TURIN -- Instead of resigning, Fiat Auto CEO Herbert Demel is solidly in place -- but his boss, Fiat group CEO Sergio Marchionne, is helping.
As of mid-November, Marchionne has assumed informal but direct responsibility for vehicle sales and Fiat Auto's network development outside Italy.
In addition, several sources suggest that Martin Leach, the former Ford of Europe president who is now Maserati CEO, could soon join Fiat Auto to take over marketing and product portfolio management.
In the last month, Turin has been awash in rumors that Demel, the first non-Italian to run Fiat Auto, was resigning after just 12 months on the job. After extensive interviews with dozens of Fiat sources Automotive News Europe has traced the flow of events.
On October 28, the rumor spread in Turin that Demel had resigned from Fiat Auto, due to a personal and management style clash with his new boss, Marchionne.
Demel had been appointed Fiat Auto CEO on November 15, 2003, by then-Fiat group CEO Giuseppe Morchio. But Morchio abruptly resigned on May 30 and was replaced by Marchionne on June 1.
The rumors spread across Europe in early November, as Marchionne toured Germany, France, UK and Spain to meet with national distribution and dealer organizations. More than 700 dealers in the four countries are being scrutinized. A key part of Demel's plan to fix the struggling automaker is to improve Fiat Auto's dealer network.
Demel's absence sparks fire
Marchionne was accompanied by several Fiat Auto top executives, but not Demel.
Joining Marchionne was Johann Wohlfarter, vice president of network development and coordination, and three of Fiat's four brand and commercial directors: Luca De Meo for Fiat cars, Antonio Baravalle of Lancia and Lorenzo Sistino of light commercial vehicles. Alfa Romeo was not officially represented because former Rolls-Royce CEO Karl-Heinz Kalbfell doesn't take over the brand until January and former Alfa boss Daniele Bandiera had already left the company.
As rumors about Demel's resignation became more persistent, Fiat public relations officers unofficially said he had not quit. They said Demel was not traveling with Marchionne because he was in Turin working on the 2005 budget.
On November 9, the first press reports of the rumor were published. That forced a Fiat Group spokesman to state "this is pure, groundless speculation. Regarding Fiat Auto, no change is being considered for the management of the company."
But such a mild denial had little effect. By November 12, the rumors were much louder. As the weekend started, several normally reliable sources were insisting Demel had resigned, this time for sure.
"He is currently negotiating his way out [of Fiat Auto,]" one source said at the time.
On Saturday, November 13, Marchionne opened a Fiat Auto steering committee meeting by stating bluntly: "Everything you have read in the press in the past weeks on Herbert [Demel] is pure crap. He is and will stay with us."
Participants at the steering committee report that Marchionne said "fixing Fiat Auto is a titanic effort" and added that despite the long hours Demel has been working, "he cannot do everything alone."
Marchionne publicly stated at the meeting that he -- in complete agreement with Demel -- had taken direct control of sales and network development outside Italy.
The move should allow Demel to give his complete attention to "fixing the industrial side of Fiat Auto," Marchionne said. That needs "to be improved as fast as possible in the areas of proper investment allocation, production quality, simplification of industrial complexity and making better use of common systems and components," meeting participants quoted Marchionne as saying.
On the podium, Demel smiled, but did not refer to this new power sharing during the full-day meeting, participants said later.
Marchionne did not mention any further power sharing at the November 13 meeting. But some sources suggest that Marchionne could ask Maserati CEO Leach to assist Demel with marketing and product development.
Leach had a reputation at Ford as a product development whiz, but any effort to move him from Maserati would be tricky.
Leach was Morchio's first choice to replace Giancarlo Boschetti as Fiat Auto CEO in mid-2003. Leach didn't get the top job because Ford would not release him from a noncompete clause.
After Demel was hired at Fiat Auto, Leach won a court case against Ford on the grounds that Ford fired him and thus made the noncompete clause unenforceable.
At that point, Morchio tried to hire Leach as CEO of both Ferrari and Maserati.
But Ferrari chairman and CEO Luca Cordero di Montezemolo opposed giving up Ferrari and insisted that Leach get only Maserati.
Morchio resigned May 30, two days before Leach took over at Maserati.
Leach took the job, but has had a direct superior -- Montezemolo -- who didn't choose him. In addition, Montezemolo was promoted to chairman of Fiat group May 30, giving him the top position in the Italian conglomerate.
Rumors that Leach could join Fiat Auto are "speculation," says Fiat. But sources say Leach could move to Fiat Auto as soon as year-end or by next spring at the latest.
One key job to fill
There is still one top-level management position to fill to complete the reorganization Fiat Auto started this summer: vice president of product portfolio management. It is a logical fit for a product guru and true "car guy" such as Leach.
In addition, sources say, Leach could also assume direct responsibility for marketing at Fiat Auto. That position doesn't exist in the current structure, but is spread between the four brand and commercial directors.