Fiat Chrysler’s Sergio Marchionne dies, shares dive on profit slide

Fiat Chrysler boss Sergio Marchionne suffered serious complications after surgery on his right shoulder last month. (AFP/Piero CRUCIATTI)
Updated 25 July 2018
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Fiat Chrysler’s Sergio Marchionne dies, shares dive on profit slide

  • Former Fiat Chrysler chief executive has died aged 66
  • The announcement drew tributes from rivals and tears from his closest colleagues

MILAN: Former Fiat Chrysler chief executive Sergio Marchionne has died after a 14-year career in which he helped to rescue the carmaker, the news arriving on Wednesday moments before the group reported a surprisingly heavy fall in profit.
The announcement of the death of Marchionne, one of the auto industry’s most tenacious and respected CEOs, drew tributes from rivals and tears from his closest colleagues, a collective grief that overshadowed a big sell-off in Fiat Chrysler shares.
He had fallen gravely ill after what the company had described as shoulder surgery in a Zurich hospital. He was replaced as chief executive last weekend after Fiat Chrysler (FCA) said his condition had worsened.
FCA’s scheduled second-quarter earnings presentation, led by Marchionne’s successor and former lieutenant Mike Manley, began on Wednesday afternoon with a minute’s silence.
As eulogies flooded in, FCA shares fell up to 10 percent as investors digested an unexpected 35 percent fall in net profit, well below market forecasts.
“Unfortunately, what we feared has come to pass. Sergio Marchionne, man and friend, is gone,” FCA Chairman John Elkann, scion of the controlling Agnelli family, said in a statement.
Marchionne rescued Fiat and Chrysler from bankruptcy after taking the wheel of the Italian carmaker in 2004 and he multiplied Fiat’s value 11 times through 14 years of canny dealmaking. He was due to step down at FCA in April next year.
“The best way to honor his memory is to build on the legacy he left us, continuing to develop the human values of responsibility and openness of which he was the most ardent champion,” Elkann added.

TRIBUTES PAID
Tributes arrived from industry figures and politicians worldwide, praising his perseverance, hard negotiating skills and candor.
Marchionne resurrected one of Italy’s biggest corporate names and revitalized Chrysler, succeeding where the US company’s two previous owners — Mercedes parent Daimler and private equity group Carberus — both failed.
“Sergio Marchionne was one of the most respected leaders in the industry whose creativity and bold determination helped to restore Chrysler to financial health and grow Fiat Chrysler into a profitable global automaker,” said Ford Motor Co. Executive Chairman Bill Ford Jr.
Daimler Chief Executive Dieter Zetsche in a post on Linkedin said, “The auto industry has lost a real giant. And many of us have lost a very dear friend: Sergio Marchionne.”
Marchionne flattened an inflexible hierarchy, replacing layers of middle management with a meritocratic leadership style. He slashed costs by reducing the number of vehicle architectures and creating joint ventures to pool development and plant costs.
A tough negotiator known for getting his way, in 2005 Marchionne forced GM to pay Fiat $2 billion not to exercise an option to sell its auto division to the US carmaker — a move that may not have helped his later merger overtures.
Marchionne’s track record with operational turnarounds was a little more patchy than his dealmaking.
Profitability in Europe is only now gradually recovering, and Alfa Romeo has yet to turn a profit.
In North America, however, Marchionne was quick to end production of unprofitable sedans and retool plants to build pricier SUVs and trucks, a move since emulated by Ford and GM.


RBS says Saudi bank merger boosts its core capital

Updated 59 min 12 sec ago
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RBS says Saudi bank merger boosts its core capital

  • RBS had a 15.3% interest in Alawwal bank
  • The changes would boost the banks CET1 core capital ratio by 60 basis points

Royal Bank of Scotland (RBS) said on Sunday the completion of a merger between Alawwal bank and Saudi British Bank would lead to RBS shedding $5.9 billion of risk weighted assets and boost its core capital.
RBS, through Dutch subsidiary NatWest Markets N.V., was part of a consortium including NLFI and Banco Santander S.A. that held an aggregate 40% equity stake in Alawwal bank, the British bank said in a statement. RBS also had an interest equivalent to a 15.3% stake in Alawwal bank.
RBS said that as a result of the merger completion, it would recognise an income gain on disposal of the Alawwal bank stake for shares received in Saudi British Bank of almost $503 million and a reduction in risk weighted assets of nearly $5 billion.
RBS also said the deal would extinguish legacy liabilities of almost $377.
The changes would increase the bank's CET1 core capital ratio by 60 basis points, it said.
The merger will also help RBS to focus on its target markets, RBS chief executive Ross McEwan said in a statement.
RBS, which was rescued in 2008 with a nearly $57 billion capital injection by the British government, has been shrinking its overseas operations since the financial crisis to focus on its UK lending operations.