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Marchionne inaugurates Fiat’s grand US campaign The Financial Times and ArcelorMittal have teamed up to reward executives this year for "boldness in business". Yesterday Fiat’s chief executive Sergio Marchionne laid a particularly strong claim for the top prize by confirming his plans to acquire a 35 per cent stake in Chrysler. Nothing could be bolder and at the same time nothing could be riskier. Chrysler is the smallest of the Big Three US car makers and the one in the direst of straits. Daimler thought it had clinched a deal "made in heaven" when it acquired Chrysler a decade ago and subsequently lived to regret every minute of its American adventure until it finally ditched the US manufacturer two years ago. Veteran Peugeot executives still have nightmares over the French company’s acquisition of Chrysler Europe in the 1970s. If this were not bad enough, European companies also have a dismal historical record of making a success of American acquisitions, not just in the car sector. Mr Marchionne should know. He is also deputy chairman of UBS where he is now trying to help the Swiss banking group recover from its gigantic US subprime fiasco. If UBS had refrained from expanding so aggressively in the US it would probably be in far better financial shape today. So why has Mr Marchionne decided to ignore the lessons of the past and embarked Fiat on such a bold transatlantic expedition? After all, he was recruited by Fiat a few years ago when the Italian car maker was also on the ropes. He orchestrated a model recovery strategy and revived the company’s fortunes. Could his success have now gone to his head? Just before Christmas, the Fiat boss was deeply pessimistic about the future, especially for mass-market car manufacturers. The party was over, he said, and the only way forward for volume carmakers was to consolidate. Scale had become crucial. Unless a car group could produce and sell between 5.5m and 6m cars a year it would be unable to make money in the future. That meant that companies had to combine and that ultimately the world mass-market would be dominated by a handful of manufacturers. Fiat produces about 2.2m cars a year, all brands included. This is clearly not enough. So Mr Marchionne decided to waste no time and take an early lead in the industry’s new wave of consolidation. There were rumours of Fiat and Peugeot forging closer ties. Industry analysts felt such a combination could make sense given the common culture of the two companies as family-held groups. There was also talk of Fiat and BMW since the German premium car manufacturer is also family-controlled and could benefit from the Italian company’s expertise in small cars. In the past, Fiat forged a partnership and equity exchange with General Motors that has since collapsed. Chrysler certainly did not seem to feature high on the list. But Mr Marchionne clearly felt it presented a good and ultimately mutually beneficial opportunity. First, Fiat is hedging its bets by not putting any money directly into Chrysler. Instead it proposes to take a 35 per cent stake in exchange for giving the US company access to its technology and its cars and helping finance the retooling of some of its American factories. The deal would open the US market to Fiat and its other brands such as Alfa Romeo. Fiat would also indirectly benefit from US government financial support to its domestic carmakers and help Chrysler develop cleaner cars, as Washington is asking. And Mr Marchionne could not have chosen a better moment to inaugurate Fiat’s US campaign by announcing a deal to help rescue Chrysler on the very day of President Barak Obama’s inauguration. But even with Chrysler adding a further 1.7m annual car sales to Fiat’s 2.2m, Mr Marchionne will still be some way off his target of at least 5.5m cars a year. This suggests that his deal-making will not stop with Chrysler and that he will be on the look out for further alliances. Some of his associates might be hoping that he will not move too fast because he will have enough to be getting on with at Chrysler.

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