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Nov-04-2009Chrysler Chief Says Its Finances Are Improving(topic overview)
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DETROIT — Coming to your local Chrysler, Dodge or Jeep dealer: Tractor-trailers full of cars and trucks with lower sticker prices. The big discounts are part of new CEO Sergio Marchionne's attempt to revive the Detroit company the way he did Italian automaker Fiat. His five-year plan for Chrysler Group LLC, to be unveiled Wednesday, calls for deep discounts across many models over the next 18 months. [1] MILAN (Dow Jones)--Fiat SpA's (F.MI) most important contribution to the revival of Chrysler Group LLC may not be the iconic 500 or other models it plans to bring to the U.S., but its manufacturing ingenuity. Inspired by Toyota Motor Co., the Italian company churns out cars faster and cheaper than it once did, having undergone a restructuring of its own a few years ago. Its manufacturing process will be the cornerstone of Fiat's five-year plan for Chrysler, to be presented in Detroit on Wednesday. From the time he set about turning Fiat around in 2006, Chief Executive Sergio Marchionne got.[2] The survival plans will be revealed by Sergio Marchionne, chief executive of Fiat and now Chrysler too. He led Fiat's turnaround but has said that the Italian maker of low-priced cars needs millions more sales to survive in today's market. Fiat officials have said he wanted to get back into the American market by manufacturing here. All this came before the U.S. government ordered Chrysler to give control to Fiat--plus a 20% stake to start--without any payment from Fiat. This deal will give Fiat a major objective: a manufacturing base in North America. The company plans to build its small 500 model in Chrysler's Mexican plant and apparently plans to use another plant here to build Alfa Romeo models.[3]
Now Massarelli's hopes of getting some compensation are pinned on ongoing talks between disenfranchised dealers and Chrysler brokered by members of the U.S. Congress. Sources close to the talks say that should they fail, Congress could force Chrysler to reinstate dealerships. Chrysler's chief executive, Sergio Marchionne of Italy's Fiat, is scheduled to present his five-year strategy for the company in Detroit on Wednesday. Amid the worst U.S. auto sales in decades and burning through cash, Chrysler and fellow U.S. automaker General Motors Corp were forced into bankruptcy earlier this year as part of a controversial rescue bid engineered by the administration of U.S. President Barack Obama. To receive aid the two automakers had to shutter plants, shed thousands of jobs and slash their dealer networks. Chrysler argued that slashing its dealer network was necessary and received bankruptcy court approval.[4]
Mr. Marchionne will unveil Chrysler's five-year plan at a day-long presentation at Chrysler's headquarters in Auburn Hills, Mich., on Wednesday. Offering the Fiat 500 is just one element of a plan that will outline which Fiat models and platforms will be shifted to North America, which Chrysler models will get the axe and how the Italian-based auto maker hopes to halt years of market share decline that sent the Detroit auto maker into chapter 11 bankruptcy protection earlier this year and a bailout from U.S. and Canadian taxpayers. It will be a long and difficult task for Mr. Marchionne to revive Chrysler. It now stands fifth in overall sales in the slumping U.S. market; its share of that market has fallen almost two percentage points this year, and just last week, Consumer Reports magazine said one-third of its vehicles were much worse than average in terms of quality.[5] For another, speculation about Chrysler's inability to survive post-bankruptcy and emerge from the current sales slump as a viable company is rampant. Its market share has fallen below 10%, it has little in the way of new products or alternative-fuel technology, and it is at war with its dealers after loading them up with inventory and then trying to terminate them. A few new tidbits about Marchionne's plans have emerged in the past 24 hours that are remarkable for their optimism and ambition. He promises that Chrysler will make a profit in 24 months and possibly break even as early as next year. That's surprising when you consider that Ford ( F, Fortune 500 ), currently the most successful U.S. automaker, is making no profit forecast for next year and only yesterday predicted it would be profitable in 2011. Marchionne has based his prediction on Chrysler's greatly-reduced cost base (thanks to bankruptcy) and the relatively conservative forecasts he has made for market size and share. He figures Chrysler can break even with a 9% market share (it is running at 9.2% so far this year) and industry sales of 10 million units (the seasonably adjusted selling rate in October was 10.9 million).[6] The presentation comes not a moment too soon, with more doubts about the company's future, which were only reinforced Tuesday when the company reported a 30 percent drop in sales for October. By contrast, both Ford Motor Co. and General Motors Corp. reported sales increases for October. The sales figures from GM, which like Chrysler filed for bankruptcy earlier this years, indicated that the company's restructuring is paying dividends. Almost 95 percent of GM's sales came from the company's four core brands and several new vehicles such as the GMC Terrain. "The industry showed signs of improvement this month with increasing sales, which is a trend we expect to continue for the remainder of the year," said Fred Diaz, lead executive for the Chrysler Sales Organization. "Chrysler Group expects to get its fair share of the increases as November and December traditionally are two of the best months for SUV sales, and the Jeep brand offers customers the best SUVs in the marketplace," Diaz said. Chrysler, however, has introduced only one new vehicle this fall, the Ram HD truck and the plan Marchionne is expected to outline today won't produce any additional vehicles for almost two years.[7]
While the possibility of an almost total withdrawal from international markets will be ringing alarm bells for Chrysler Australia, the centrepiece of the plan is expected to be the introduction of new fuel-efficient models to the U.S., using Fiat-developed technology. The Chrysler brand is expected to share and draw most of its platforms from Lancia, which Fiat also owns. The Reuters source said that Fiat will take over development of the rear-wheel-drive platform scheduled to underpin the next generation 300C, scrapping its own existing rear-wheel-drive project in Europe. Alfa Romeo will add an SUV to its future line-up, using platforms drawn from Chrysler, the source added. Marchionne - CEO of both companies after Fiat took a 20 percent stake in Chrysler in June - is due to brief the press on November 4 (early November 5 in Australia) on the Italian carmaker's plans to revitalise Chrysler's products and sales.[8] Fiat, one of the few global automakers to post a third-quarter net profit ($31.44 million), has met many of the targets Marchionne outlined in 2006 even in a challenging environment, said Paul Newton, an auto industry analyst for IHS Global Insight in London. "I think given the conditions, he (Marchionne) has done an excellent job," Newton said. "Despite the worst global economic crisis in a long time, they have been one of the winners." Fiat's success includes model hits such as the 500 minicar, the Punto compact and the Panda small crossover vehicle, many of which will be incorporated into Chrysler's product lineup. Its premium brands, Alfa Romeo and Lancia, haven't seen much success outside of Italy, Newton said. Alfa has more cache, but it still does not stack up against a German premium car, he said. It's still questionable whether Americans will accept the new Fiats and will be willing to buy the smaller cars that are popular in Europe.[1] Independent auto consultant Erich Merkle said there is very little in Chrysler's lineup that consumers want to buy. He said its Ram pickup truck and the Town & Country minivan are both competitive products, as are several Jeep models, but demand for these larger vehicles has been shrinking due to the weak economy and high gas prices. Merkle said Chrysler doesn't really have a midsize sedan that is competitive with the Toyota Camry or Honda Accord, two of the best selling cars in the U.S. He added that neither Chrysler nor Fiat have a very good offering in the growing crossover segment. Robinet said that it will take a long time for Chrysler to adapt to the new market landscape -- even if it simply imports some of Fiat's big sellers from Europe into the U.S. He said redesigning a European car to meet U.S. safety standards as well as the tastes of American car buyers takes at least a couple of years. Other experts said this is time that Chrysler probably doesn't have, even if the market for autos and overall economy improve. "Money buys time," said Van Conway, president of Michigan turnaround firm Conway MacKenzie, Inc. "It all depends on how much money Fiat is willing to invest."[9]
NEW YORK (CNNMoney.com) -- Fiat Group will soon unveil its plans to help get the struggling Chrysler Group back on track. The question that won't be answered is whether these changes will come in time to save the company. The Italian automaker, which now owns a controlling minority stake in Chrysler, is expected to announce Wednesday which Fiat models it intends to make available in the U.S. It also will disclose which Chrysler, Dodge or Jeep vehicles will be phased out.[9] Fiat was given a 20-percent stake in Chrysler by the U.S. Treasury's autos task force in exchange for bringing more advanced vehicle technology to the U.S. automaker as part of an effort to allow it to meet tough new U.S. fuel economy standards. Other elements of the Fiat plans for Chrysler will reflect a recognition that the automaker cannot be made viable with only minor changes to its past strategy for its three brands, Chrysler, Jeep and Dodge, the sources said.[10]
"The Plan," as Chrysler Chairman Sergio Marchionne's anticipated announcement has come to be known, will lay out an aggressive strategy to completely and quickly revamp the automaker's moribund lineup by introducing vehicles and technology from Italian automaker Fiat SpA. Though it won't be certain until the words are delivered this week, the Toledo area's Chrysler plants - Toledo Jeep Assembly, Toledo Machining in Perrysburg Township, and Global Engine Manufacturing Alliance in Dundee - will get new products with probably hundreds of additional good-paying jobs for the regional economy.[11] Chrysler Group LLC will present its vision of the future on Wednesday, when it releases a five-year business plan it hopes will set it on a new path towards recovery. Starting at 11 a.m. ET, Chrysler CEO Sergio Marchionne will outline the automaker's strategy at its headquarters in Auburn Hills, Mich. In addition to product and manufacturing plans, design and styling details, and quality concerns, the company will also provide financial details.[12] AUBURN HILLS, Mich. — Chrysler CEO Sergio Marchionne says the automaker is on firmer financial footing as it attempts to revive the company's sagging fortunes. Chrysler is announcing a new business plan at a daylong event Wednesday, including the introduction of three new Dodge cars by 2013 and new exteriors, interiors and engines on most of its current lineup.[13]
TURIN -- Tell most analysts that Chrysler Group's sales are going to rise to about 3 million in 2014 from roughly 1.5 million this year and here is the reaction you will get: No chance. That kind of skepticism is sure to follow the presentation of the struggling U.S. automaker's five-year plan by CEO Sergio Marchionne today in Auburn Hills, Mich. Marchionne's sales target is not outrageous to him. He is used to making bold promises and then pushing himself and his team until the doubters have to become believers. We have seen this before.[14] Auburn Hills (WWJ) -- On Wednesday, the CEO of Chrysler Group, Sergio Marchionne, plans to release details of the eagerly awaited 2010-2014 business plan at a briefing for analysts and reporters at the company's Auburn Hills headquarters.[15]
