Fiat CEO Takes Over at Fiat Auto

Fiat Chief Executive Sergio Marchionne strengthened his grip over the Italian industrial group on Thursday, taking over as head of its core but cash-bleeding car arm to drag it back to profit.

Marchionne replaces Fiat Auto CEO Herbert Demel, who will leave the company after 15 months in the job.

The shake-up is the latest in a long battery of management changes as Fiat hired waves of outside executives to help pull the Italian industrial icon back from record losses in 2002.

Fiat Auto, historically run by managers born and bred in Turin, has now been peppered with foreign executives poached from top carmakers like Nissan and Volkswagen. The management structure has also been flattened to improve cost controls.

Marchionne, who moved to Fiat last June, said that adding Fiat Auto to his job brief was "aimed at concentrating Fiat Group's efforts into the recovery and relaunch of Fiat Auto."

The move comes four days after Marchionne won a $2 billion divorce from General Motors, ending a long row over a now-defunct put option to sell Fiat Auto to GM and freeing the Italian carmaker from strictures imposed by their partnership.

"We can now operate with total autonomy, without constraints but also without excuses, dedicating ourselves completely to the fundamentals of an auto maker: products, sales networks and customer service," Marchionne said in a statement.

"A profound cultural transformation is underway following a management reorganisation that has delivered a more agile and efficient structure ... based on accountability and speed of decision-making processes," he added.

But unions were quick to criticise the move.

"It seems we are in a soccer team that keeps changing manager because he asks to buy players to stay in the top league and the owners don't want to spend the money," said Giorgio Cremaschi, of the Fiom-Cgil metalworkers union.

Media have reported that the relationship was strained between Marchionne and Demel, who was hired by Marchionne's predecessor Giuseppe Morchio when former Ford Europe CEO Martin Leach was barred from taking the job.

Sources said Marchionne was frustrated by how long it was taking to turn around Fiat Auto, which last year postponed its break-even target to 2006 from 2005. Some industry insiders expected Demel to leave and Leach to take over.

Fiat Auto has made an operating loss in five of the last six years and a slump in car sales dragged the whole industrial group into its worst-ever crisis and a deep restructuring which has begun to bear fruit outside the auto sector.

On Thursday, Fiat said all its units - which include tractor maker CNH Global and truck unit Iveco - performed better than expected in 2004 and confirmed that the group should have hit breakeven at operating level last year.