Auto Industry Featured Story

Implications of Marchionne exit from FCA; automakers suffer massive data breach

Written by Norris McDonald

It is with regret that announces the death of Sergio Marchionne, a champion. This column was written and posted when news first broke last weekend that Mr. Marchionne was unable to continue his life’s work as CEO of Fiat Chrysler Automobiles. He passed several days later. He was a giant of industry and sport. Rest in peace.

As is the case of the media coverage of Donald Trump, in which newspapers, radio and television are so busy reporting on the inconsequential that they’re missing the really important stuff, so is the case today with the Sergio Marchionne story.

It is tragic that Marchionne, a Canadian-educated auto executive who rescued both Fiat and Chrysler from oblivion with a combination of daring-do, business savvy and bluster, went into hospital for shoulder surgery and is now so ill he has had to be replaced as President and CEO of Fiat Chrysler Automobiles.

But, in the end, Marchionne already had the company on the road to recovery – some would argue prosperity – and had been planning to step down next April anyway. The naming today of Mike Manley as CEO, effective immediately, accelerated the process.

Indeed, the statement by FCA early Saturday afternoon (July 21) made clear that Manley and his team will continue the Marchionne vision. Said FCA: “Mr. Manley and his management team will proceed  with the implementation of the 2018-2022 Business Plan as presented on June 1 this year, a plan that will further assure FCA’s strong and independent future.

Now, automotive analysts will, I’m sure, have a field day with the last four words of that statement – “strong and independent future.” More than one had suggested Marchionne has been trying to either sell FCA or merge it with another auto company.

Statement from John Elkann, Chairman of Exor

I see things differently, though. I’m sure FCA will prosper. My questions are: how will this affect Ferrari? And how will this affect FCA operations in Canada? Marchionne was a fan of both.

As a fan of motorsport, the Ferrari question is top of mind. Marchionne ran that team and was respected by everybody in it and one false move by the new guy, reportedly Louis Camilleri, a former Philip Morris International Inc. chairman and a member of Ferrari’s board, could upset the apple cart.

More important, however, is that, as a Canadian, I am concerned that the replacing of Marchionne could prove to be a negative, particularly since Mexico appears to be doing an end run on this country in the NAFTA negotiations (which our major media don’t seem to be too terribly concerned about, preferring instead to focus on the U.S. President’s sex life). Manley is now responsible for FCA’s NAFTA region and I have no idea how he feels toward Canada and Canadian production. I do know that Marchionne had a soft spot and, when push came to shove, would likely have ensured we were looked after. Or, at least, not killed. Now, who knows?

But, as I said in the beginning, media tend to focus on one story while other, more important, stories are floating around. As important to the auto industry the Marchionne story may be, this second story is a major cause for concern.

Quoting the New York Times, the Detroit News reported today that Fiat Chrysler, Ford, GM, Volkswagen and Tesla have all been hit with a massive data breach that exposed sensitive business information.

According to an Australian security company, UpGuard Inc., a security researcher for the company discovered tens of thousands of sensitive documents including company manufacturing secrets on an unprotected and publicly accessible computer server.

According to the Detroit newspaper, the server in question is owned by Level One Robotics, a Canadian engineering service with an office in Auburn Hills, Mich.

“That was a big red flag,” Chris Vickery, the researcher who found the data, told the Times. “If you see NDAs (Non Disclosure Agreements), you know right away that you’ve found something that’s not supposed to be publicly available.”

Corporate data such as contracts, invoices, price negotiations, robotic configurations, specifications, animations and blueprints and customer contact information were also exposed, according to UpGuard.

The security services company said the leaks demonstrate the risk that carmakers and other manufacturers take when they exchange sensitive information with third-party companies.

“The supply chain has become the weakest part of enterprise data privacy,” UpGuard said. “Companies that spend many millions a year on cybersecurity can still be exposed by a vendor who handles their data.”

Back in 1983, there was a movie out called War Games, starring Matthew Broderick (a.k.a. Mr. Sarah Jessica Parker), about a teenager who goes looking for video games on his home computer, accidentally gets into a military supercomputer, and nearly starts World War III.

What a great movie, everybody said. I saw it and said to my friends that, perhaps unintended, it was a warning. Technology, like so many things, is great in theory but dangerous in reality.

And look where we’ve gone since.

We – industry, governments, society – start going down these roads and very quickly it becomes obvious that we are making a serious mistake and yet nobody has the courage to say stop. I once worked for a company that tried something different and everybody in the place knew it was the wrong thing to do, and said so, and yet it was full steam ahead and was only stopped after millions and millions of dollars were flushed down the drain.

Did you know that nine in 10 Canadian companies suffered at least one cyber security breach in 2017? And yet on we go, oblivious.

I will leave you with this.

The president of a large corporation arrived for the annual meeting with shareholders carrying three briefcases bulging with documents.

What are those, he was asked?

Reports and memos, he replied.

Wouldn’t it be easier to just bring a laptop, he was asked?

You can’t hack paper, he said.

There is a lesson there, but nobody will pay any attention to it.