Chrysler Group LLC's new chief executive officer, Sergio Marchionne, will outline his plans for the future of the automaker today with an elaborate presentation at the company's headquarters in Auburn Hills.[7] All will become crystal clear tomorrow when Chrysler Group capo - er, I mean chief executive - Sergio Marchionne, also president of Fiat, presents a product plan detailing how current and future Fiats are about to take American citizenship as Jeeps, Chryslers and Dodges.[16] As previously reported, Marchionne is planning a major overhaul of Chrysler's product line by substituting Fiat platforms or entire Fiat products. By the time he gets done -- and details about product plans for 2013 are leaking out -- he will be running what will in effect be an entirely new company. Gone will be such familiar names as Jeep Patriot and Dodge Avenger. In their place will be Fiats and Alfa Romeos. Introducing American buyers to all these new brands will be a massive job.[6] While dealers and consumers want to know what products will be sold as Chrysler, Jeep, Dodge, Fiat and Alfa Romeo brands in the future, many of the presentations will focus on implementing Fiat systems to engineer more vehicles from fewer underbodies; developing new cars in 18 months rather than three years; manufacturing vehicles more efficiently using Fiat processes; and improving quality.[17] "Introducing some of Chrysler's products is obviously in the cards," the report said, singling out the potential of the Dodge Ram full-size pickup. Where the analysts see savings for Fiat is in "avoided cost" by allowing the Italian automaker to stop some of its development efforts and replace them with Chrysler technology. Into this category fall versions of large rear-drive sedans (Chrysler 300) and sport utility vehicles (Jeep Grand Cherokee) for the Alfa Romeo brand.[18]
Marchionne -- who is also CEO of Italian carmaker Fiat, which is now officially Chrysler's new corporate partner -- will also have to outline some of the steps taken to shore up Chrysler's finances. A new report released this week by the federal government's General Accounting Office said that Chrysler will have to provide the U.S. Treasury Department with financial information on a regular basis. "You've got the added element that the banking system is still locked up," and it's not clear that banks would be willing to lend to suppliers that are working with Chrysler, he said. Chrysler, however, is continuing to get vital support from credit union members who will receive preferred pricing on all 2009 Chrysler, Jeep, Dodge and Ram Truck vehicles and a select number of 2010 vehicles, Chrysler announced this week.[7] The latest is a report from Reuters that Fiat will put a stop to Chrysler's plans to expand its vehicles globally. Only Jeep will continue to be pushed as an international brand because of its stronger international brand recognition. Fiat will increase marketing for Jeep in developing markets such as Brazil. Other anticipated announcements include new efficient technology being brought to Chrysler's U.S. stables and shared development between the U.S. and European companies.[19]
The plans will likely result in an undetermined investment for Chrysler's Windsor, Ont., assembly plant. Sergio Marchionne, chief executive officer of both Fiat and Chrysler, is unveiling the plan as U.S. vehicle sales begin what is expected to be a slow climb out the industry's most damaging slump since the Great Depression.[20] D ismal sales numbers, crumbling market share and an outdated lineup are staring Fiat SpA and Chrysler Group LLC chief executive officer Sergio Marchionne in the face as he prepares to unveil a sweeping reorganization for the company Fiat saved from the scrap heap five months ago.[5] DETROIT (Reuters) - When Sergio Marchionne unveils his vision for Chrysler's revival on Wednesday, he must more than anything win customer confidence -- and auto industry players think he has the charisma to do that. Marchionne, who now heads both Chrysler and Fiat SpA, which he drove to success, persuaded the Obama administration earlier this year to give the Italian automaker 20 percent of the bailed-out company and put him in charge. Chrysler's sales have slumped this year.[21] I assume that the Liberty will stay in the portfolio in some way, and that the Nitro will go away." Mr. Phillippi said he was invited to Chrysler's secluded testing grounds in Chelsea, Mich., last month, where he saw a test vehicle for what he said "might be the next Liberty." He said the vehicle, albeit cobbled together, "looked more like a crossover than something that would be trail-rated." No group may be as financially invested in Chrysler's product future as its beleaguered dealer network. With sales of Chrysler-made vehicles down 40 percent this year, while the rest of the industry is off 27 percent, Chrysler has dropped market share and slashed 789 dealers from its sales network to try to improve sales at remaining dealers. Even after two years of turmoil, dealers say they can still have faith in the company, especially if they see hope on the horizon this week.[11] The announcement comes as recovery has eluded Chrysler so far. It reported a 30-per-cent tumble in U.S. sales in October on Tuesday, compared with a 4-per-cent rise for rival General Motors Co. in a flat market overall. The Chrysler sales drop sent its market share in the United States to just 7.9 per cent. Its vehicles in such crucial market segments as compact cars, mid-size cars and crossover utility vehicles are also-rans. Coming up with successful and profitable products in those segments is critical to Chrysler's future, analysts and Chrysler dealers throughout North America say. Both it and GM were forced into Chapter 11 bankruptcy protection in the spring and were given life-saving bailouts by the U.S., Canadian and Ontario governments.[20]
U.S. market share for Chrysler, which includes the Chrysler, Dodge and Jeep brands, has plunged to 9.2% over the first three quarters of the year, down from 11% only a year ago and 13.6% as recently as 2005. The company's cash crunch in recent years has starved its product development, experts said. That couldn't have come at worse time. U.S. car buyers have shifted from light trucks, which made up most of Chrysler's vehicle lineup, to cars and crossovers -- SUV-like vehicles with a more car-like drive and feel to them.[9] If reports coming out of Detroit are correct, Dodge will be the brand that will be hit hardest by the plan that Chrysler Group LLC executives will share with stockholders today. It is the first official glimpse at the road map that will steer the company's fate over the next five years. Over the next couple of years, Dodge stands to lose just about all of its automotive products except the Charger and the Challenger, which reinforce the high-performance image that is expected to be the centerpiece of the marketing strategy for that brand.[22]
Analysts familiar with Chrysler's plans suggest it could make up the difference by buying a brand that produces 1.5 million units (GM's Opel would be a big step in that direction) or make a large push into the China market. He wants to own more of Chrysler. Marchionne is expected to increase his stake in Chrysler to 35% from 20%. It isn't clear whether he will fork over any cash in order to do so. Fiat got its original stake in the American company by offering to share its platform engineering and technology, but no funds actually changed hands. He is a tough taskmaster. Brand heads Michael Accavitti (Dodge) and Peter Fong (Chrysler) were abruptly dismissed just weeks after they were promoted. Their sin? They gave interviews at the Frankfurt motor show in September despite Marchionne's order to remain silent. Marchionne is said to sleep only four hours a night and spend the rest of his time working. He expects his subordinates to labor as hard as he does, and some of the Americans aren't happy about putting in 15 hours a day, seven days a week.[6] Sergio Marchionne -- who also heads Fiat -- will present the five year plan to hundreds of journalists and analysts in a six hour presentation at the company's Auburn Hills, Michigan headquarters. The maverick executive said earlier this month that he can make Chrysler profitable within two years and plans to orchestrate a public stock offering "sometime after 2010."[23] Fiat and Chrysler CEO Sergio Marchionne will host a six-hour presentation on the company's post-bankruptcy plan in Auburn Hills.[24]
When Fiat CEO Sergio Marchionne lays out Chrysler's new business plan on Wednesday, many of Wolf's best selling models may not make the cut.[25] LESS THAN TWO DAYS before new Chrysler CEO Sergio Marchionne is due to reveal Fiat’s plans for its troubled American partner, new details have come to light.[8]
Automotive News will provide you with minute-by-minute reports Wednesday from a team of reporters and editors at Chrysler Group headquarters as CEO Sergio Marchionne unveils his 5-year plan for the U.S. automaker.[26] Fiat laid out pretty specific financial details. Those included earnings projections, debt forecasts, yearly cash cushions and other details for 2007 '10. That confab, like the Chrysler event Wednesday, was meant to introduce CEO Sergio Marchionne's plan for the automaker. He's now CEO of Chrysler, too. It is, perhaps, not surprising in that context that Fiat would assume a several-hour, one-day presentation is modest.[27] CEO Sergio Marchionne, who also is CEO of partner Fiat SpA, board chairman Robert Kidder and Chrysler managers will outline the company's goals and initiatives through 2014. They will address products, quality, manufacturing, engineering, engines and technology, brands, financial goals and the automaker's proposed international reach.[17] Chrysler Dealers discuss Marchionne's Five-Year plan and share their predictions on the DealershipForum website. On November 4th Chrysler's CEO, Sergio Marchionne, will release his Five-Year plan and share details of how he'll resurrect the car maker. For the past several weeks, many Chrysler dealers have been discussing Marchionne's plans on the DealershipForum website and making their own predictions on what changes will be forthcoming at Chrysler. Chrysler has shared very little information with their dealers regarding future product plans since emerging from Chapter 11 bankruptcy. This communication style is in stark contrast to what the dealers experienced when Chrysler was owned by Cerberus and they could rely on regular conference calls with Jim Press and his management team.[28]
Marchionne, who is running the two automakers, plans to replace Chrysler's small and midsize vehicles with Fiat-designed products built in North America, the person said. He will not announce that he is scrapping models like the Dodge Caliber small car or the Chrysler Sebring midsize sedan for fear of hurting sales, the person said.[1] Experts say that unlike rival Ford Motor ( F, Fortune 500 ), which reported a surprise profit of nearly $1 billion the third quarter, Chrysler has a relatively empty product pipeline for the next two years. That, coupled with slim cash resources, make a return to profitability for Chrysler very unlikely. "Unfortunately, it's a race against time," said Michael Robinet, vice president of global vehicle forecasts for auto consultant CSM Worldwide. "I think what they're announcing is a starting point, but many more changes will be required going forward." Industrywide sales plunged sharply this year, causing losses among even the healthier automakers like Toyota Motor ( TM ).[9]
"The task to turn around Chrysler is huge, potentially bigger than any other task faced by Mr. Marchionne before," the report said, citing market share that has shrunk to 8 percent, continued reliance on low-profit fleet sales, "a relatively empty product pipeline," about $18 billion in debt, most of it in government loans, and staff that has been "dramatically downsized in recent years, suggesting that a lot of talent has left the company."[18] Sales are off 40 percent for the first nine months of the year and its share of the U.S. market has dropped to just over 9 percent. Industry analysts say lowering prices may be the only lever Marchionne can pull to keep Chrysler alive while he tries to restock a model lineup that was practically left for dead by the automaker's two previous owners, private equity firm Cerberus Capital Management LP and German automaker Daimler AG.[1] Chrysler's task after emerging from bankruptcy protection and falling into Fiat's hands, observers say, is to tune in to consumer demands in a crowded market. Mr. Marchionne's presentation comes a day after Chrysler reported a 30-per-cent decline in U.S. sales, while its rivals Ford Motor Co. and General Motors Co. posted gains. Chrysler is expected to say it will revamp its lineup and share vehicle platforms with sister company Fiat, a move it hopes will boost sales while saving manufacturing costs.[29] After a swift government-backed bankruptcy filing, Chrysler emerged as a new company under Marchionne's direction in June. Its U.S. sales -- which were down 30 percent in October even as its rivals posted gains -- remain down 39 percent for the year to date.[23] Holiefield said that even if a reprieve is not included in the five-year plan, the UAW and Chrysler will continue to talk to find a way to keep the plants open. Chrysler emerged from bankruptcy on June 10 by completing the sale of most of its assets to a new company led by Fiat, which took a 20 percent stake.[30] DETROIT (Reuters) - The United Auto Workers union remains engaged in talks to convince Fiat SpA ( FIA.MI ) to reverse plans to shutter Chrysler plants scrapped in the U.S. automaker's bankruptcy, a union executive said on Friday. "The jury is still out as it relates to those facilities," said UAW vice president General Holiefield. "We're naturally having conversations all the time, trying to determine if there is something we can do to pull those locations up by the bootstraps," he told Reuters.[30] Without the Nitro, that part of Toledo Jeep would have ample capacity and flexibility to build the Liberty and other vehicles. Such vehicles, experts have speculated, could include a replacement sedan for the slow-moving Chrysler Sebring and Dodge Avenger, both of which are built at Chrysler's Sterling Heights, Mich., plant, which is slated to close. Officials from United Auto Workers Local 12, which represents nearly 4,000 people locally whose livelihoods are tied to Chrysler's SUV production at Toledo Jeep, would not speak specifically about what they've been told of Fiat's plans for Toledo. They say Fiat has noticed the productivity of the local work force, the flexible nature of the plants themselves, and the commitment by local union officials to work with the automaker to get things done.[11]
