Fiat Chooses New CEO

MILAN, May 31 Jane Barrett writing for Reuters reported that Fiat will fill the sudden vacancy in its top management by picking Sergio Marchionne, the head of Swiss inspection group SGS and a Fiat director, to take over as its CEO, a source close to the Italian group said on Monday.

Fiat had to scramble to find a new chief executive after Giuseppe Morchio resigned on Sunday in protest at Ferrari chief Luca di Montezemolo being named chairman of Italy's biggest industrial group, a post he was reported to have wanted himself.

The storm, which hit just three days after former chairman Umberto Agnelli died, cast clouds over Fiat's efforts to pull out of its crisis. Morchio's turnaround plan is beginning to bear fruit, but a huge amount remains to be done.

When news trickled out that Marchionne was the likely new CEO, its shares pared earlier three percent losses to close down one percent at 5.74 euros.

"He is the man and will be presented as the new CEO on Tuesday," the source told Reuters. Fiat declined to comment.

Fiat's board is due to meet at 1200 GMT on Tuesday to pick its fifth CEO in two years. Montezemolo plans to hold a news conference in Turin at 1230 GMT.

Marchionne, a former accountant and chairman of Swiss chemicals group Lonza, will have to buckle down quickly to continue the Fiat turnaround and meet Morchio's target of hitting breakeven at group operating level this year.

"He has a very good track record in share performance and is seen as one of Switzerland's best managers," said Giovanni Bizzarri, fund manager at Banca Ifigest. SGS stock has more than doubled since Marchionne became CEO in February 2002.

"He and Montezemolo both have great images, so it's a winning duo from that point of view. In reality, it will take a year or two to see how good they are for Fiat," he added.

Marchionne, 52, had been touted as a possible Fiat CEO in a previous round of management speculation but instead joined the board in 2003 to oversee the company's turnaround.

NO TIME TO WASTE

Analysts said that however good a manager Fiat hired, it would take at least three months for the new CEO to get to grips with the tractor-to-robotics empire and that Fiat's recovery was bound to be hampered by the shake-up.

"Fiat doesn't have a minute to waste, but now middle management are left without a leader once again, which is going to slow everything down," said one auto analyst.

But bankers also hold Montezemolo in high regard as the charismatic manager who pulled Fiat-owned Ferrari out of the doldrums to sporting and financial glory and hope he can do the same for Fiat.

Montezemolo's political connections and close friendship with Fiat's controlling Agnelli family should also help re-establish stability at a group that was plagued by revolving-door management at the height of its crisis.

Creditor banks urged Montezemolo to keep to Morchio's plan to design new cars and share more costs across the group or with General Motors, which owns 10 percent of Fiat Auto.

The new duo now take on delicate negotiations with creditors and must settle a spat with GM before December over whether the U.S. giant could be obliged to buy the rest of Fiat Auto under a put option.

They will also have to decide whether to stay on as a top shareholder in Italian power group Edison when a series of put and call options comes due in 2005.

The Agnellis' speedy choice of Montezemolo as chairman was welcomed as a sign Italy's uncrowned royal family was still committed to the carmaker their ancestor founded 105 years ago and which they control with a 30 percent stake.

Instead, the family named two more from its ranks to the board on Sunday, including Umberto Agnelli's son Andrea. John Elkann, the 28-year old grandson and heir of late Fiat patriarch Gianni Agnelli, was promoted to the post of vice-chairman.