Do exceptional times require exceptional leaders?
It is widely accepted that the automotive industry has never experienced so many challenges in parallel as we face today – electrification, economic downturns, new entrants, tariffs and much more besides. At the same time, we have seen some turmoil in the leadership of the major car manufacturers with new CEOs in place in the last year at Changan, GAC, JLR, Nissan, Polestar, Porsche, Renault, Stellantis and Volvo. Do we need a different type of leader in these challenging times, or when things get tough, do Boards just pick on the CEO as an easy target when the results don’t meet expectations?
Whether we liked them as individuals or not, I think everyone would accept that there are some auto industry leaders who made an exceptional impact on the businesses they led. Would the VW Group exist today without the strong direction set by Ferdinand Piech? Could BYD and Tesla have grown to become direct rivals for the largest BEV manufacturer in the world without the respective drives of Stella Li and Elon Musk (recognising that Stella Li is not actually the CEO). Would Stellantis exist if Sergio Marchionne had not applied his financial engineering skills to create FCA as one of the two constituent parts of the larger group? Given the current situation of Stellantis, you might argue that Marchionne’s judgement was flawed, but he set a strong and positive direction before he had to resign due to ill health. That naturally takes us to Carlos Tavares, undoubtedly a strong leader, somewhat in the mould of Piech, but perhaps overly focused on costs and not sufficiently addressing how the complex product portfolio could be differentiated in the way that Piech did so well in the VW Group.
Strong leaders not only set the direction of the business but create an atmosphere where the necessary changes are implemented and embedded in a way that survives their tenure. They are not administrators, caretakers or process managers, but visionaries who identify the most fundamental, sometimes existential, challenges facing the business. They identify the necessary actions to address those challenges and build a team of loyal lieutenants to implement. In the process there are typically casualties as consensus building and challenge is incompatible with decisive and rapid progress. There are many examples of capable senior executives who left the businesses led by those strong leaders – as the saying goes “my way or the highway”.
This may not be the management style that builds the strongest business in the long term with strength in depth through the whole organisation, but I suggest that there are points in time when you need to focus on different priorities as a matter of survival. With the multiple pressures on the industry now, particularly at manufacturer level, there needs to be change of gear. Actions need to be taken on multiple fronts, coordinated and implemented rapidly. The change of direction is more important than perfect execution because a changing environment means that what might have seemed to be ‘perfect’ last year is almost certainly going to be overtaken by events this year.
One thing that does not change is the expectation of shareholders. Many are driven by financial returns, some by family linkages (the Ford and Porsche-Piech families for example), and others by political considerations (the government of Lower Saxony in the case of VW, various government institutions in the case of the Chinese state-owned enterprises). The purely financial investors will shift their focus elsewhere to more attractive sectors like AI or defence for example, but Boards need to respond to this. Strategic investors will probably maintain their stakes but will apply pressure directly to ensure that their goals are met, whether that is protecting a family legacy or a strong local economy.
The end result is the same. The pressure comes on top management to deliver change quickly, to avoid a decline in the business and fight back against all the various pressures. In these exceptional times, I believe that this will result in more changes at the top of the car manufacturers as Boards search for those exceptional leaders. As a result, their businesses will stand a better chance of still being there in ten years’ time even if the individuals have served their purpose and moved on.
Image: CHatGPT