Plus, Fiat killed the importation of a Mercedes truck, a city delivery vehicle that was labeled a Dodge and had excellent potential. It also killed a plan to build pickups for Nissan ( NSANY - news - people ), which would have helped Chrysler's production volume. It's possible that Marchionne didn't like doing business with European competitors--meaning Mercedes and French Renault ( RNSDY.PK - news - people ), which is allied with Nissan.[3]
What we hope to determine when reading the upcoming November vision plan from Chrysler is whether the Chrysler Group dealers across American will be selling Fiat and Alfa models with just a Chrysler, Dodge or Jeep label on the fender or will we be seeing fresh new stylish skins covering the Fiat-based architecture.[31] Tomorrow's product announcement comes four months after the Chrysler Group exited Chapter 11 bankruptcy. Fiat currently holds a 20 percent stake in the company and, as the plan shows, is leveraging its own technology where possible rather than channelling funds into current ageing model range.[16] Part of the Chrysler disadvantage is that the only all-new product for the 2010 model year is the Ram heavy-duty pickup. Deutsche Bank puts at zero the value of Chrysler to Fiat initially (noting Fiat paid no cash for its initial 20 percent stake), which Deutsche Bank said has no real downside other than the investment in time and energy if the joint venture fails.[18]
The 7-percent discount off last year's $30,135 sticker price, is unusual for a new model year, especially for a vehicle that's revamped with an improved suspension, increased towing and hauling ability, and a far more comfortable interior. The reductions, made possible by expense cuts and lower parts and manufacturing costs, will continue as Fiat combines Chrysler's purchasing and manufacturing into its own lower-cost operations, said the person, who didn't want to be identified because the plan has not been made public.[1] And, as previously reported, the 500 minicar, unattached to the Fiat brand, will reach U.S. showrooms in late 2010 or early 2011. Fiat also wants to put more of its fuel-sipping engines -- both gas-burning and diesel -- into smaller Chrysler and Dodge models, to recover capital investments faster and to assure that Chrysler meets the 35.5 miles-per-gallon average fuel-economy standard by 2016. It's Marchionne Wednesday's crowd is coming to see. This is the guy who, in less than a month, convinced President Barack Obama and his automotive task force to reconsider pulling the plug on Chrysler. Without paying a dime, he walked away with 20% of Chrysler and about $10 billion in U.S. taxpayer support. He did not stop there. Marchionne extracted the first-ever no-strike pledge from the UAW and convinced the CAW to cut Chrysler workers' pay and benefits to the same level that Toyota and Honda pay their hourly workers in Ontario. With the help of Sullivan & Cromwell, one of New York's top-flight law firms, he even exempted himself from any government-imposed compensation limits.[32]
Mr. Marchionne is engineering a massive revamp of Chrysler that will see many of the automaker'''s models killed and new ones, many using the underpinings of Fiat and Alfa Romeo cars, introduced. The governments of the United States, Canada, and Ontario rescued Chrysler from liquidation earlier this year witih more than US$14-billion in aid.[33] How will Fiat, itself struggling, keep Chrysler alive financially until, presumably, resuscitating it with small, fuel-efficient Fiats, bigger Alfa Romeos, perhaps even Lancias built on Chrysler's big-car, rear-drive chassis? Modifying or redesigning the Italian cars and fuel-efficient powertrains to meet U.S. regulations and consumer expectations could take a couple of years. What North American factories will build them, bringing a sigh of relief to communities that depend on those factory jobs? The automaker must make about 40% of its U.S. sales volume in the U.S. under a promise made to the Treasuary department to get emergency federal loans.[27] Italian car maker Fiat SpA ( FIA.MI ) is up almost 3 percent ahead of October Italian vehicle sales figures and bolstered by hopes for its plans to revive U.S. automaker Chrysler.[34]
Italy's Transport Ministry will release October car registration figures at 1700 GMT. France reported a 20.1 percent rise in October sales from the year before, with Fiat up 13.3 percent. Fiat will outline its 2010-2014 business plan for Chrysler on Wednesday.[34]
As part of a restructuring directed by the Obama administration, Chrysler had initially planned to close seven U.S. plants. Two of those plants have closed down, and union activists see little chance of saving a third plant, Chrysler's stamping facility in Twinsburg, Ohio. One of the initial seven plants, Detroit's Connor Assembly plant, is now listed as part of the new Chrysler and has been taken off the closure list. That has put the focus for the UAW and its political allies on three plants -- two in the Detroit area and one in Wisconsin -- that they see as potentially fitting into the new five-year business plan being developed under the management of Fiat.[30] Demand for the new engines, which will use Fiat's "multiair" technology to boost power and gas mileage, would mean the plant will soon be running at capacity for the first time since it opened in 2006. Fiat executives said this year that the Jeep brand was part of the reason they coveted a strategic alliance with Chrysler.[11] Mr. Hall could not comment on specific plans the automaker has for the future. He noted that along with an estimated $8 billion in planned new technology, Fiat has brought "a global and diffuse distribution network" to its strategic alliance with Chrysler. "The Jeep brand is so strong and the market is so wide," Mr. Hall said, "in a good year, you could be talking about six figures of exports for them."[11]
As part of the wholesale shake-up under Fiat, Jeep will remain an international brand because of the strong name recognition it commands, the people said. Fiat plans to develop the Jeep brand and beef up marketing for its iconic SUVs in emerging markets such as Brazil, one of the sources said. Chrysler's pickup truck line-up has been rebadged as Ram, leaving its Dodge brand as a niche offering. One of the elements of this week's product plans will be discussion of bringing an electric car to the Dodge brand, one of those with knowledge of the plans said.[10] Fiat apparently plans to use Chrysler's rear-drive platform, used on the Chrysler 300 and Dodge Charger models, to build larger, higher-priced cars, maybe Alfas, in a European plant.[3] Daimler's attempt to boost Jeep sales with the big Commander and compact Compass failed. Jeep's appeal lies in its rugged looks and capability. Its model line should grow, but any new Jeeps must be consistent with those values. It's hard to imagine any strategy that doesn't require Chrysler to close some of its remaining plants. Whether that's the end of the corporate shrinkage, or merely another slice in Chrysler's death by a thousand cuts, will depend largely on how well the automaker's new leaders conceive and execute the plan they reveal today.[35]
The centerpiece of the five-hour presentation by Fiat and Chrysler executives will focus on plans to bring new fuel-efficient models to the U.S. market using Fiat-developed engine technology, according to the sources, who asked not to be named ahead of the formal announcement. That will include plans to introduce Fiat's fuel-saving MultiAir engine technology to Chrysler vehicles, the sources said.[10] Fiat took a 20-per-cent stake in Chrysler in June. Mr. Marchionne has already expressed surprise at the lack of new vehicle development at the auto maker under its previous owners, Cerberus Capital Management LP. Cerberus picked Chrysler after the wreckage of the perennial No. 3 Detroit auto maker's first trans-Atlantic marriage, which was a 1998 merger with Daimler-Benz AG to create DaimlerChrysler AG. The revival plan is also crucial for Canada's auto sector because Chrysler manufactures about 20 per cent of its North American-made vehicles at factories in Windsor, Ont., and Brampton, Ont. That's the highest percentage of any of the Detroit Three.[20] I would look for us to head in that direction." adds Wolf. Auto industry insiders expect Marchionne to replace Chrysler's unpopular cars with new Fiat models, but they will not be ready for another two years.[25] NEW YORK -- Chrysler Group LLC said Tuesday its October auto sales fell 30 percent compared with the same period last year, as sales across nearly every model declined.[36]
As part of that effort, an attempt to build Chrysler up as a separate brand outside North America will be abandoned, the sources said. That would mark a reversal of strategy for Chrysler that began under its ownership by Daimler AG ( DAIGn.DE ). In recent years, Chrysler has drawn about 90 percent of its sales from North America, making it more vulnerable than its larger rivals to the steep, four-year decline in the U.S. car market.[10] "A number of factors were taken into account, including profitability," said Chrysler spokeswoman Kathy Graham. Taking into consideration market share and the number of dealers in a given area, Chrysler aimed to shrink itself to match a U.S. car market likely to have sales of 10 million vehicles this year, down from 17 million in the peak year of 2005, she said. "This was difficult process that affected a lot of Chrysler workers and suppliers," Graham said.[4] If you can come in with better styling and if you can meet the requirements of the consumers, you have a chance." Analysts believe a credible vehicle from Chrysler in the mid-sized car segment - where sales have totalled 1.27 million vehicles this year - is critical.[5]
The all-new midsize cars due around 2013 could be based on either a Fiat platform or the underpinnings of the new Chrysler 300/Dodge Charger that are to go on sale in about a year.[35] October sales numbers will be released Tuesday. Sergio Marchionne, the head of Fiat, said recently he was surprised at the lack of product development done by Chrysler's previous owners, Cerberus Capital Management CBS.UL and Daimler AG (DAIGn.DE: Quote, Profile, Research, Stock Buzz ), in the two years before his arrival in June.[37] Chrysler and Fiat CEO Sergio Marchionne's creation of a Ram sub-brand for Dodge trucks could capitalize on the Ram pickup's strength and add sales with Fiat-based commercial vehicles above and below the pickup.[35] You can bet when Chrysler and Fiat CEO Sergio Marchionne unveils his five year plan on Wednesday workers at the Belvidere Chrysler plant will be listening intently.[25] In September, Fiat Chief Executive Sergio Marchionne, who assumed management control of Chrysler when it emerged from bankruptcy in June, said plans to shut the plants had not changed.[30] Fiat Chief Executive Sergio Marchionne is set to brief analysts and reporters on Wednesday on plans that the Italian automaker has been developing for Chrysler after taking management control as part of a restructuring arranged and funded by the Obama administration.[10] Ken Lewenza, president of the Canadian Auto Workers, agreed. He met recently with Fiat and Chrysler Chief Executive Sergio Marchionne and said he was struck by the CEO's confidence in plans that call for the two companies to merge their strengths -- and by the underlying threat that this is the only option.[38]
About 300 people, including analysts, government and union officials, dealer representatives and media will gather in Auburn Hills for presentations by members of senior management, including Sergio Marchionne, who is chief executive of Chrysler and Fiat.[18] Bouncing from Europe to the United States to Brazil, with side trips to China or India, Marchionne must move quickly. "He looked like he just got off a 20-hour shift, and he probably had," said Ken Lewenza, the Canadian Auto Workers president who met with Marchionne and other Chrysler executives in Auburn Hills for six hours Oct. 14. This Wednesday, maestro Marchionne will lead Chrysler's first public performance -- a six-hour opus detailing a 5-year road map to survival and, with luck, an initial public stock offering and repayment of $8.2 billion in taxpayer loans. The 57-year-old Italian-born, Canadian-educated lawyer and accountant did not give an interview for this article, but Chrysler employees, dealers, union leaders and analysts have offered their assessment of him and what they expect from his plan.[32]
