Fiat Chrysler CEO Marchionne steps down due to ill health

Shares in Fiat Chrysler fell on Monday after the company said over the weekend that chief executive Sergio Marchionne would not be returning due to complications following surgery.

Fiat has appointed Mike Manley, the head of its Jeep brand, as Marchionne's successor.

The company said in a statement on Saturday that unexpected complications had arisen while Marchionne was recovering from surgery and that these have worsened significantly in recent hours.

"As a consequence, Mr. Marchionne will be unable to return to work," it said.

Manley and his management team will proceed with the implementation of the 2018-2022 Business Plan as presented on 1 June.

Chairman John Elkann said: "The succession plans we have just announced, even if not without pain from a personal point of view, mean we can guarantee the maximum possible continuity, preserving our companies’ unique cultures. It has been my privilege to have had Sergio at my side for all these years. I would ask everyone for their understanding in these circumstances and to respect Sergio’s privacy and that of those who are dear to him."

Morgan Stanley said in a note that it holds Manley in high regard. "He has deep experience running FCA’s two most valuable businesses, Jeep and Ram. We have long valued these businesses at well over 100% of the total market cap of FCA. If Jeep's commercial success is any indication, Mike Manley has extremely strong credentials to run a global automaker in technological and strategic transition.

"Jeep has increased global volume four-fold under Mike’s tenure, more than doubling its product line-up and undergoing profound geographic expansion into Europe, South America and Asia."

Still, MS went on to say that it is impossible to overstate how deeply Sergio Marchionne engaged in all key aspects of strategy and operations of the business.

"Whenever the investment community pressed the topic of succession and ‘key man risk’ to Sergio he always referred to the deep bench of talented leaders he had groomed over the years. Investors must decide if the next generation can carry on the legacy."

MS rates the stock at 'overweight' with a €23 price target.

Meanwhile, Barclays trimmed its price target on the overweight-rated stock to €21 from €23 following the news on Marchionne, saying he will be missed "on diplomatic fronts".

"While the succession comes around seven months sooner than we and the market anticipated, we nevertheless believe that the investment case for margin expansion and eventual strategic options remains intact.

"Nevertheless, Sergio’s deal-making and political skills will be missed as FCA faces trade/tariff uncertainty, some labour unrest in Italy, and a constantly shifting landscape in LATAM."

The bank added: "Mike Manley as the former global head of Jeep brings a wealth of experience in creating a differentiated brand image, which is increasingly important in the crowded utility vehicle market."

At 1310 BST, the shares were down 2.1% to €16.07.