During its history of more than a century, the global motor industry has numbered many charismatic and influential personalities among its leaders. It is generally accepted that Gottlieb Daimler was the pioneering visionary at the end of the Nineteenth Century, and Henry Ford was a game changer with his ideas on mass production and affordable private transportation for the masses. Since those early days there has been a veritable string of iconic personalities, with the two most prominent in recent times being Carlos Ghosn, best known as the architect of the Renault-Nissan-Mitsubishi Alliance, and Sergio Marchionne, who conjured up Fiat Chrysler Automobiles from the residue of a bankrupt Chrysler Corporation, and a seriously compromised Fiat Auto SpA. Analysts and commentators have been closely following the progress of FCA through its first five-year corporate plan, which is nearing its conclusion, and anticipating the exit of Marchionne to a planned and well-earned retirement at the end of 2018
It came as a complete surprise, therefore, to read reports over the weekend of 21-22 July that Sergio Marchionne had vacated his positions as CEO of both FCA and Ferrari, with immediate effect, as he was too ill to work. Then, on July 25th came the shocking news that he had passed away at the ridiculously early age of 66 years. Initially, it was announced that he had suffered complications following planned shoulder surgery, but it was later revealed that the real issue was cancer. This development resulted in the immediate appointment of Mike Manley as CEO of FCA, and Louis Camilleri at Ferrari, both under the direction of John Elkann, heir of the Agnelli family.
Sergio Marchionne trained as an accountant and lawyer, and first joined the Fiat empire in 2004. We first became aware of his influence in 2005, when, as CEO and an acknowledged turnaround expert, he oversaw the disengagement of Fiat SpA from an unhappy alliance with General Motors Corporation, which had commenced with the purchase by the US concern of a 20% shareholding in Fiat Auto in Year 2000. The dissolution of this relationship resulted in GM paying $US 2 billion in compensation, and acquiring certain Fiat assets. From Fiat SpA’s perspective, the cash injection from GM was particularly welcome as the group moved towards break-even targets for itself, and the Fiat Auto division, although the outcome was also somewhat ironic, given future developments discussed later in this piece. Then, in 2009, it was announced that the Fiat Auto Group had confirmed its intention to form a partnership with Chrysler, when the latter emerged from Chapter 11 bankruptcy protection, and that Fiat would hold an initial stake of 20% in the American manufacturer.
Sergio Marchionne’s leadership will be hugely missed by Fiat Chrysler Automobiles, Ferrari and the global motor industry
Sergio Marchionne was also subsequently appointed Chief Executive Officer of the renamed Chrysler Group LLC.
In 2011, Fiat stepped up its shareholding in Chrysler Group LLC from 25 to 30%, and the final merger of the two organisations was formalised early in 2014, with Fiat Chrysler Automobiles coming into existence as the world’s seventh-largest carmaker. Significantly, the presentation of a five-year corporate business plan by Sergio Marchionne was delivered in Auburn Hills, Detroit, clearly signaling the importance of the North American market to FCA’s future success. Global group sales, which ran at 4,4 million units in 2013, were forecast to increase to nearly seven million by 2018. Important components of the plan included the refining of the group product mix, realignment of the market positions of some brands, and the achievement of platform and component rationalisation across nameplates. During November, 2014, FCA announced that it was “spinning off” Ferrari to become a stand-alone company, putting 10% of its stock on the open market, and distributing 80% of Ferrari shares among FCA shareholders. Sergio Marchionne then took over the chairmanship of Ferrari following the departure of long-time incumbent Luca Cordero di Montezemelo.
By 2015, Sergio Marchionne had become a highly vocal proponent of consolidation in the global motor industry, and ruffled some feathers with a widely publicised proposal that FCA and General Motors should join hands (see earlier comment)! His position was that stand-alone development of extremely costly new models by individual manufacturers could not be cost-effective, and that a significant improvement in industry profitability would flow from a greater spread of cost amortisation over fewer manufacturers. Unsurprisingly, his advances were not welcomed by GM CEO Mary Barra, herself another new-era industry icon. Earlier this year, we reviewed progress in FCA’s five-year strategic plan, which had achieved only 4,74 million unit sales in 2017, and had fallen well behind the rate required to reach the original global volume target set for 2018. Nevertheless, FCA reportedly returned a profit of $US 4,4 billion, and halved its debt in 2017, so the group has made considerable progress in terms of financial viability.