If the auto executives can't or won't detail a robust financial plan Wednesday to keep Chrysler in business the next few years, then the $13.8 billion in government loans, the layoffs and plant closings, the dealer cuts the past few months meaningless. "If they don't announce financial details, people assume the worst," says Brad Coulter, a turnaround specialist at consultants O'Keefe and Associates.[27]
Early reports stress any differences are being overridden by the amount of work to be done and the intensity with which Chrysler is being restructured. With Fiat, there is a better understanding of their goals than with Daimler, Lindland said. The jury's still out as to whether the melding of these two companies and cultures will yield success, said former Chrysler executive Gerald Meyers. Chrysler unveils its five-year business and product plan Wednesday. Signs of accomplishment within the next month will determine how well Chrysler employees accept the new status quo, he said. "If they don't see success, there will be a culture clash," Meyers said.[38] "The company was being structured by Daimler and the Chrysler people didn't like being put in a straitjacket." The failure to work well together under DaimlerChrysler was not just on the Daimler side, said Mike Aberlich, a 24-year veteran who rose to head of Chrysler communications until his retirement in December 2007. "People on both sides were not willing or ready to accept each other," he said. The divisiveness prevented the merged company from reaching its potential, Phillippi said. Chrysler operated as a separate entity until Daimler sold a majority stake to Cerberus Capital Investment LP in 2007 and divested the last of its shares when Chrysler declared bankruptcy. Similar fears are not arising under Fiat management. "It's a partnership of inclusion," said an employee from the product side of the business.[38] Despite Marchionne's dramatic turnaround of Fiat, Warburton is not sure the CEO can do the same for Chrysler. "While superficially there may appear to be some similarities -- a damaged brand, a product hiatus, weak quality, low employee morale -- there are also some vast differences" between the two automakers, he said. Warburton notes that even when it was sick, Fiat still had a huge share in its home market, something Chrysler lacks.[14]
New Chrysler CEO Sergio Marchionne, who also heads up Fiat in Italy, has moved fast to put together a strong team to lead Chrysler from the financial abyss. Fortunately for longtime Chrysler employees, he isn't playing favorites and assigning only hotshot Italians from Fiat to the job.[31] While Fiat officially officially remains mum on the subject, information has begun leaking out, and it appears new Chrysler chief Sergio Marchionne is betting heavily on the Fiat 500 ''' a classy subcompact that'''s been popular in Europe ''' and the Alfa Romeo MiTo, a small hatchback.[39]
The Chrysler partnership is Fiat's ticket back into the United States, from which Alfa Romeo pulled out in 1995. Though no one questions Marchionne's negotiating savvy, many wonder how he is at managing a massive and complicated enterprise. Marchionne gave a glimpse in a 2008 article he wrote for Harvard Business Review. He said one of his first objectives at Fiat was to kill what he called the "Great Man" theory of leadership, which might explain why he routinely passes on suits and sets up in an engineering conference room rather than the penthouse of Chrysler's 15-story executive tower. "My job is not to make decisions, but to set stretch objectives and help our managers work out how to reach them," he wrote.[32]
Alas, the Fiat actions so far indicate the leaders don't know much about the American market--and Chrysler executives who talked to the press appear to have been pushed out of the company. Again, Marchionne deserves great credit for the Fiat turnaround, but his latest plans for "saving" Chrysler seem questionable.[3] Among the failures York cited, was Daimler's inability to increase Chrysler's penetration in foreign markets. He said that if he was in Marchionne's shoes, he would be pushing Jeep, rather than Chrysler or Dodge, overseas. Marchionne has said Chrysler is in a "cleansing process" similar to one that he led in 2004 when he started a successful turnaround of Fiat, and Chrysler's weak September sales results do not reflect the true viability of the company.[37] ST CHARLES, Illinois (Reuters) - Nearly five months after Chrysler Group LLC emerged from bankruptcy under the leadership of Italian automaker Fiat SpA ( FIA.MI ), Rocco Massarelli faces almost certain ruin. "It's dead here," said Massarelli, owner of a Chrysler, Jeep and Dodge dealership that the U.S. automaker terminated as part of its bankruptcy process, waving a hand wearily at the empty showroom he has tried to turn into a used-car dealership and parts center.[4] Fiat and Chrysler Group are scheduled to spend an almost unblievable six hours Wednesday briefing analysts and journalists about the U.S. automaker's five-year business plan, or survival plan, if you prefer.[27] Chrysler Group LLC managed to squeeze out a break even operating performance in September and is not bleeding cash, its new chief executive insisted Wednesday in opening comments to outline the automaker'''s business plan.[33]
The Chrysler Group LLC Business Plan presentation will begin with a welcome by Chrysler Group Chairman Robert Kidder and a strategic overview by Mr. Marchionne followed by presentations from members of the management team including the brand leaders.[15]
The full details of the Italian company's five-year business plan will be revealed later tomorrow in a marathon press conference, but according to Reuters only Jeep will remain as an international brand. Chrysler is likely to remain a domestic brand and Dodge will become a niche player that could find an electric vehicle in its portfolio.[40] According to Reuters, people "with direct knowledge of the plan" have confirmed that Chrysler will withdraw all but the Jeep brand from markets outside North America. Jeep will remain an international brand because of its iconic status and global name recognition, while Chrysler, Dodge and the new Ram brand will be restricted to the North American markets, the Reuters source said.[8] MILAN/DETROIT (Reuters) - Fiat SpA's ( FIA.MI ) plans for Chrysler will scrap the U.S. automaker's long-held plans for its brands outside North America with the exception of Jeep, people with direct knowledge of the plan said.[10] AUBURN HILLS, Michigan — After a massive government bailout, a quick spin through bankruptcy and a hasty alliance with Italy's Fiat, Chrysler's latest leader will on Wednesday unveil his plan to revive the storied U.S. automaker.[23] Chrysler CEO Sergio Marchionne will brief the press today from 11AM EST - 6PM EST at the Chrysler Technology Center in Auburn Hills, MI on his 5-year business plan for the oft-embattled automaker.[41] There are more than 400 journalists, photographers, analysts, dealers, public officials and PR folks filing into Chrysler's styling dome today for CEO Sergio Marchionne's long-awaited five-year business plan.[42]
Some are making hopeful comparisons with Lee Iacocca, who turned around Chrysler in the 1980s and appeared in a series of commercials for the company's vehicles using the ad campaign "The Pride is Back." Marchionne enjoys the limelight and has some star power, recognized by Italians worldwide who have been known to stop him in the street and ask him to pose for photos. His open managerial style and deep knowledge of the industry have already affected the head of the biggest U.S. auto union, Ron Gettelfinger of the United Auto Workers. "I am convinced Sergio Marchionne is going to be very good for Chrysler," he told the Reuters Autos Summit on Tuesday. Not only does Marchionne have a "clear vision" for the company, but he is also "extremely respectful of the union. extremely open," Gettelfinger said.[21] '''Some of you have been surmising that we are losing money. and we'''re burning through the cash endowment that we received when we came out of bankruptcy,''' Sergio Marchionne said. '''This is not true.''' The maker of Ram trucks and Jeep off-road vehicles had US$5.7-billion cash at the end of September, up from its cash endowment of US$4-billion at the end of June, Mr. Marchionne said. Chrysler was positive on an EBITDA basis by roughly US$200-million in the third quarter and broke even on operating costs in September, he said.[33]
The Auburn Hills, Mich., automaker was forced into bankruptcy protection but emerged with far less debt and fewer burdensome contracts. The new Chrysler, left with an aging and unpopular model lineup, has struggled ever since the government installed Marchionne as its CEO in June.[1] The Chrysler Sebring, one of the car models that could be phased out under Chrysler's new turnaround plan. Chrysler was king of the hill with its 300 series just a few years ago.[9] Chrysler badly needs a strong entry in the family-sized segment of the American market now dominated by Camry, Accord, Malibu and Fusion. It is thought that maybe Chrysler can replace their slow selling and poorly received Sebring and Avenger sedans with brand new models using the Alfa Romeo 159 bones as the starting point. The only drawback with this plan is that it would take until 2012 or 2013 before the models would arrive and the need is now.[31] A temporary repair job for the Sebring and Avenger is in the works, with a redesign of the front and rear ends and a new interior, sources said. Fiat is expected to come up with a longer-term solution in the form of a model for Chrysler from its sporty Alfa Romeo division.[5]
There will be sketches of new larger vehicles from Chrysler's design center and of smaller vehicles based on existing Fiats or Alfa Romeos.[1]
The Chrysler 300, Dodge Charger and Dodge Challenger cars are among Chrysler's strengths. They may provide the underpinnings for luxury-sport sedans for Fiat's Alfa Romeo and Lancia brands.[35] The PT Cruiser, which recently won a stay of execution, and the Sebring are set to disappear by 2012. In their place will come Fiat product re-engineered and restyled as Chryslers, and also reintroduce the Alfa Romeo brand to America. It is already apparent the baby 500 is going to become a Chrysler in North America in 2011. It's also thought a medium-sized sedan shared between the two marques will be released in 2012.[16] York suggested that Chrysler could run out of cash before a wave of new products could turn the brand around. He also highlighted that '''Fiat does not have a great reputation''' in the U.S. and so there could be some skepticism about Chryslers based on Fiat technology.[40] Marchionne is due to announce a five-year strategic plan for the ailing No. 3 U.S. automaker, including a new product lineup next Wednesday at Chrysler's headquarters in Detroit.[30] Chrysler Group LLC is preparing to unveil a five-year plan today that is heavily dependent upon products and technology from its partner, Italian automaker Fiat.[22] Chrysler Group LLC plans to introduce three new Dodge vehicles and is considering building a midsize pickup truck as it looks to rejuvenate its product portfolio and attract customers.[43] Chrysler Group LLC and partner Fiat SpA make vehicles with little in common, which will make harmonizing product, parts purchasing and production difficult, a Deutsche Bank analysis concludes.[18] Badging intentions. Which Fiat Group vehicles will be sold in the U.S.? Will they carry their own brand names, or be marketed as Chrysler Group vehicles a midsize Fiat Group sedan replacing the Avenger, for example.[27] Since Chrysler Group LLC was formed on June 10, 2009, management has set about refocusing on the company's brands. "I'm excited to see how he's going to deal with the question of dealing with Fiat cars, and Chrysler cars, and where they're going to be manufactured, and how he's going to be able to put both companies together," CAW president Ken Lewenza said.[12] Chrysler Group was formed to emerge from Chapter 11 bankruptcy in June by assembling Chrysler's best assets and giving Italy's Fiat, a huge industrial conglomorate that includes Fiat Auto, management control and a 20% stake in the new Chrysler Group. Fiat's fuel-efficiency technology, stylish designs and worldwide distribution network are to be its contribution to Chrysler. "Fiat's clearly announced that it's not going to put any money into Chrysler. That'll have to change," to satisfy lenders, Coulter says.[27] Chrysler also planned to sell assets to the new Chrysler Group LLC. Fiat would hold a 20% stake in the new enterprise.[44]
