Future will test CEO Marchionne's legacy

MILAN -- Sergio Marchionne's achievements as one of the automotive world's most charismatic chief executives include the bold trans-Atlantic merger of Italian carmaker Fiat and U.S. No. 3 Chrysler after he restored both to health.

But Marchionne told analysts during a big presentation last month his true legacy at Fiat Chrysler Automotive would be the culture of a corporation where "mediocrity is never, ever worth the trip."

The Italian-Canadian always insisted a replacement would come from the ranks of his hand-picked and tested team, managers who met his exacting standards. Asked whether he planned to leave a script behind when he stepped down next year as planned, Marchionne said doing so wouldn't be necessary.

"There is no script or instructions. Instructions are institutional and temporary," he said. "FCA is a culture of leaders."

Marchionne, 66, was hastily replaced Saturday as CEO of Fiat Chrysler after the company announced his health had taken a turn for the worse following shoulder surgery last month in Zurich. Details of the complications and his condition were not disclosed, but the company said they prevented him from returning to work.

The head of Jeep and Ram, Mike Manley, was picked to replace Marchionne. The Briton was a key executive on Marchionne's team, growing the quintessentially American Jeep brand into a global marquee and giving it a belated foothold in China.

Fiat chairman John Elkann, in a letter to Fiat's 236,000 employees Sunday, called Marchionne a "true, rare kind of leader" and lauded him as ''the best CEO that anyone could ask for and to me personally, a true mentor, partner, close friend."

Elkann, the 42-year-old heir of the Agnelli family founding Fiat in 1899, remembered Marchionne coming to the Italian carmaker in 2004 at "one of the darkest moments" for the long-struggling company.

"It was his intellect, perseverance and leadership that saved Fiat," Elkann wrote in the letter. "He taught us to have the courage to challenge the status quo, to break with convention and go beyond the tried and tested."

The Fiat-Chrysler merger remains the crown jewel in the 14-year Marchionne era, an accomplishment built on a series of daring plays.

In 2005, the trained lawyer who studied philosophy demonstrated his deal-making skill by getting GM to pay $2 billion to sever ties with Fiat as part of a failed cross-border tie-up. The money was pivotal to relaunching the failing carmaker.

Then in 2009, he secured a deal with a then-new U.S. President Barack Obama to take over bankrupt Chrysler without Fiat having to put a penny down in exchange for Fiat's small car technology.

Other essential corporate moves included the spin-off of the heavy industrial vehicle and truck maker CNH and of the Ferrari supercar maker. Both deals unlocked considerable shareholder value for Agnelli family heirs.

Analysts at Albert Bridge Capital calculated the companies controlled by the Agnelli family's holding company grew in value from 6 billion euros at the start of Marchionne's tenure to more than 60 billion euros today.

But his ambition to complete another big deal -- a merger with American carmaker GM -- was not realized. The failure ultimately made it easier for Marchionne to contemplate giving up day-to-day control of FCA after delivering 2018 earning.

Marchionne also has been replaced as CEO of Ferrari and chairman of CNH Industrial. He had planned to update the financial community on his 5-year plan for the super sports car maker in September, which was expected to include details of how he envisioned transforming it to a luxury goods company beyond cars. That will fall to the new CEO, Louis Camilleri, a former manager at Philip Morris.

Fiat analyst Philippe Houchois of Jeffries Financial Group said Marchionne's departure would ''test his cultural legacy sooner than expected." He predicted significant share price volatility for both FCA and Ferrari when markets resume trading Monday.

Houchois noted other carmakers were reconsidering capital spending, in some ways echoing Marchionne's insistence the industry needed to tackle the high cost of investment in new technologies

''In our view, Mr. Marchionne's industry thinking cannot be overstated," Houchois said.

As part of his efforts to revamp Ferrari, Marchionne focused heavily on Formula One, arguing that more prestige for the racing side would increase the carmaker's value.

Ferrari manager Maurizio Arrivabene affirmed at the German Grand Prix in Hockenheim that the pair always worked together on strategy.

Mercedes CEO Dieter Zetsche, whose Mercedes team beat Ferrari on Sunday, said he was pained by the news of Marchionne's failing health.

''With Marchionne, I always had an excellent relationship of esteem and friendship that went beyond industrial realities," Zetsche told Italian racing magazine RMC Motori. ''I always saw him as a great perso