FCA is still very much a work in progress, and Sergio Marchionne will not be around to see the empire that he created reach its full potential. He had a reputation as an extremely hard worker who made equally great demands on himself and his subordinates. His foresight in using Chrysler’s volume base to secure Fiat’s future and reduce its reliance on an overtraded European market was remarkable, as was his navigation of the complicated process that was required to create FCA as a cohesive entity. Some elements of his strategic plan, such as product cross-pollination between European and American platforms, the revival of Alfa-Romeo and the re-invention of Maserati to include electric AWD power, Ferrari-supplied powertrains, and SUV’s in its portfolio have been quite fascinating. Jeep’s SUV’s and Ram’s light commercials have been the jewels in FCA’s crown, and both brands still have more potential for increased footprints. The planning process has continued, and the FCA group published brand strategies for the next five years as part of a presentation to financial analysts in June. The plan noted that the “parent” Fiat and Chrysler brands were under-performing, and corrective action, including even the dropping of famous nameplates, was under consideration.
Sergio Marchionne, during his tenure at Fiat and FCA, became an important spokesman for, and commentator on, the automotive industry. This made his opinions of considerable interest, and at a recent motor show appearance, he expressed the opinion that many automakers were rushing rather too quickly into the realms of electronic propulsion and autonomous vehicles, and that diesel engines would still have a role to play in decreasing corporate average fuel consumption performances in the US. After retirement from FCA, Marchionne planned to continue as Ferrari CEO for several years, but this has now come to naught. We suspect that his uncompromising management style had a great deal to do with Ferrari’s recent return to form in Formula One, so it will be interesting to see if this momentum is sustained going forward. Whatever the outcome, the new CEOs at FCA and Ferrari have huge boots to fill.
Ciao and RIP Sergio! We certainly enjoyed reporting on your sometimes radical opinions and impressive achievements.
ZF Demonstrates New Technologies for Commercial Vehicles
While it is now generally accepted that the world is moving inexorably towards the widescale adoption of electric traction and autonomous (driverless) operation for its vehicles, there are still widely diverging opinions on the timing of the implementation process. Potential sticking points include the inconsistency of supporting infrastructure from country to country, interaction with drivers and vehicles using existing technologies and operational regimes during the transition period, uncertainty over the real cost of the new technology, and a number of safety-related concerns. There is no doubt that most of the enabling technologies are already in existence, and are being implemented to some degree, but the earliest that universal adoption is likely to be achieved is well into the second quarter of the twenty-first Century.
The CEO of major component supplier ZF Friedrichshafen, Wolf-Hennig Scheider, speaking at a recent Technology Day event presented by his company, predicted that the earliest large-scale adoption of autonomous and electric traction technologies would take place in the commercial vehicle industry. He foresaw that 30% of all buses and vans, and 20% of heavy-duty trucks would run on some form of electric power by 2025, propelled by regulations aimed at reducing oxides of nitrogen, and growing social pressure to decrease the use of diesel. He said that operators of these vehicles would be motivated by the lower cost of ownership derived from improved fuel consumption, and faster return on investment as battery and component prices decrease with technology and volume advances.
These predictions seem logical on the grounds that many commercial vehicle applications provide a more favourable environment for pioneering technologies in that they traverse fixed routes in concentrated geographic areas, making the provision of charging facilities and technical support a convenient proposition. Private motorists, on the other hand, tend to use their vehicles in a more random manner, over varying routes and distances, and therefore require more comprehensive replenishing and service support. Suitable operating environments for Level 4 automated-driving technology, which still requires a driver to be available to take over in emergencies, will initially be found in controlled areas such as freight yards, and harbour precincts, but could also be extended in the medium term to include specific controlled access highways. Professional operators are also more likely to be convinced by a business case that offers significant productivity, safety and cost benefits.
ZF has demonstrated some of its new autonomous and electric-drive technology features at special Technology Day events. These include an electric-powered “last-mile” parcel delivery van, with fully integrated ZF motor and transmission, which enabled its driver to walk alongside the vehicle while it dropped off packages, navigated around parked vehicles, circled when no parking was available, and loaded in sequence. There was also a fully autonomous yard truck-tractor equipped with on-board sensors to control steering, braking, hitching and unhitching, which picked up and dropped off semi-trailers at specific locations in a simulated freight yard, and an autonomous rigid truck which loaded and unloaded containers with precision accuracy. The accurate guidance of these vehicles to their loading and offloading points was achieved using a Cloud-based telematics platform, plus RFID chips in the asphalt which came into play when the vehicles were shielded from GPS satellites.
Some products developed by ZF initially for use in buses are now being adapted for freight transport applications. These include an electrically-powered combined wheel motor and reduction gear “portal” that is being trialed on prototype medium- and heavy-duty trucks in North America. Other ZF products suitable for use in goods vehicles include the “CeTrax lite” and “CeTrax mid” electric motor/transmission packages for medium and light-duty commercial applications, electric motor drives integrated with heavy-duty automated mechanical transmissions, and a fully electric steering system for heavy-duty trucks, designed to reduce weight and complexity and improve control. Some of these innovations have the potential to significantly alter the shape of commercial vehicle configurations as the world moves deeper into the electric and autonomous vehicle era.
