, head of the Jeep brand – everyone would do it.

With a trade war and the auto industry set amidst an unprecedented technical upheaval that meets the goals of Marchionne set will be difficult. But with the revival of Jeep, which today is the main source of Fiat cash flow, Manley has proven to be a very capable leader. He also inherits a much stronger company than the one that took over Marchionne in 2004.

Marchionne braved the predictions of Fiat's descent while working harder, better distributing funds and creating more value than his colleagues. During his tenure, he increased the value of Fiat assets by more than tenfold.

The fact that he also spoke much more eloquently than most executives and took into account the concerns of investors (in the auto industry not a matter of course).

Recognizing the potential of the Jeep brand, reversing the luxury Ferrari brand, and turning early from low-margin cars to more profitable SUVs, he managed to revive Fiat Chrysler and reduce net debt to zero. The company expects to generate approximately $ 6 billion in net income this year, roughly the same as Ford Motor Co.

It is a comfort that Marchionne, who was due to retire in April 2019, was able to do one in June Curtain as he outlined new financial goals for the group.

Still, he leaves the stage before the job is done. The new goals are ambitious – maybe too ambitious. Can Fiat double operating profits to $ 16 billion ($ 19 billion) over the next five years and generate $ 30 billion in free cash flow?

For now, investors are not buying it – Fiat's shares are traded dull times five times estimated revenue, less than General Motors Co., Ford and Volkswagen AG.

Weighing on the stock is the high investment required to catch up in electric vehicles (where Fiat is perceived as a laggard) and the risk of a large US penalty over the diesel emissions of its vehicles. In addition, at some point, the long-running US automobile cycle will come to an end – cycles always do.

It's possible that Manley decides that the best way to tackle all these challenges is to pursue a merger with a peer – as Marchionne tried and did not do with GM.

Marchionne's assessment in his 2015 "Confessions of a Capital Junkie" remains true: it's insane for automakers if they develop almost identical technologies while developing the load would be more efficient.

Without a merger, Manley risks being in the same predicament as Alice: running at double speed so as not to stop.

This column does not necessarily reflect the opinion of the editors or Bloomberg LP and its owners.

To contact the author of this story:
Chris Bryant at cbryant32@bloomberg.net

Contact the responsible editor for this story:
Edward Evans [19659019] at eevans3 @bloom berg.net


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