Sergio Marchionne Replaces Hebert Demel As Head of Fiat SpA Auto Division

ROME February 17, 2005; Alessandra Rizzo writing for the AP reported that Fiat SpA ousted the head of its money-losing auto division and appointed group Chief Executive Sergio Marchionne to the post -- a move the company hopes will help speed up the car-making unit's recovery.

The decision was announced days after the Turin-based giant won independence from General Motors Corp. It was the latest in a series of management changes.

Hebert Demel, an Austrian, had been named to lead Fiat Auto in October 2003 and took over the following month. Prior to the Fiat appointment, Demel had been a Volkswagen executive.

"I have made the decision to take on the post of CEO of the auto unit to speed up the company's recovery," Marchionne told the ANSA news agency. "The auto (section) remains the group's main problem."

In a statement released in Turin, Marchionne said the decision "is aimed at concentrating Fiat Group's efforts on the recovery and relaunch of Fiat Auto," and added that "of all Fiat Group Sectors, Fiat Auto must be the principal focus of our attention."

Marchionne, a turnaround expert who joined Fiat last year, has lamented in the past that Fiat Auto's turnaround was proceeding slower than hoped. In October, he said that new models launched as part of the unit's relaunch plan were not boosting revenues as much as hoped.

The auto division had an operating loss of just under 1 billion euros ($1.3 billion) in 2003, and is expected to post a loss of around 800 million euros ($1.04 billion) for 2004. The unit is working to break-even in 2006.

On Sunday, Fiat and GM dissolved a 2000 partnership that included an option that could have forced GM to buy the 90 percent of Fiat Auto SpA that it did not already own. GM agreed to pay the Italian automaker 1.55 billion euros ($2 billion), mostly in exchange for canceling the clause.

"The agreement reached with General Motors saw Fiat's rights confirmed and represents a fundamental step in Fiat Auto's future," Marchionne said in the statement. "It is now possible to operate in total autonomy, without constraints but also without alibis."

Fiat has been trying to get out of its worst crisis since the company was founded more than a century ago. After the death in May of its president, Umberto Agnelli, the company appointed new management. In November it announced it was revamping its executive structure in a bid to make it leaner and more efficient.

Marchionne, who has criticized Fiat's "bureaucratic" culture, said Thursday that "a profound cultural transformation is underway following a management reorganization that has delivered a more agile and efficient structure."

This week Fiat also announced that it will buy the Maserati sports car brand from Ferrari -- a company in which it already has a majority stake.