Fiat CEO Marchionne Replaces Demel at Struggling Auto-Unit; Demel to Leave Company

ROME February 18, 2005; Alessandra Rizzo writing for the AP reported that Fiat SpA Chief Executive Sergio Marchionne has taken the reins of the company's ailing auto-unit, a move he said was aimed at focusing the group's attention on the division and speeding up its recovery.

Marchionne also said that Fiat, which recently won independence from General Motors Corp., can now operate "without constraints but also without alibis."

Marchionne replaces Herbert Demel, an Austrian who had been named to lead Fiat Auto in October 2003 and previously served as a Volkswagen executive. Demel will leave the company, Fiat said.

The decision, announced by the Turin-based giant Thursday evening, was the latest in a series of management changes.

"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 anticipated.

The auto division had an operating loss of just under $1.3 billion in 2003, and is expected to post lose about $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 $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," he added. "We must dedicate ourselves completely to the fundamentals of an automobile manufacturer: products, sales network and customer services."

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, and 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.