Carmakers: New hands on the wheel

FT.com

September 8, 2013 6:19 pm

By Henry Foy

Carlos GhosnThe matchmaker: Carlos Ghosn, Renault. In an industry enamoured of alliances but awful at making them work, he is the exception. A Renault executive in 1999 when it bought a stake in Nissan, he made the Japanese company profitable within a year and was leading both by 2005. His gruelling air miles between Paris and Yokohama play to the alliance’s strengths, blending Renault’s diesel technology and European reach with Nissan’s manufacturing prowess. He shows no sign of loosening his grip. Mr Ghosn’s legacy hinges on his bet on emerging markets and his faith in electric and self-driving vehicles. Possible successors: Andy Palmer, Nissan executive vice-president; Joe Peter, Nissan CFO; Jérôme Stoll, Renault sales and marketing chief.

On August 29, Renault’s chief operating officer Carlos Tavares quit the company after an emergency meeting of the astonished board.

Only two weeks earlier, the Portuguese executive had given an interview that convulsed the motor industry: he had taken a shot at his widely-respected boss and had suggested that he would be more successful as chief executive at a rival carmaker.

His remarks, made to the Bloomberg news agency on August 14, have so far failed to land him a plum job at another company. Still, the unexpected comments from a man considered heir-apparent at France’s second-largest carmaker has lifted the bonnet on the hottest and most intriguing story in the car industry: succession.

Many of the world’s biggest car companies, all run by men, are expected to change their chief executives soon.

“You are going to see a generational transition start to emerge over the next 12 to 18 months,” says a senior executive at one global carmaker. “There’s a cycle approaching in the industry.” In an industry that requires long product development and demands long-term investment decisions, automotive chief executives typically stay for the best part of a decade. They define companies and their vehicles for years.

Such is the sense of anticipation about the leaders-in-waiting that when General Motors merely tweaked the composition of the pension of 64-year-old chief executive Dan Akerson in April, it sparked a flurry of speculation that he was looking to leave.

Boardroom pressure on Daimler chief Dieter Zetsche and the movements of those tipped as frontrunners to replace him have generated more headlines this year than the company’s financial performance.

The world’s most powerful car chief executives come from mixed backgrounds. Gone are the days when an engineering degree and a decade on the production line were the route to the top. The seven largest car groups by sales are now headed by a former aviation executive (Ford), an accountant (Fiat-Chrysler), a tyre expert (Renault-Nissan), a naval officer turned private equity executive (GM), one metallurgist (Volkswagen) and two sons from distinguished families (Toyota and Hyundai).

Ford and Fiat have all turned to successful businessmen from outside the industry to rescue them in the past 10 years. Both rebounded spectacularly, thanks mainly to financial rigour and restructuring.

“There are very few people today that you can really call auto guys [at the top],” says Stefano Aversa, managing director at AlixPartners, a consultancy. “The concept that a top executive should be an auto guy ... that knows the product inside out, clearly is not true any more.”

But at Volkswagen, run almost exclusively by engineers and technically-minded managers such as chief executive Martin Winterkorn, success has been built on an unrelenting focus on improving the engineering of the vehicles. “In the premium segment you need to be more of a product guy, long-term oriented,” adds Mr Aversa. “But in the mainstream volume, you need more general management skills, financial discipline.”

Mr Tavares named Ford and GM as the two companies that he thought he was good enough to run. Both have denied plans to hire him, but the two are considered the most likely to begin the expected flurry of successions.

At Ford, the future looks clear. The company announced in November that chief executive Alan Mulally, 68, would remain at the helm through 2014, while all but anointing Mark Fields as his replacement by promoting him to chief operating officer.

Mr Akerson at GM has yet to set a departure date but is considered unlikely to continue past 2016. The field of potential successors is wide. Vice-chairman Steve Girsky and North America head Mark Reuss are seen internally as the frontrunners, say two people close to the company. Mary Barra, head of product development, and Grace Lieblein, who is in charge of purchasing, are also in contention to become the industry’s first female chief executive.

Mr Winterkorn, 66, is keeping his cards close to his chest. Volkswagen has a wide range of internal candidates across the group’s vast array of brands. Audi’s chief executive Rupert Stadler is considered the frontrunner.

Many big names in the industry sport a number of different company marques on their CVs. Companies typically choose to hire talent from outside when launching new initiatives or product lines. Nissan poached Audi’s former US head Johan de Nysschen to run its new push towards premium vehicles and VW’s former China chief Karl-Thomas Neumann left to head up GM in Europe.

That is good news for carmakers without an obvious successor.

Fiat’s Sergio Marchionne shows no sign of stepping down but lacks an obvious protégé at the Italian carmaker and has struggled to cultivate a shortlist of potential heirs, say two people who know the company.

The same is true at Renault in the wake of Mr Tavares’ departure, officials admit. At sister company Nissan, which has the most international blend of executives in the industry, the bench is deeper.

“One of our main concerns in the industry broadly is a lack of leadership candidates across the board,” says Anil Valsan, lead automotive analyst at EY, the professional services firm. “There’s a worry that [carmakers] are not doing enough to mentor and nurture future leaders.”