Chrysler-Fiat Merger Essay

Leadership is a dynamic, involved, and personal endeavor. The act of leadership encompasses many variables from personal interests of the leader to modeling what is right rather than what is wanted. There are Five Practices of exemplary leadership: model the way, inspire a shared vision, challenge the process, enable others to act, and encourage the heart (Kouzes & Posner, 2007). The most successful leaders attempt to model what they are expecting of others; especially in a rapidly changing climate.

Modeling can be one of the most effective ways leadership can encourage the outcome of change they wish for in a corporation. Leaders establish and maintain credibility predominantly through communication; this is especially critical during corporate mergers when a level of uncertainty can cause anxiety to overtake an organization. Communication not only consists of language correspondence but also attitude, body language, lifestyle, etc. Leaders must take all aspects of communication into account in order to establish credibility and emphasize a positive relationship with a new community of workers (Wall, 1998).

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It is also imperative during a merger that there is an understanding of benefit for both sides. It doesn’t matter how much give and take is in the relationship if one or both parties do not understand the circumstances or benefits of the new relationship. This idea and the common “hammer fix” can disintegrate credibility; the hammer fix is the quick fix that does not get to the root of an issue and simply forces a band-aid like fix (Wall, 1998). Leadership style and credibility weigh heavily on the success of a merger from both the acquiring side and the acquired side.

There are several noted aspects of leadership that should be addressed when a merger is coming to fruition: relational, inspirational, supportive, and stewardship administration (Sitkin & Pablo, 2004). The relational administration involves the leadership building and strengthening connections with both current employees and employees of the new company – creating an equal environment. Inspirational leadership encourages all employees to perform to the peak of their abilities (Sitkin & Pablo, 2004).

Supportive and stewardship administration enables employees to believe and see their company contributions as integral to the success of the company and the merger (Sitkin & Pablo, 2004). Chrysler Chrysler has based its economic standing predominantly on its ever-popular SUVs and especially the Jeep brand it boasts (Fiat plays double, 2010). However, as gas prices rose and the company continued to overspend while maintaining its antiquated plant-centric culture the organizations internal economy slumped into the red.

SUVs lost desirability with the increase in fuel prices and Chrysler had little to fall back on without a competitive vehicle in the fuel-efficient categories. Since Chrysler had long been one of the nations top three auto companies its business culture was production centric. The company obtained success through reputation and size rather than customer support. Once the company began to struggle in the decade or so Bob Nardelli, CEO, realized the culture must be changed for the company to make and attempt to turn around the profit loss (Boudette, 2008).

Nardelli pushed for a complete overhaul of company culture starting with the upper echelon of management to the plant employee to switch to a customer centric culture. Satisfying the customer became the centerpiece of the Chrysler vision (Boudette, 2008). By creating a customer centric environment Chrysler has an asset in culture to bring to the Fiat-Chrysler table and can continue to be a vital asset in the newly emerging larger and global auto entity. Chrysler’s most recent managerial perspective prior to the Fiat merger was that of situational dominance.

The company was clearly struggling and needed a leader who could carry the company through the potential for a merger with a stronger company while still supporting the integrity, as much as possible given the circumstances, of the company and the employees involved. The leadership at the time had to be directive and implement protocols to increase income to the highest extent possible while knowing thousands of people would loose their jobs; this would be harsh and fast changes to the environment (Bob nardelli, 2007).

This system, it could be said, may have limited the number of employment casualties there would have been given a different or slower approach (Bob nardelli, 2007). Fiat Once Marchionne took over as CEO at Fiat and made a profit margin feasible for the company again he realized the company needed to expand in order to survive. The company did not stand a long-term chance by attempting to grow as a regional entity in Italy while recovering from a subpar reputation.

Marchionne acknowledged Fiat’s economic livelihood depended on a merger; Chrysler becoming available offered the opportunity for two smaller regional companies to have a chance in the global auto economic market (Fiat plays double, 2010). Fiat maintained a very traditional work culture with a standard hierarchy of leadership and distance between the upper and lower echelons for the majority of its existence. Once Marchionne became CEO he quickly realized this traditional stance had created a stagnant environment with little room for growth.

Marchionne terminated this torpid culture by restructuring the management system and boasting an atmosphere of autonomy and initiative (Marchionne, 2009). Sergio Marchionne started with Fiat in 2004 and almost immediately changed the leadership climate and profitability of the company. On the managerial perspective he worked diligently to model the management aspects he expected out of those in positions of authority and turned the atmosphere into a solely meritorious environment (Hobbs, 2008).

This environment encouraged employees to perform the best of their abilities and live in healthy competition rather than stagnant seniority (Hobbs, 2008). This system and Marchionne’s focus on teambuilding will inherently create a stronger ability to merge successfully with Chrysler. Teambuilding Teamwork can be a critical emphasis item in a merger of two large organizations. Not emphasizing the importance of unity during a merger can create animosity and weakness in combined efforts.

Also, not encouraging an understanding of the meaning of teamwork and what teams can enable will possibly create a separation of workers. This part of the merger falls largely on the leader, the face of the merger. The leader must be able to define a constructive vision for the new organization while respecting the “history and achievements of the acquired organization (Pande, 2008). ” This is the first step in developing cooperation and teamwork within a diverse team that allows for “cross-functional and cross-business representation (Pande, 2008). In the case of the Chrysler-Fiat merger, the focus on teamwork has proven to be a huge part of the success the new-formed relationship has seen. After being name CEO of Chrysler-Fiat Sergio Marchionne, previous CEO of Fiat, realized the need for a cohesive team that represented the interests of both corporations individually in order to become one solid entity. He instituted a team of twenty-two executives, from both sides, who report directly to him to combine the multiple brands of the corporations and allow for cross-representation and have responsibilities across geographic borders (Taylor, 2011).

The institution of said executive team has proven to be highly beneficial in bringing both brand cultures together and an environment to work in unison. At this time Mr. Marchionne has set forth on a goal of six million global vehicle sales by 2014, an endeavor unfeasible to each corporation on its own and now a valid objective due to teamwork (Vlasic, 2012).


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CNBC, Retrieved from http://www. cnbcmagazine. com/story/sergio-marchionne/429/1/ Kouzes, J. M. , ; Posner, B. Z. (2007). The leadership challenge. (4 ed. ). San Francisco, CA: John Wiley ; Sons, Inc. Marchionne, S. (2009). Fiat’s extreme make over. The Australian Financial Review, Retrieved from http://newretailweb. wordpress. com/2011/02/11/review-of-harvard-business-review-article-on-fiat/ Pande, P. (2008, January 7). How to avoid a ‘merger gone wrong’. Forbes, Retrieved from