Super-Marchio puts his foot down at Fiat

Sergio Marchionne wants his little Italian firm up with the auto giants, and fast.

Italians have no trouble identifying with Sergio Marchionne, whom they nickname Super-Marchio, or Turbo-Marchio. But though he is a full-blooded Italian who speaks the language and drives a Ferrari – fast; in 2007 he had a nasty prang – the key fact about the new Mr Fiat is that the crucial years of his education and much of his working life were spent in Canada.

Italians lament that theirs is a country to which no expatriate can return. Meritocracy is such an alien concept, the vice of raccomandazione or nepotism is so pervasive, unreformed bureaucracy weighs so heavily on every enterprise, that deal-cutting, no-nonsense Italians reared abroad don't stand a chance. Either they never get hired, or, if they do find a job, every effort is made to ensure that they quickly conform to the prevailing sluggish ethic. The really ambitious run a mile, back to where they came from.

Sergio Marchionne is the exception. He was brought into a firm run by the most august dynasty in the country – Fiat has been guided for three generations by Agnellis – because it was in terrible trouble. "It was a laughing stock," Marchionne recalled recently in Harvard Business Review. "Whenever you opened a newspaper in Italy, there was another embarrassing story: Fiat had lost more money; its new car had flopped; a strike was on somewhere."

The man who for decades had been identified with the firm, Gianni Agnelli, grandson of the founder, Giovanni, died in 2002. His younger brother and successor, Umberto, was so desperate to save the car firm, Fiat's core business, from collapse that he was willing to look outside the family, the industry, and the country for a saviour. As it happened, the Agnellis had already benefited from Marchionne's growing reputation as a manager with the magic touch. They were shareholders in SGS, the Swiss testing and certification company, and when Marchionne became its chairman in January 2002, the very fact of his arrival caused the share price to jump 13 per cent. Umberto Agnelli was so impressed by his impact on the firm that the next year he appointed him to the Fiat board. A year later, shortly before his own death, Umberto picked Marchionne to be managing director.

Although he looked Italian and spoke Italian, the new boss's intellectual formation and career were worlds away. Uprooted from Italy at age 14 when his family emigrated to Canada, he "lost six years," as he revealed recently, trying to rid himself of his strong Italian accent and make himself pleasing to Canadian girls. By the time he hit higher education, his distinction was clear. A degree from law school in Toronto was followed by a doctorate in philosophy and an MBA. By the time he went out to look for work, he was bristling with qualifications, as a certified accountant, solicitor and barrister. He embarked on a high-flying financial career, and his familiarity with international finance, and his directorship at UBS, have been crucial in enabling him to propose pan-industry solutions to the greatest crisis the motor trade has ever faced.

But it was his deal-making skills, his impatience with old answers and his ability to pull off dramatic improvements in the companies he joined, and at incredible speed, that marked him out. Still, he expected the worst in Italy. "Even more worrying to me [than Fiat's dreadful performance]," he wrote, "was the fact that the company had gone through four chief executives in three years. Imagine showing up in June 2004 and being the fifth guy to try to resuscitate what appeared to most people to be a cadaver.

"And just imagine what top management thought. These poor fellows saw this executive – almost a foreigner, I'd left Italy in 1966 – coming from outside the car industry to be their new leader. They all sat there thinking: 'Here we go again. We're going to have to teach this guy what the business is about, and if he ends up being like the last one, we're screwed.' I could see it written all over their faces. I would have felt exactly the same in their shoes."

A talent like Marchionne's, one whose motto is, "think at the speed of light", and who has the ruthlessness of North American business drilled into him, could only hope to survive in a country as set in its ways as Italy at a moment of dramatic crisis. That was Fiat's reality back in 2004 – and instead of succumbing like the four chief executives before him, he went to war, slashing dead wood from the hierarchy, head-hunting hungry young executives trapped in out of the way corners of the company, cutting the development time of new models from four years to 18 months. The stunning vindication of his approach came within three years: a succession of brilliant new models that seemed to arrive from a totally different firm from the tired, stale place that had been quietly dying for decades. The Italians sang hallelujah.

"We've come a long way," he says. "We've had to make some major changes to the way the company runs. We've abandoned the Great Man model of leadership that long characterised Fiat and have created a culture where everyone is expected to lead. My job as chief executive is not to make decisions about the business but to set objectives and help managers work out how to reach them."

It is Marchionne's paradoxical good fortune that, while Fiat staged a brilliant recovery, crisis has engulfed the entire car industry. Restlessness is at the heart of the Marchionne style, and the crisis has given him the opportunity to turn little, ailing Fiat, practically unknown in the US, into one of the handful of auto giants which, in Marchionne's view, is all that the market will support once the crisis is over. Today Fiat sells 2.15 million cars a year. By taking over Chrysler and merging with Germany's Opel output could be raised to at least 5.5 million, hoisting the firm up beside Toyota and VW as a survivor.

Of the deal with Chrysler, which has President Barack Obama's approval, he says: "They have everything I don't have (including some things I will never need) and I have everything that they don't have and need." Of the possible deal with Opel, which has to overcome the fears of German and Italian unions about factory closures, he says: "We will learn stuff from each other. This is a marriage made in heaven, industrially."

But, characteristically, he is not going to allow his German counterparts too long to think about it. "This will be done in May," he said last week. "An agreement in principle has to be struck in 30 days."