Component supplier ZF has practically demonstrated a number of autonomous and electric vehicle technologies
Fuso Introduces Petrol/Auto Medium Trucks in North America
North American operators still persist in their off-beat preference for petrol-engined light and medium trucks. This means that manufacturers with serious ambitions in that market area are obliged to offer petrol-engined derivatives of the diesel models they sell everywhere else in the world, and also, in some cases, special bonneted models which satisfy another quirky North American preference for “conventional” cab layouts. A typical example of the latter was Hino’s six-model “North American Project” medium truck range introduced in 2004 which used a bonneted cab specially adapted from the forward-control 500 Series cruiserweight series. The NAP concept also included the US market’s preferred selection of drivetrain components from Hendrickson, Allison, Dana and Eaton.
Daimler Trucks occupies a dominant position in the US heavy truck market with its Freightliner range, so it would logically like to strengthen its position in the lighter payload sectors, where it currently participates with diesel powered cruiserweights from that marque and Japanese subsidiary Mitsubishi Fuso. This has led to the introduction of petrol-engined derivatives of Fuso products, based on the forward control FE model line-up, using a 6,0-litre V8 engine procured from General Motors, in Classes 4 & 5 (gross vehicle mass ratings from 6364 to 8864 kg) of the US market. Initially this new FE Gas range will consist of the FE140 rated at 6,6 tons gross vehicle mass, the FE160 positioned at 7,3 tons GVM, and a similarly-rated crew-cab equipped version of the latter model. A petrol-engined version of the heavier FE180 model, rated at 8,2 tons GVM, is included in future product plans.
The Class 4 FE Gas models will also be fitted, as standard equipment, with Allison’s 1000 series fully-automatic transmissions, equipped with FuelSense 2.0 transmission management software incorporating the “Neutral at Stop” feature, and DynActive computer-controlled variable shift point technology. These features are claimed to yield a two to six-percent improvement in fuel economy, and it is intended that future versions of the FE Gas range will offer versions that can operate on CNG or LPG fuels. Mitsubishi Fuso Truck of North America has more than 300 dealers in the US, Canada, Puerto Rico, and Guam. The Fuso brand has a 30-year history in the North American market, selling more than 100 000 trucks during that period. Targeted “work truck” applications for its cruiserweight lineup include beverage, catering, refrigerated, dry cargo, vehicle recovery, towing, pest control, plumbing, light construction, and landscaping transportation duties.
Daimler Trucks’ Fuso brand has introduced a special petrol engine/automatic driveline Canter range to suit the North American market
Mitsubishi Bounces Back
The sudden takeover of Mitsubishi Motor Corporation by Nissan Motor Company, and by extension the Renault-Nissan Alliance, in 2016, was broadly interpreted by industry analysts as positive for the future of a manufacturer that had proved to be demonstrably capable of producing highly acceptable products and technology. However, Mitsubishi had endured a somewhat chequered corporate history, which included an ill-fated relationship with the former DaimlerChrysler ending in 2005, and a more recent scandal relating to overstated fuel economy data submitted to Japanese authorities in respect of more than half-a-million Mitsubishi and Nissan-branded mini vehicles. It was, therefore, somewhat surprising that the extensively restructured management board that was tasked with taking MMC forward under Renault-Nissan patronage included, at the insistence of Alliance supremo Carlos Ghosn, one Osamu Masuko as its chief executive. For the record, former MMC President Masuko had overseen a profitable phase in the company’s history before the aforementioned emissions scandal had sent the company’s share price into freefall, and threatened its financial health.
The soundness of this decision appears to have been confirmed in the announcement that MMC had recorded earnings of ¥98,2 billion ($US 891 million) for the fiscal year ending March 31st, 2018. The company’s targets for the 2019 financial year include lifting the earnings level to ¥150 billion, increasing R&D investment by 50%, concentration on all-wheel drive vehicles, and growing its marketing presence in China and Southeast Asia. MMC has ties with Thailand going back to 1966, when it began assembling trucks in that country, and it senses an opportunity in its low ratio of vehicle ownership, and growing middle class. MMC posted record sales of 275 000 units in the Southeast Asia region during the recent fiscal year, and opened a new plant near Jakarta, in Indonesia. Analysts expect that Mitsubishi will build a Nissan-badged version of its Pajero Sport SUV at this Indonesian facility, as part of its increasing engagement with Alliance partners. In China, sales grew in the past financial year by 55% to 157 000 units, mostly of the Outlander CUV, which is built by the GAC Mitsubishi Motors partnership.
Mitsubishi Motor Corporation is gaining momentum under the patronage of the Renault-Nissan Alliance