If any of you out there have a management problem and want to know how to invigorate the troops – just have a little listen to Sergio Marchionne’s Q and A at the end of any of his quarterly presentation on Fiat’s earnings.
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The man is magnificent. He doesn’t just deliver answers in an utterly convincing manner. He also makes the analysts reconstruct questions if he thinks they lack calibre.
“In view of the lack of critical mass in the truck business….,” began the man from one bank. “I hate to interrupt,” interrupted Marchionne, “but how is it sub-scale? We have 12% of Europe when the market leader has 20. And on engine and transmission we make more than that, because many engines also have applications in CNH, the construction equipment division.”
New question: “In terms of the performance of Ferrari and Maserati, when will they catch up with Porsche….”. The Interrupter appears again: “You are surely not talking about on the track…?.” Marchionne demanded, having only just done a bit of trumpeting about Ferrari winning the double in Formula One.
The eventual answer to the actual Porsche question by the way, was that Ferrari was already very close to the 18% margins made by Porsche. “We are close and we are getting there.”
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By GlobalData“And Maserati?”
“Maserati has the potential to get there too.”
Marchionne is restless. He could interrupt you for just thinking negatively of the Fiat Group or its management. A pal who writes scholarly equity research reports, picked up his cell phone at home one evening while casually inspecting his toe-nails. It was The Interrupter who ploughed straight in with …. “I’ve been reading your report.”
Imagine that. Sitting around in your jimjams after a hard week putting numbers in little boxes, and you suddenly get the chairman of Fiat in your ear. I’d rather find a lion on my draining board.
Two things were bugging Marchionne that might have made him slightly more fractious than usual. One was that Moody’s, that very afternoon, declined to rate Fiat as investment grade. That’s a bit like saying: “This company stinks.”
Marchionne complained: “We are better off than some of our competitors and they have the rating.”
It barely matters now because Fiat has half a billion of cash in the bank (compared with EUR10bn of debt when Marchionne started in the job) and he does not need to borrow. So the rate he would have to pay for those borrowings is not an issue.
Some investment funds get into trouble with their trustees if they knowingly invest where the ratings agencies advise otherwise; so that’s the issue. If the pool of potential buyers was larger, the share price might be better and then Marchionne would not have to spend all day pondering whether to buy back some of Fiat’s shares.
That annoys him. He thinks that they are desperately cheap and that they look even cheaper now that subprime is common parlance and car demand is declining.
The bind is that if Fiat buys and cancels Fiat shares (the advantage being that it then saves paying dividend on them) he is accused of having no better ideas for spending the money. If he doesn’t, his observers will say: “So the shares are not that cheap then?”
It’s a funny one because Marchionne is so decided about so much; but this one bugs him and he airs it in public time after time. If you want my advice, Sergio, invest extra money in Alfa. It is still a fabulous brand and the fact that you got off to a bad start with both management and product choice does not mean that it is not worth a substantial second attempt.
I only say that in the belief that you do not have my cell phone number.
Rob Golding
See also: ITALY: Fiat group trading profit soars
