Chrysler Group CEO Sergio Marchionne Faces Managerial

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Chrysler Group CEO Sergio Marchionne Faces Managerial Challenges Case Study

A decline in sales isn’t the only big problem facing Chrysler Group. Another, according to Chief Executive Sergio Marchionne, is the almost ingrained tendency to react to falling sales by slashing prices. In Detroit, “there’s almost a fanatical, maniacal interest in [market] share,” Mr. Marchionne told reporters Monday on the opening day of the North American International Auto Show. But rarely, he added, has heavy discounting in pursuit of high volumes helped automakers generate profits in the long term.

For the past several months, the 57-year-old Italian-born Canadian has been working to shake up Chrysler and move the company away from old ways that forced it into bankruptcy reorganization last year. He has ousted several veteran executives, flattened its bureaucracy, and, according to people who have worked closely with Mr. Marchionne, injected an element of fear into its ranks. One of the more frustrating problems for Mr. Marchionne has been the use of heavy rebates and other incentives to maintain sales—an issue that has plagued General Motors Co. and Ford Motor Co. over the years.

When the U.S. government offered as much as $4,500 in “cash for clunkers” rebates, Chrysler’s sales chief at the time, Peter Fong, drew up a plan to offer an additional $4,500 from Chrysler, two people familiar with the matter said. But when Mr. Marchionne found out about it, he was furious, these people said. In an August meeting with Mr. Fong and his sales team, the CEO excoriated them, saying doubling discounts amounted to “giving away margin” at a time when Chrysler was scrambling for profits, one person familiar with the details of the meeting said. “Sergio was ballistic,” this person said.

Mr. Marchionne took the helm at Chrysler in June of 2011, when the company exited bankruptcy protection and formed an alliance with Italy’s Fiat SpA, where he also serves as CEO and which owns about 20% of Chrysler. In November of that year, he laid out a turn-around plan that calls for Chrysler to launch a series of small cars designed by Fiat, and envisions Chrysler breaking even and returning to profitability in the next few years. Besides working out ways for the two companies to work together, Mr. Marchionne has tried to shake up Chrysler’s plodding corporate culture. To select his new management team, Mr. Marchionne held dozens of 15-minute interviews with Chrysler executives over several days to evaluate which ones to keep and which to push out, according to people who participated in the process.

When the process was over, Mr. Marchionne had 23 people reporting to him. Some were junior executives who had been moved up a level or two in the organization. Mr. Marchionne took an office on the fourth floor of the technology center at Chrysler’s headquarters in Auburn Hills, Michigan, among Chrysler’s engineers, instead of an office in its adjoining executive tower. His management team began meeting weekly in a nearby conference room equipped with video gear so that Fiat executives in Italy could take part.

In these meetings, Mr. Marchionne often spelled out what he saw as Chrysler’s many deficiencies: margins and vehicle quality needed to improve and better control over pricing was imperative, according to one person who has been in the sessions. Details of the discussions weren’t to leave the room. Security officers even called senior executives over the summer to make sure no one was talking to reporters about the company’s plans. Mr. Marchionne, a notorious workaholic, carries five cell phones and works seven days a week. He spends about one full week a month in Michigan and flies back for weekend meetings when he isn’t in town.

Of the eight good behaviors Google executive discovered that made their managers more effective, cite two exhibited by Marchionne and an example of each.

Be a good coach.

Empower your team and don’t micromanage.

Express interest in team members success and personal well-being.

Don’t be a sissy: Be productive and results-oriented.

Be a food communicator and listen to your team.

Help your employees with career development.

Have a clear vision and strategy for the team.

Have key technical skills so you can help advice the team.

Reference no: EM132289611

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