Employees of Chrysler Group LLC could be forgiven for being wary of their new Italian bosses. Detroit's No. 3 carmaker has been under European rule before -- but the culture clash was too great, and the merger that created DaimlerChrysler AG ended badly. Workers are more encouraged about their partnership with Italy's Fiat SpA. No cash exchanged hands in the June 10 union; sharing and collaboration are the currency of this partnership.[38] With new and higher gas standards staring auto companies in the face, it is expected that Fiat will provide the Chrysler group with badly needed platforms that feature four-cylinder engines and modern architecture.[31]
Can Fiat save Chrysler? That'''s the big question for the next few years. Chrysler is scheduled to roll out its new line-up on Wednesday, and the Fiat group is expected to figure in a big way in the new program.[39]
Today's bailout is going to cost taxpayers $6.6 billion. Hopefully, Chrysler charts a new course, with strong product lines that consider both consumer tastes and energy efficiency. No car or a historic company like Chrysler should be allowed to fade away or spend its last years on the back lot.[44] On Tuesday it reported October sales up 6 percent from September and said it had cut inventory 60 percent at the end of October from a year ago. To really drive the business forward, it needs new products in its brands -- which include Dodge and Jeep -- to revive customer interest and restore confidence the company will still be there if a car needs fixing or they want to trade in.[21] Chrysler needs a compelling line of midsize cars to replace the hapless Chrysler Sebring and Dodge Avenger sedans. The facelift -- a new grille, lights, etc. -- that's reportedly in the works for those cars next year isn't the answer. Cosmetic changes may boost sales slightly, but won't make them competitive with leaders like the Chevrolet Malibu, Ford Fusion, Honda Accord and Toyota Camry.[35]
With U.S. auto sales expected to remain at historically low levels for at least another year, competition will be fierce. The Fiat-Chrysler alliance could prove to be the savior of both companies should it survive the next few years, Cole said. "Neither Chrysler or Fiat were survivable: they didn't have global presence and they didn't have global scale," Cole said. "They have to take advantage of coming together and that's going to take a while to do."[23] The Chrysler CEO unveils his five-year plan in Detroit today as he embarks on the hard task of reviving the U.S. auto maker. He's faced with dismal sales, a sinking market share and an outdated lineup.[29] Edmunds puts Chrysler share higher, at 9.1 percent, and said it takes a Chrysler dealer 124 days on average to sell a new vehicle, which is substantially more than the industry average of 87 days to make the sale.[18] All new practices must collectively reduce cost so that Chrysler, which has shrunk, can still be profitable even if it has just 8 percent share of a market in which overall sales are down.[17]
On a positive note, the geographic differences offer market potential, according to the three analysts who wrote the report. Chrysler historically has sold 90 percent of its vehicles in North America whereas Fiat is strong in Europe and has 25 percent market share in Brazil, the authors said.[18] The report cautions: "We see a risk that Chrysler's turnaround could absorb a greater share of Fiat's energies than what we currently assume. We could review the ratings if management is distracted by this new challenge or if the integration appears to us to be disadvantageous for Fiat."[27]
Word already has spread about a number of Chrysler, Dodge and Jeep models that are supposed to be discontinued by 2012. Less has been said about what Fiat Group models might replace them. The accuracy of those reports, which have kept Chrysler scurrying to stamp out rumors without giving away too much in advance, will be verified or refuted today.[27] Reports that Fiat models will simply be rebadged as Chrysler, Dodge or Jeep vehicles are inaccurate.[35]
U.S. media reports say the challenge was to keep Chrysler afloat until 2012, when the bulk of the new offerings will arrive. Until then, it will rely on current models and minor upgrades, such as a face-lifted Jeep Grand Cherokee and Chrysler 300C sedan. What this means to you: Head office decisions will surely hardly help lift brands' already battered image here.[16] In a strange twist that could only befall a U.S. brand, the car that has just been given a new lease of life here might be just a day from being sentenced to death row. As part of its recovery from bankruptcy, Chrysler-Jeep seems set to drop some of its own models in favour of vehicles from Italy's Fiat, its strategic partner.[16]
The current image is that Chrysler is a producer of gas-guzzling sport utility vehicles and pickup trucks. It's suffering from that image in a market that has turned away from such vehicles to crossover utility vehicles and passenger cars. The 500, which helped Fiat recover from a crisis of its own earlier this decade, is actually a subcompact that will give Chrysler a presence in a segment where it has no car. It will help Chrysler meet U.S. corporate average fuel economy requirements and give the company a car that's easy on gas as fuel prices rise.[5]
There has been trans-Atlantic travel as Chrysler and Fiat engineers and designers develop products together, but it is limited under strict travel restrictions to keep cost down, Ranieri said. It is a far cry from the DaimlerChrysler days when the company jet shuttled employees round trip between Pontiac and Stuttgart three times a week -- five return trips in busy times, said former Chrysler communications chief Mike Aberlich. He remembers hundreds of Daimler counterparts in Auburn Hills at any given time. Americans took German lessons while constantly looking over their shoulder. "People feared they would be out of a job to their German counterpart and best practice meant their practice," said an employee.[38] Washington gave Chrysler $12.5-billion (U.S.) in loans, while Ottawa and Ontario kicked in $3.8-billion (Canadian). A report by the U.S. government's Government Accountability Office issued earlier this week said Washington is unlikely to recover its investment in either Chrysler or GM. As the Fiat and Chrysler executives made their presentation, a small plane circled the Chrysler campus in Auburn Hill, Mich., towing a banner reading "Fiat/Chrysler bailout bandit."[20] Ottawa and Queen'''s Park provided a $3.775-billion loan and took a 2% stake in the automaker. Chrysler needs to have a market capitalization of US$54.8-billion for the U.S. government to earn enough on the sale of its equity to break even, the U.S. Government Accountability Office said in a report released this week. The automaker has never in its history been that valuable. In 1997, the last year it trade publicly, its market capitalization ranged between US$23.1-billion and US$31.7-billion, the congressional audit agency said.[33] The American public has a stake in the outcome, as $12 billion in taxpayer money was used to help bail out the struggling automaker, which has just a 9 percent share of the U.S. vehicle sales market. The insiders say Mr. Marchionne will reveal a number of technological advancements, including the introduction of eight-speed transmissions with twin alternators across most of the vehicles in its lineup, and introduction of Fiat-based diesel engines in vehicles other than trucks.[11]
DETROIT (Reuters) - A former top executive at Chrysler said on Monday that the No. 3 U.S. automaker, which emerged from bankruptcy in June by selling most of its assets to Italy's Fiat SpA (FIA.MI: Quote, Profile, Research, Stock Buzz ), had less than a 50 percent chance of long-term survival.[37] Chrysler has taken $12 billion to date, according to Steven Rattner, who had led the government auto bailout team, a nifty sum but much less than the $50 billion General Motors was granted. If this doesn't save Chrysler, Fiat still will have established a production base in the U.S. at little cost, and it probably would keep Jeep, which still is a well-known global brand.[3] Debt had climbed to 8.1 billion euro ($11.9 billion) at the end of September, from 3.7 billion euro at the end of 2008, Fiat reported. Despite the intense interest in how Chrysler will pay its way the next several years, Fiat executives "don't get it about transparency. They'll disclose as little financial information as possible," predicts Rebecca Lindland, director of auto reseach for the Americas at consutlants IHS Global Insight.[27]
The 57-year-old lawyer and accountant has a record of success after walking into Fiat in 2004 with no previous auto industry experience and driving the storied Italian carmaker into profitability. The Detroit Free Press has called him a "man with a plan" and a "skilled survivor" who is "conducting a global industrial orchestra on adrenaline, four hours of sleep a night and only God knows how many cigarettes." "After all, this is the guy who, in less than a month, convinced President Barack Obama and his automotive task force to reconsider pulling the plug on Chrysler," the paper wrote in a front page story Monday. "The chances were pretty slim -- and the odds still aren't great -- (that Chrysler will survive) but without him and his management style there wouldn't be a chance," Anwyl said in a telephone interview. "They need to make a leap forward and you're only going to do that by getting people to perform way above levels they thought they could perform at. He does that."[23] Fiat is not expected to announce plans to spare Chrysler plants already scheduled to close, the sources said. That would represent a setback for the United Auto Workers union, which owns 55 percent of Chrysler through its health- care trust fund.[10]
Don't be mesmerized by the array of new compact and smaller cars Chrysler and Fiat will reveal in their 5-year plan today.[35] The Chrysler brand could disappear from Europe under Fiat'''s plans for the American car maker.[40] Addressing Chrysler's shortcoming in compact cars is one of the key issues the restructuring will address, with confirmation that the Fiat 500 will be assembled in Mexico beginning next year for the North American market.[5]
Ed W. Report This is not Europe. If they are pinning Chrysler's recovery on these two models, then Fiat doesn't stand a chance in the North American market.[39] Since exiting bankruptcy protection and merging with Fiat in June, Chrysler has shed vehicle models.[29]
Fiat, after Chrysler filed bankruptcy last spring, agreed to take over the Detroit-area company and inject new management, new technology, and new life, while spending few euros.[11] There are far fewer Fiat executives in Auburn Hills than the number of Daimler colleagues here in 1998; the new Italian managers show a greater willingness to work together and Chrysler's situation is more dire today.[38] Fiat's proposals for Chrysler appear more to be aimed at helping Fiat rather than at saving Chrysler. That, at least, is the impression from looking at the information that has leaked out before the Italian company's formal announcement of its plans on Wednesday.[3] Experts question whether Fiat's rescue plan for Chrysler will provide needed help quickly enough to save the company.[9]
The rebirth of Chrysler will need to be combined with a marketing campaign to restore some lustre to the company's brands and convince drivers that "the Fiat stuff is better" than what Chrysler offered before, says Leonard Lodish, a professor of marketing at the University of Pennsylvania's Wharton School of Business. "I think they might have to put a longer warranty on at least the Chrysler and maybe the Fiat ones," Prof. Lodish says. "That would be a way of telling the public 'you know what? We're going to back you and we'll stand behind our cars.'"[5] "The real issue from here, is whether Fiat has the ability to take a company like Chrysler, which is an absolute millstone, and turn it around." AP Business Writer Colleen Barry in Milan, Italy, contributed to this report.[1]
Says Warburton, Marchionne's reign at Fiat has coincided with a massive increase in the company's business in Brazil. The automaker spent years investing in the country and now is benefiting from its booming economy and its strong demand for new vehicles.[14] The presentation is expected to last at least six hours, and watchers will closely parse the presentation for indications of the company's direction. The automaker has given few indications of its plan since emerging from bankruptcy in June and joining forces with Italian carmaker Fiat, also led by Marchionne.[12]
"There is no business as usual at Chrysler," the auto maker's chairman Robert Kidder said Wednesday. Mr. Marchionne plans to make Chrysler a public company again, Mr. Kidder said, although he did not say when an initial public offering would be made.[20] Chrysler is unveiling a five-year business plan on Wednesday for turning itself around. Many analysts say Chrysler desperately needs new vehicles to steer its faltering operations toward recovery.[37] Auburn Hills -- Chrysler Group LLC is presenting its long-awaited five-year business plan today, outlining its vision on how it will address shortcomings and return to profitability.[17] A day-long media presentation will begin later today (4 November 2009) by Chrysler Group LLC CEO Sergio Marchionne and his senior management team in Auburn Hills, Michigan.[45] Chrysler CEO Sergio Marchionne attends a press conference at Chrysler headquarters October 1, 2009 in Auburn Hills, Michigan.[20]
