By Eric Sylvers
Fiat Chrysler Automobiles NV Chief Executive Mike Manley spent
his first year in the job trying to motivate employees stunned by
the sudden death last summer of his charismatic predecessor, Sergio
Marchionne.
Now, the 55-year-old executive must once again rally the
workforce following Fiat Chrysler's failed merger proposal and a
whistleblower lawsuit filed by one of the company's highest-ranking
American executives.
Fiat Chrysler last week withdrew a proposal to merge with
France's Renault SA that would have created the world's
third-largest car company by volume, blaming the French government
for creating barriers to the deal.
If Fiat Chrysler had been successful, Mr. Manley -- the former
head of the company's Jeep and Ram brands -- would have moved to a
new role, becoming one of two chief operating officers at the
combined entity, say people familiar with the plan. Renault's
current chief, Jean-Dominique Senard, would have become CEO of the
group, they say.
The unexpected breakdown of talks leaves Mr. Manley to soldier
on at the top, even as questions remain about whether the company
will seek another merger partner -- or return to talks with
Renault.
On Sunday, French Finance Minister Bruno Le Maire said that
while the auto industry needs further consolidation, Renault and
Nissan should strengthen their two-decade partnership before being
involved in any new merger moves. The French government is
Renault's largest shareholder.
Fiat Chrysler declined to make Mr. Manley available for an
interview. Since taking the top slot last July, he has largely
concentrated on operations and stayed out of the limelight.
Fiat Chrysler Chairman John Elkann led the charge in merger
talks with Renault, meeting with both French government officials
and Renault executives, while Mr. Manley worked to flesh out the
details. Mr. Elkann, exasperated with the French government, was
also the one to pull the plug.
On Friday, Mr. Manley, in an address to some employees, said
that it can be difficult to make an about-face but sometimes it is
the right thing to do.
Moving past the failed merger proposal could be a challenge for
Mr. Manley and other company leaders, especially if it was
positioned as a solution to a problem, said Peter Cappelli, a
management professor at the University of Pennsylvania's Wharton
School of Business.
"It's probably not going to be very satisfying for people to
hear, 'Oh well, we're going back to business as usual,'" Mr.
Cappelli said. "People want to hear a story that says, 'OK, here's
where we're going. Here is why this didn't work out.'"
While Mr. Manley has repeatedly said Fiat Chrysler can thrive on
its own, the company has numerous hurdles to overcome, the biggest
of which is generating enough cash to invest in new technologies
such as electric cars, as global auto sales cool. In 2018, Fiat
Chrysler posted a 3% rise in net income to EUR3.6 billion ($4.1
billion) as revenue advanced 4% to EUR115 billion. Profit and
revenue fell in the first quarter of this year.
Mr. Manley also must fix Fiat Chrysler's money-losing operations
in China and Europe, confront the challenge of autonomous driving,
build a stronger pipeline of new models, and improve sales for its
underperforming luxury brands, Maserati and Alfa Romeo, analysts
say. The company is struggling with rising costs related to meeting
tougher emissions standards, particularly in Europe -- a problem it
was hoping to remedy via a merger with Renault, a European leader
in electric-car technology.
Fiat Chrysler has sought partnerships to deal with the mounting
costs. On Monday, it said it would begin integrating the
self-driving technology of Silicon Valley startup Aurora into some
commercial vehicles. Financial terms of the agreement weren't
disclosed.
Mr. Manley played a pivotal role under Mr. Marchionne, turning
Jeep from a U.S.-focused brand into a global success. Jeep sold
fewer than 300,000 vehicles in 2009, the year Fiat Chrysler took a
stake in the then-bankrupt Chrysler. Last year, it sold more than
1.6 million Jeeps world-wide, according to LMC Automotive, making
it the top-selling brand in the company's portfolio. Jeep even
surpassed the Fiat brand in sales.
Two months before his death last year, Mr. Marchionne had
presented an aggressive set of operational and financial targets
with a big jump in profitability and new models, which Mr. Manley
inherited. Many analysts at the time were skeptical the company
could meet the goals and have since cast further doubt.
"There is the big question of what Mr. Manley will do with
Europe, but there are other issues such as sorting out the premium
brands Maserati and Alfa Romeo that have underperformed the
expectations set by Marchionne," said Stephen Reitman, an analyst
at Société Générale.
Fiat Chrysler's China business, an area Mr. Manley oversaw for
years as head of Asia-Pacific, has also missed expectations and is
in need of a "reboot," Mr. Reitman said.
The speed at which Mr. Manley confronts these challenges will
influence how attractive Fiat Chrysler is to another merger
partner, say analysts.
The auto maker is also dealing with a whistleblower lawsuit
filed by Reid Bigland, the current U.S. sales chief. Mr. Bigland
accuses Fiat Chrysler of cutting his pay to punish him for
cooperating with an investigation by the Securities and Exchange
Commission into the company's sales-reporting practices. Mr.
Bigland is still employed by Fiat Chrysler, the third-largest U.S.
car maker by sales.
Fiat Chrysler declined to comment on the lawsuit but said Mr.
Bigland's incentive pay, like that of other corporate officers, is
determined by the board of directors, which must first complete an
evaluation of the issues that surfaced in the federal
investigation. Deborah Gordon, Mr. Bigland's attorney, said his
performance at work has never been an issue, including in 2018.
Along with the SEC probe, the U.S. Justice Department began
investigating the company's sales reporting practices after an
Illinois dealership group filed a lawsuit claiming Fiat Chrysler
used "strong-arm" tactics to get dealers to falsify monthly sales
reports to inflate results. Fiat Chrysler has denied the claims.
The company settled the lawsuit in April with the dealership
group.
--Ben Foldy contributed to this article.
Write to Eric Sylvers at eric.sylvers@wsj.com
(END) Dow Jones Newswires
June 10, 2019 10:00 ET (14:00 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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