Page 171 - DMGT521_PROJECT_MANAGEMENT

Project Management

Notes
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Case Study Project Failures From the Top Down: Can
Marchionne save Chrysler?

hen Chrysler merged with Fiat on June 10, 2009, there was cause for hope and
optimism. After an endless string of bad news, perhaps, the auto industry was
Wnot dead yet.

On paper it looked like a good deal for everyone. Fiat would return to the US market and
sell its popular 500 (Cinquecentro), Chrysler would acquire a line of cars that consumers
might actually buy, and tens of thousands of workers would keep their jobs.
But the real prize might just 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 failure. It manufactured a lackluster product line and had suffered more than $12 billion
in losses over the previous five years.
To transform the company he embarked on several strategic and operational projects. He
fired senior managers, upended a bloated bureaucracy, and brought a team of young
aggressive managers on board. Then, he reviewed all projects and killed those that could
not pass the market test. And he hired new designers, and demanded a portfolio of exciting
projects that would bring customers back to dealer showrooms.
In less than three years he succeeded in one of the most impressive turnarounds in
automotive history.
Now, as part of his plan to grow Fiat into a global competitor he has taken on Chrysler.
But, can he perform his magic again? Can he save yet another company whose
circumstances in many ways, but not all, are strikingly similar to those faced by Fiat just
five years ago? Can his leadership style as well as the Fiat 500 be successfully exported to
the other side of the Atlantic?
If we look at Marchionne’s record by itself, not only is it impressive, but it suggests that he
might be the right person at the right time. But, before we can reach this conclusion, his
ability to succeed must be considered in the context of what has happened to Chrysler in
the last decade. In that case, success may not be assured.
Daimler Chrysler
In May 1998, Daimler-Benz merged with Chrysler. Jurgen 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 automotive companies in the world.” Even
bringing together two companies from Europe and the United States was not considered
a hurdle; Robert A. Lutz, Vice-Chairman of Chrysler, argued that there was “definitely no
culture clash here.”
But behind this display of public enthusiasm and corporate kinship, Schrempp took
complete control and his actions made it clear that this was indeed no “merger of equals.”
Eaton responded by deferring to Schrempp, often retreating to the safety of his office in
Auburn Hills; his top managers responded by defecting to Ford and General Motors. Soon
Chrysler was rudderless, projects were lackluster, and within just a few years not only was

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