From the dark rumpled sweaters he wears most days to his modest, fourth-floor command post at the Chrysler Tech Center in Auburn Hills, Sergio Marchionne has said that he is intent on debunking the "Great Man" theory of leadership.[32]
A big chunk of Toledo's economic future lies in a computer in Auburn Hills, Mich. - waiting for Wednesday when Chrysler Group LLC will announce what local workers will build for the 110-year-old automaker.[11] The other decent Chrysler is the Grand Voyager which is a genuinely good people mover. That said it's Jeep that makes up the bulk of Chrysler Group sales in Oz, so from a purely business view it makes sense, for the Chrysler Dodge afficianado's (which there are many it will be a big loss).[8] The maker of the Chrysler, Dodge, Jeep and Ram truck brands said it sold 65,803 vehicles last month, up 6 percent from September. Chrysler is aiming to show steady improvement from month to month as the U.S. economy starts to emerge from its yearlong slump.[22] Eating into the profits is a 21.7 percent average discount on a Chrysler, Dodge or Jeep vehicle, or $4,584 per vehicle.[18]
The plan is expected to include financial and strategic goals, future product plans and the positioning of the Chrysler, Dodge, Jeep and Ram brands.[15] Some things associated with Chrysler's Toledo operations won't change in design - specifically, the Jeep Wrangler - but are likely to change in terms of worldwide distribution, analysts say. "The Wrangler is the ultimate icon of the Jeep brand, so clearly the Wrangler stays in the Jeep plan," said Joseph Phillippi, a longtime industry analyst with AutoTrends Consulting in Short Hills, N.J. "That aspect of the Toledo complex should be in good shape.[11] Daimler was "deathly afraid of diluting the Mercedes brand," said Joe Phillippi, analyst with AutoTends Consulting Inc. in Short Hills, N.J. "Brand bibles" were established with rules to preserve Mercedes' sanctity, and Daimler never recognized that Chrysler had anything world class worth adopting. Even seemingly twin vehicles such as the Chrysler Pacifica and Mercedes R-Class did not share components, and Mercedes tried to play down elements of the Mercedes SLK in the Chrysler Crossfire.[38]
Under the product plans, Chrysler and Lancia will also share the same basic vehicles, albeit sold on opposite sides of the Atlantic.[40] Toledo is one of the largest metro areas in the country where Chrysler-built vehicles maintain a leading market share, but a lack of technological investment by Chrysler's two previous owners, German-based Daimler AG and private-equity firm Cerberus Capital Management Inc., has exacted a toll on Chrysler's product lineup, Mr. Yark said.[11]
The company'''s market share is falling. It has little international presence. Many of its vehicles, notably Chrysler cars, are simply not on buyer'''s shopping lists.[33]
Cerberus Capital Management LLC is generally blamed for the dearth of new vehicles because it slashed the company's product development budget in a failed effort to make the company profitable. "Chrysler continues to struggle," Consumer Reports said earlier this month.[7] Just 21,713 Wranglers were sold outside North America last year. Few people know exactly what the new Chrysler chairman will say or whether he will discuss locations where potential products will be produced.[11] Beyond the product woes, Chrysler still has severe long-term financial headaches to deal with as well, said Jeffrey Manning, managing director at Trenwith Securities LLP, who specializes in bankruptcy and restructuring. He said that the government put too much emphasis on moving Chrysler quickly through bankruptcy earlier this year in order to not risk a confrontation with the United Auto Workers union over pensions or other legacy costs.[9] Stories about the financial difficulties griping the Detroit Three automakers have dominated the front page of the AN for a long time. For sure, the manure hit the fan this year when the collapsing economy sent both GM (just as celebrating its 100th anniversary) and Chrysler into a fatal tailspin that pushed both into bankruptcy court.[31]
C hrysler Group LLC will introduce a new mid-size car, a subcompact hatchback and a full-sized sedan for its Dodge brand in the 2012-2013 time frame, according to a company presentation made Wednesday in Detroit. It will also upgrade its Dodge Caravan minivan with a new engine and suspension, new interior in the fourth quarter of 2010 and introduce new, fuel efficient engines starting next year.[20] The idea of killing the Dodge minivan is that buyers would take a Chrysler brand minivan instead. It's more likely that half of them would take a Honda ( HMC - news - people ) Odyssey or Toyota ( TM - news - people ) Sienna and the Detroit company would fade from the minivan market it created. This wouldn't be a new experience for Chrysler. It's been "saved" before by companies more interested in their own agendas.[3]
"We're losing money here every month." Founded by his father three decades ago, Massarelli's dealership franchise in this Chicago suburb of around 40,000 was one of 789 -- out of a total of 3,181 -- that Chrysler terminated in June with just a few weeks notice. Bitter does even begin to describe Massarelli's feelings toward the company he said was once virtually a member of the family. Massarelli said he bought the local Dodge franchise for $1.7 million at Chrysler's request just three years ago and made improvements to the dealership that have left him with a $4 million mortgage on his dealership for which he used his home as collateral. "The way that Chrysler has treated us is inhumane," he added. "I've put my entire life into this business and the way this going I am going walk away with nothing."[4]
Many here are hoping that Marchionne -- Chrysler's fourth chief executive officer in less than three years -- will be the one to finally transform the third largest U.S. carmaker into a truly viable company.[23] Marchionne believes the U.S. market could climb as high as 11 million units next year, and if Chrysler does well, it could sell stock in an initial public offering.[6]
Chrysler said yesterday that October sales fell 30 percent below the same month last year. They improved from September when the U.S. auto industry had a hangover from the government's summertime Cash for Clunkers program.[22] On an overall level, focusing on North America would seem a logical move: in recent years the North American market has has accounted for around 90 percent of Chrysler's sales.[8]
GM is still struggling. Like Chrysler, its sales still lag in double digits, some times as high as 40 percent lower than in 2008. It doesn't help GM that four of its brands are no longer in the family.[31]
Chrysler underwent a painful divorce from Daimler in 2007 and its new owners -- private equity group Cerberus -- took the helm as auto sales were beginning to tumble.[23] We all watched Chrysler sink after that. Then came Cerberus, the private equity boys who said they wanted to rebuild Chrysler but went about it by putting in one of their team--who knew nothing about the auto business--and killing new models and old models, and stripping the company of talent.[3] Chrysler's greatest challenge and brightest hope lie elsewhere: midsize cars, the new Ram truck sub-brand, and company icons like Jeep and the 300C and Charger sedans.[35] Newton described Fiat running Chrysler as an average car company taking over a worse one and trying to fix it.[1] The Fiat 500 is "absolutely vital" for a company comeback, says David Kelleher, who owns two Chrysler dealerships in the Philadelphia area. "It's absolutely vital because we need to have an image that we have versatility in our lineup."[5]
"Chrysler needs technology, and at the end of the day, Chrysler needs product," Mr. Yark said. He is encouraged about the rumored advances expected to be announced by Mr. Marchionne. "Frankly, it's kind of exciting that they're going to get this infusion of Fiat technology, especially in the small cars."[11] Chrysler's biggest challenge will be surviving the next two to three years until the Fiat products arrive, said David Cole, chairman of the Center for Automotive Research.[23]
What the November vision plan will contain is open to conjecture, but it is known that the product assets of Fiat and Alfa Romeo will be part of the grand scheme. What we know for sure is that Chrysler/Dodge/Jeep dealers will be selling both Fiat and Alfa Romeo models by 2011 or 2012.[31] Reuter'''s sources are also claiming that Alfa Romeo will get an SUV based on a Chrysler platform, a vehicle that will probably be built in the U.S. as part of the attempt to re-launch Alfa in North America. Jerry York, once Chief Financial Officer at Chrysler, said today that he rated Chrysler'''s chance of long-term survival as '''less than 50 per cent'''.[40]
Chrysler has $5.7-billion (U.S.) in cash, up from $4-billion in June, and eked out positive earnings before interest depreciation and amortization of $200-million in the third quarter, Mr. Marchionne said. "The new Chrysler is being incredibly parsimonious," he said.[20] To the extent the poll is non-scientific and the sample size is very small the results are most likely not reflective of the attitude of most Chrysler dealers. That said, the skepticism expressed by some DealershipForum members illustrates the damage that was done to factory/dealer relations as a result of the 789 dealer terminations. DealershipForum will be closely following Mr. Marchionne's presentation and Chrysler dealers and their employees are invited to join the forum and share their assessment of Chrysler's Five-Year plan. DealershipForum was developed for Dealer Principals and their employees to share thoughts and ideas with others throughout the country.[28] Wednesday, Marchionne will be in the spotlight for six hours, presenting Chrysler's long-awaited 5-year plan to several hundred journalists, analysts and dealers.[32]
According to Chrysler insiders, the theme of Mr. Marchionne's speech outlining Chrysler's plan for the next several years is "expect the expected, and especially expect the unexpected."[11] WWJ AutoBeat reporter Jeff Gilbert will be covering the announcement. Chrysler has kept mum about its plans since it emerged from Chapter 11 on June 10, and Marchionne has avoided the limelight.[15]
In proceedings during Chrysler's rapid trip through bankruptcy, executives said their manufacturing plan called for more fully utilizing fewer plants.[11] What does that mean for area plants that build or make parts for Jeep, Dodge, and Chrysler vehicles? Lots and lots of change, if previous court filings, executive statements, and insider leaks are accurate.[11]
The UAW has been lobbying Fiat to keep a Chrysler assembly plant near Detroit and an engine plant in Wisconsin running.[10] Because if you believe some of the media reports the Belvidere Chrysler plant may turn into a Belvidere Fiat plant.[25]
Mrs. Handler said that while the Wrangler facility's future is solid, the Liberty and Nitro factory's future is less certain. "Even if you add some Alfa-Romeo and other Chrysler-based product, if you only have the Liberty built at that plant, that's probably not enough," she said. She said it "is a good sign" that Toledo Mayor Carty Finkbeiner was invited to attend Chrysler's announcement this week. Public officials from other towns also were invited, but Mrs. Handler implied such invitations likely were offered to those whose cities would hear good news.[11] New products that would require additional shifts of workers would mean the callback of all remaining laid-off employees and the addition of hundreds of new jobs. Executives also indicated that they planned to utilize the award-winning engine plant in Dundee to manufacture engines for its entire lineup of small cars.[11]
DETROIT (Dow Jones)--Chrysler Group LLC plans to introduce three new Dodge vehicles and is considering building a midsized pickup truck as it looks to rejuvenate its product portfolio and attract customers.[46] The new plans will focus on the product slate but it will be Marchionne under the spotlight for workers in battered Detroit, which has fallen from the global Motor City to a landscape of skeletal skyscrapers and foreclosed homes.[21]
NEW YORK (Fortune) -- On Wednesday, Fiat-Chrysler CEO Sergio Marchionne will go before the media to reveal his plans for America's number-three automaker.[6] The CEO of Fiat-Chrysler, Sergio Marchionne, is scheduled to make a major announcement today charting his five-year plan for the struggling car maker.[47]
La Repubblica daily says Chief Executive Sergio Marchionne still wants to list Fiat Auto.[34] In November 2006, Marchionne gathered 250 financial analysts and investors in Turin to present a five-year plan for Fiat's then-ailing auto division. Marchionne promised Fiat would start producing a net profit of $15 million a day by 2010, up from the $6.5 million it was losing daily when he took over in June 2004.[14] Since 1925, Chrysler has sold the American Dream to the car-buying public. In 2007, Daimler sold 80% of its stake in Chrysler to a private equity firm. Later, Daimler agreed to sell its remaining stake and deposit $600 million into Chrysler's pension fund. At least that was the plan.[44] With some forecasts as high as 12.9 million next year and 14.5 million in 2011, Jonas expects Chrysler to report a $841 million operating profit in 2010 and a $952 million net profit a year later.[14] Chrysler lost upward of $8 billion last year and would have run out of cash had the U.S. government not stepped in with $15.5 billion in aid.[1]
Analysts say Chrysler is taking a tremendous risk with the move because as the years have gone by, Dodge has built a reputation as a blue-collar oriented brand.[22] Unclear is what will happen to Dodge's high-performance Viper coupe and roadster. Another open question is whether the American buying public will accept Fiat, a brand that had a reputation for poor quality years ago.[22]
The replacement for Chrysler's poor-selling Sebring and its Dodge twin, the Avenger, will be based on Fiat's new compact C-EVO frame and suspension.[1] I'll never forget the day Dad brought home the biggest car we had ever seen. We're not sure why he bought it. Maybe Mom had tired of the old Dodge Coronet, one of several purchased from a family-owned dealership in Lansdale, Pennsylvania? Maybe Mom was due for new car? Who knows? But, there it was in our driveway: this great, big 1972 Chrysler Imperial. From 1969 to 1973, Chrysler built 77,980 of these monsters.[44] The Dodge Caliber was 13th in sales out of 20 in the compact conventional market and The Dodge Avenger and Chrysler Sebring stood 10th and 13th out of 17 in mid-sized cars as of September.[5] Chrysler emphasizes that it won't abandon the compact and midsize car market that makes up roughly half of U.S. car sales.[27] Buick's all-new LaCrosse is drawing praise, and more new models are on the way, many smaller in size but premium in content to more effectively compete with Lexus and the Mercedes/BMW twins. I feel good about GM. The two big things that could trip up this former giant automaker is reluctant buyers with doubts about GM's future and a long drawn-out economic recovery where car sales stay in the dumps. The next 12 months will reveal just how successful the Detroit Three are in convincing U.S. car buyers that they are back in the saddle.[31] The goal is to lift sales, generate cash and keep the automaker going. That will give Marchionne, who is working 20-hour days, enough time to try to revamp the automaker's struggling model lineup, according to a person briefed on the plan.[1]
In recent weeks, the Toledo Jeep factory, which makes the Wrangler and Wrangler Unlimited, has produced an unusually large number of right-hand-drive Wranglers for export. Steven Landry, the company's now-former head of sales and marketing, revealed this year that the slow-selling Dodge Nitro, which shares the Toledo Jeep assembly line with the Jeep Liberty, would be phased out by 2012, the same time the Liberty would be due for a redesign.[11] Before it merged into Daimler of Germany 11 years ago, Chrysler was perhaps the most successful carmaker in the world. Its market share was growing and its profits were large. It was "global," so it went into a "merger of equals" with Daimler.[3] With Chrysler's nationwide market share below 10%, it could be a long wait for Belvidere. Wolf says his business has been doing fine ever since Chrysler emerged from bankruptcy.[25]
Edmunds.com on Monday released figures that offer further insight into the difficulties Chrysler is having selling vehicles and retaining share.[18]
The Chrysler brand will be integrated into Fiat's own Lancia brand with shared vehicle platforms.[10] The move to divide passenger vehicles from those with potential commercial applications mirrors a strategy adopted by Fiat, which has a 20% stake in Chrysler.[48] By 2014, a combination of Fiat and Chrysler technology will increase the use of four -cylinder engines in Chrysler vehicles to 38 per cent, compared with just 19 per cent in 2010.[20]
Each is designated for a key group in the Fiat empire: Fiat Group Automobiles, Chrysler Group LLC, Iveco commercial trucks and CNH agricultural and construction equipment, and the division overseeing Fiat's parts and tooling subsidiaries.[32] After the completion of the formal event, Chrysler Group executives will join journalists for a media question and answer period.[15]
Jack Wolf has been selling cars in Belvidere for a long time. Chrysler may be going through some rough times, but Wolf says his auto group is doing fine because Stateline consumers can find what they want from him. "We have sold an awful lot of the Calibers and they are more interested today in vans and more economical cars. They have been very popular here." says Wolf.[25] A 300-based midsize concept car called the Chrysler 200C drew raves at the North American International Auto Show in Detroit last January.[35]
Canadian Auto Workers president Ken Lewenza is also sitting in on the presentation. Chrysler chairman Robert Kidder said that "Chrysler plans financial performance that allows the company to recapitalize and the current shareholders to realize a return on the investment they have made."[20] Granted, some or most of the production increase is to replace models that sold quickly during the successful Cash for Clunkers program initiated last summer by the federal government. In recent articles that I've read in AN, several makers, especially luxury makers, are doing better and they were not impacted by the Cash for Clunkers at all. Those of us who follow the auto industry are waiting with baited breath for Chrysler to announce its future plans sometime in November.[31] "You're hoping that you are able to maybe at best stabilize things, at worst mitigate some of the decline by using pricing as a weapon," said Erich Merkle, president of the industry consulting firm autoconomy.com in Grand Rapids, Mich. It doesn't help that Consumer Reports recently panned most Chrysler products. Chrysler had only one model, the Ram pickup, that the magazine recommended based on reliability and tests by its staff.[1]
A Chrysler spokeswoman declined to comment on the pending product announcements. "It will be comprehensive," the Chrysler spokeswoman said of the briefing scheduled to include Marchionne and Chrysler Chairman Bob Kidder.[10] Chrysler's problem was not a lack of good products. Their styling and design have been the best of the Domestic 3 by a wide margin for at least a decade-and-a-half. If Chrysler had not been financially raped by Daimler, and then again by Cerberus, the former siphoning out billions in ca$h that Chrysler's execs were apparently too ignorant to be able to quantify beforehand, and the latter taking what was left of the company from Daimler's hands via a megabuck loan that effectively put an otherwise-profitable company hopelessly underwater at the onset of ownership, then they would still have been a heavyweight contender today.[39] Chrysler's current product offerings are weak and there isn't much in the pipeline after the internal and external turbulence of recent years.[23] What product would Chrysler then have to reach that large part of the market driving Hondas and Toyotas? That's walking away from a big market."[22]
"Our guys have done a fantastic job over there," said Local 12 President Bruce Baumhower. "They've been called the most productive plant in North America, combined with the fact that we've got Chrysler's most modern facilities in North America, and we know we're going to be a big part of Chrysler's future going forward."[11] Holiefield said politicians and union officials were having talks with Chrysler executives about saving the plants.[30]
'''I believe that most of you underestimated the substantial reduction in fixed costs that was carried out by the old Chrysler during the bankruptcy,''' the executive said. '''The new Chrysler is being incredibly parsimonius, ie cheap, in its spending these days.'''[33] Government bailouts saved Chrysler, allowing it to emerge from bankruptcy, but the aid ends there. Now it is counting on its partnership with Fiat to become profitable again. In these early days, cultural differences are not emerging as a divisive issue, say many employees, who spoke on condition of anonymity. "There was a lot of fear and loathing under DaimlerChrysler, but this feels like a good partnership," said one employee. "We're feeling more optimistic, like we're all in this together," said another. "Things are moving fast and it's contagious."[38] In April 2009, Chrysler filed for bankruptcy and announced partnership with Fiat.[44]
Fiat owns 20% of Chrysler. It is contributing engineering and technology in exchange for control of the automaker.[35] On the surface, Marchionne's global vision for Fiat-Chrysler is pretty simple: No automaker can survive unless it builds and sells at least 6 million vehicles annually. Fiat is holding its own in Europe, is Brazil's largest automaker and has partnerships in India and China.[32] Fiat's Sergio Marchionne may have to blow up the automaker in order to save it.[6]
With numerous Dodge and Jeep models potentially on Fiat's chopping block what will replace them? 23 News reporter Adam Behrman spoke with local dealer Jack Wolf to learn what consumers want. [25] According to the leak, so too are the biggest Jeep of all, the cumbersome Commander, as well as Jeep's other lite-roader, the Compass, two models that failed to drum up much Kiwi custom. Goners from the Dodge lineup include the Caliber, the Nitro, the Avenger sedan - another brief holder of NZ residency (along with its more-glammed Chrysler equivalent, the Sebring) - and their version of the super-sized Voyager MPV.[16]
We'll get the rest of the details on what's in store for Chrysler, Dodge and Jeep when the full plan is revealed on Wednesday.[19]
Workaholic Marchionne is making it clear that you better work hard and get the job done. Last month he relieved the two top team members at Chrysler and Dodge division after they were on the job for only four months.[31] While many dealers are optimistic about Chrysler's future, a current poll suggests that Mr. Marchionne will need a convincing presentation to overcome some of his critics.[28] The Teamsters, who are fighting Chrysler's attempt to use non-union car-haulers, have hired a banner plane flying loops above the Chrysler campus. Chrysler contends by using more trucking companies it can reduce the cost of delivering vehicles to dealers and manage their inventories better.[42] In four of the five largest segments in the U.S. market, Chrysler vehicles are also-rans, most notably in the two largest segments - compact and mid-sized cars.[5] Chrysler hopes the car will make it more competitive in midsize sedans, the largest segment of the U.S. car market.[13]
Adam Jonas of Morgan Stanley sees the restructured Chrysler breaking even once the U.S. market tops 11 million annual sales.[14] Ford seems poised for great things. The stigma of not being a recipient of a federal government bailout seems to have benefited the Dearborn-based company, as its sales are down but not as nearly as badly as GM's and Chrysler's.[31]
Marchione says Chrysler had $5.7 billion in cash at the end of September, up more than a billion dollars since the company emerged from bankruptcy protection in June. He also says Chrysler was breaking even for the month of September.[13] The company's fourth chief executive officer in fewer than three years, Marchionne seeks to convert about $10 billion in taxpayer money into popular, fuel-efficient vehicles and create a globally competitive Fiat-Chrysler. If he succeeds, Marchionne, 57, could be hailed as the 21st-Century Lee Iacocca.[32] Bill Diehl, chief executive of advisory firm BBK, said Marchionne "has a reputation for getting things done." The challenge, he added, "is to demonstrate to consumers his plan is viable." Marchionne, who favors baggy trousers and a sweater over suits, is known for his confidence in answering journalists' questions and his habit of holding impromptu press briefings. Gettelfinger, in suit and tie like most of the summit's guests, was impressed by Marchionne's focus on people. "I know he went out to the facilities and one of the things that he did was walk into the rest room to inspect it. Now you don't normally see that happen," he said.[21]
The rollout of Chrysler's 2010-2014 business plan also will be available through a live audio webcast from 11 a.m. to 6 p.m. at chryslergroupllc.com. [24] Chrysler cannot succeed without a good small-car lineup, but that's just the start of what today's plan must produce if the automaker hopes to flourish.[35] The restructuring plan is also expected to address Chrysler's manufacturing capacity in North America.[5] Chrysler does not have a stronghold in a developing market that is on the verge of a massive boom. It sells about 90 percent of its cars in North America.[14] Chrysler ads boasted, "Coming through with the kind of car America wants." And, it's true: America desired cars just like the Chrysler Imperial.[44]
Compact trucks like the Fiat Scudo and Fiorino vans can be inexpensive and fuel-efficient delivery vehicles. Commercial vehicles lack the sex appeal of the sporty little Alfa Romeo MiTo or the funky Fiat 500 city car, but they can be serious moneymakers.[35] "Look at the Dodge Journey," a crossover SUV, says Lindland. "It's just the type of vehicle people are looking for, a great product that nobody knows about. There's been such a painfully small amount of marketing money dedicated to it." Think of those buyers as "sitting down with an American cheeseburger and fries," Lindland says, "and thinking, 'beer.' Fiat's red wine."[27] I'm ready and eager to buy a Fiat 500! Sporty and fun. I've driven them in Europe and even one here in the U.S. Fiat has many things to offer to the U.S. Americans aren't familiar with the product that Fiat has been putting out in Europe. It is top notch.[39]
Leading forecasters agree that Americans will buy more small cars in the future, but nobody expects little vehicles to become the core of a U.S. automaker's business.[35] Chrysler is currently selling vehicles at an annual rate of about 790,000 units in the United States. It holds roughly 9.2% of the U.S. market.[33] Fortunately, minivans and trucks have been Chrysler's most successful and profitable vehicles for several years.[7] Within two years the Chrysler executive team that had been so successful was gone, replaced by second raters and Germans.[3] Chrysler sold 31 percent fewer trucks, or 48,247 versus 69,516 a year earlier.[36]
The next speaker is Scott Kunselman, head of engineering. He said Chrysler will introduce 21 new models, and some of those will cover two small-car segments Chrysler doesn't compete in today, but with four fewer platforms, or engineering foundations, than it has now.[42] Coming in the next year will be several brand new entries including the tiny Fiesta and an all-new Focus. Several spin-off models, based on both cars, are also in the works. Importantly, the two new small cars will be pretty much based on the architecture of their European twins.[31] Fiat will help in building two smaller car models, but that could take two years or more to accomplish.[3] The first model to arrive will be the popular Fiat Cinquecento (500) city car including the sporty Abarth model.[31]
Autoblog goes on to say that new models will be brought in from Fiat to replace the outgoing cars." the Wall Street Journal and Autoguide dot com have made similar predictions regarding the demise of the Caliber Compass and Patriot.[25] Where the money will come from for those new models is the question. From Fiat? That seems unlikely.[3]
Jeep could benefit by sharing parts with Fiat's five-door hatch Panda Cross. Jeep could put a new skin on the little SUV and offer it in both front drive and four-wheel drive, much like the current Patriot.[31] "Fiat needs to export Jeeps, and that means there could be more business faster than anywhere else in the corporation," said longtime auto analyst Jim Hall of 2953 Analytics in subur-ban Detroit.[11] Tracy Handler, who studies Chrysler for IHS Global Insight in suburban Detroit, said Toledo Jeep's Liberty and Nitro factory "is directly competing" with Chrysler's small-vehicle factory in Belvidere, Ill., for future work.[11]
Chrysler will meld Fiat-engineered platforms with new bodies and interiors tailored to American tastes.[35] "The Daimler people felt superior and that came through at decision-making time," said Gerald Meyers, a University of Michigan professor, former chairman of American Motors Corp. and retired Chrysler executive.[38] Presentations from about 15 Chrysler executives in Auburn Hills, Mich., are scheduled to start at 11 a.m. ET and end about 6 p.m.[26] More than 300 people are scheduled to gather at the company's Auburn Hills headquarters, where the design dome in the Chrysler Technology Center has been transformed to host a giant press conference that will last eight hours -- with a short break for lunch.[17] "Culturally, you're still looking at an American company entrenched in North America and an Italian company entrenched in Italy," said Rebecca Lindland, director of automotive industry research for IHS Global Insight in Lexington, Mass. Each has its quirks. One employee told of Americans visiting Italy, ready for meetings at 7 a.m. while their Italian counterparts tended to start later and expected to continue through 10 p.m. dinners -- bedtime to Auburn Hills colleagues.[38]
With so few Fiat executives in Auburn Hills, a culture clash is almost a nonissue, Ranieri said.[38] There is also the challenge of working to put small cars into dealerships that celebrate the Hemi V-8 and helping Fiat executives understand the importance and popularity of pickups and minivans the size of a small Italian apartment, Lindland said.[38] Fiat had just launched the Panda minicar, which would win the 2004 European Car of the Year, and was about the debut the Punto subcompact, which quickly became one of the top-selling cars in Europe.[14] Fiats have scored at or near the bottom in the most recent J.D. Power and Associates satisfaction surveys of owners of two-year old cars in the U.K., France and Germany. Fiat insists those rankings don't account for improvemenst made the past two years.[27]
Castellano points out that "Marchionne has been a crucial part of the Fiat turnaround" from near-bankrupcty in 2004 to profits within a few years.[27] S&P's Sept. 25 report on Fiat, the most recent, noted that Marchionne, for 2009, "has targeted a ?1 billion reduction in (Fiat's) industrial debt. This seems challenging in our opinion."[27]
"We doubt Chrysler/Fiat can be much quicker." The report comes out as Chrysler prepares to host a six-hour briefing Wednesday on its five-year plan. [18] "Cutting our dealer network was a sad but necessary part of that process." Dealers who lost their franchises argue state franchise laws should have protected their businesses. "Those laws were in place to protect us," said Alan Spitzer, who lost seven of his eight Chrysler dealerships in Ohio and is a member of the Committee to Restore Dealer Rights, which is representing disenfranchised dealers. "There is no way dealers would spend millions of dollars on their businesses if there weren't laws to safeguard those investments."[4] "Chrysler dealers are going to have to rely pretty heavily on selling minivans and trucks," said Brad Coulter, a consultant with O'Keefe & Associates in Bloomfield Hills.[7]
For the sake of Fiat, as well as the union trust funds and U.S. taxpayers who own most of the rest of the company, the plan had better work. [9] "To be a full-fledged car company in the U.S., you have to compete in that segment," Prof. Belzowski says. "When people walk into your dealership, they have to be able to see vehicles that are going to be competitive with the rest of the fleets that are out there."[5] Recent Court action allows the sale to proceed, and U.S. Bankruptcy Court lets the company shed 750+ dealerships.[44] Saab has been sold, as has the Hummer brand. While the four dropped brands represented only a small portion of U.S. total auto sales, their rapidly diminishing sales numbers help contribute to GM's poor showing.[31] While Jeep is thought to be one of the most recognized automotive brand names on the planet, sales of Jeep vehicles have been largely confined to North America, leaving untapped potential markets elsewhere.[11] The Jeep brand has the strongest, most iconic image of all the brands, as a rugged, well-built product line that popularized four-wheel drive sport utility vehicles.[22] It, too, will lose a number of products, including the Jeep Patriot and Jeep Compass, two compact products that Jeep aficionados long have complained were diluting the brand's image.[22]
Among the other Dodge models expected to be dropped is the Dodge Grand Caravan, a popular minivan, but admittedly not a product in keeping with a high-performance image. "That decision would really be something," Mr. Libby said. "Even though the minivan segment is smaller, it's still about 4 percent of the market, and there were very few players left." It is unknown what models, if any, will replace the Dodge products that are being dropped. [22] The Dodge car brand will eventually be reduced to some niche models, and, apparently, the Dodge Grand Caravan minivan, the best-selling minivan in the world, will be killed.[3]
We will take parts from other vehicles and offer a vehicle that better resonates with younger buyers. This will be a face face-lift for every model in the brand.[42]
As for Alfa Romeo's role in the future of the company, Mr. Libby suggested that it could be established as a niche luxury brand. In the meantime, Dodge's storied Ram truck will become its own brand in an effort to strengthen the company's hand in the truck field. [22] Wes Lutz, the owner of a Dodge dealership in Jackson, Mich., knows nothing about what will be in today's announcement. He's not alone in wondering what's coming next: The company is keeping their plans close to their chest.[47]
According to an auto blog report. "unloved nameplates like Dodge Nitro Caliber and Avenger will be eliminated along with the Jeep Patriot and Compass."[25] Toledo Jeep and its workers have grabbed top efficiency honors the past two years from a widely respected industry study of all vehicle assembly plants in the United States and Canada.[11] Ontario assembly plants in Windsor and Brampton that make minivans and full-sized cars respectively will remain a critical part of the company's operations.[5] The company is being propped up by taxpayer dollars and offering cars few people want to buy. Mr. Marchionne will lay out a five-year strategy, but he knows he doesn't have that long to make the company work.[29] Marchionne believes that automakers need to produce at least six million cars and trucks to achieve global economies of scale.[6]
General Motors Co. is still smarting over the $2 billion Marchionne wrangled from it in 2005 to unwind an option that enabled GM to buy the 90% of Fiat it didn't already own.[32] Fiat Group reported a net loss the first three quarters of 565 million euro ($786.6 million).[27] Pairing the two automakers forms a stronger automotive unit within the Fiat Group that could be spun off from the heavy truck and agricultural divisions. "This would uncover the value potential of CNH (Fiat's agricultural unit), which we analyze to be the main asset," say the analysts.[18] Three years ago, Nov. 8 and 9, 2006, Fiat hosted analysts, investors and journalists at a two-day affair in Italy called Fiat Investor and Analyst Days.[27] The Canadian-Italian has overcome doubts before. When he walked into Fiat in 2004 as the fifth CEO in three years -- and with no automotive experience -- some looked skeptical.[32]
Fiat'''s radical Multiair engine technology will also be used on most of the engines used by Fiat Auto vehicles.[40] There's no question Fiat can provide the pieces to build a terrific line of compact, subcompact and smaller cars.[35] The automaker filed for bankruptcy protection on April 30 and emerged roughly six weeks later under the control of Fiat, which holds an initial 20% stake.[33] PLEASE FIAT, for the sake of all that is holy, LEAVE THE JEEP ALONE!!!!!! We love our jeeps and its American made simplicity and ruggedness.[8] Max Warburton, at the time an analyst at UBS in London, said that hitting Fiat's ambitious 2010 target looked "at least as complex as splitting the atom."[14] Employees and analysts say the Fiat hookup may read like deja vu on paper, but key differences may prevent a culture clash from scuttling efforts to succeed.[38]
THE DIVISIONS: The car division said October sales fell 30 percent to 17,556 sold from 25,014 last year. [36] For the first ten months of the year, sales tumbled 39 percent to 781,319 compared with 1.28 million in the same period last year.[36]
On Wednesday we will hear of Sergio Marchionne's plans. Maybe they'll be wonderful--but from here it doesn't look that way. [3] Uncle Sam's wallet is closed. "Treasury has stated that it has no plans to provide additional assistance," a report earlier this week from the U.S. General Accountability Office pointed out.[27]
SOURCES
1. The Associated Press: AP Source: New management plans Chrysler price cut
2. FOCUS: Fiat Brings Know-How, Not Just Models, To Chrysler - WSJ.com
3. Is Fiat Helping Chrysler--Or Fiat? - Forbes.com
4. Former Chrysler dealers hold on for compensation | Reuters
5. Chrysler's revival to lean heavily on Fiat - The Globe and Mail
6. Motor World: The coming explosion at Chrysler - Nov. 3, 2009
7. Chrysler chief to outline plan for future - The Oakland Press Business: The best place for news in and around Oakland County
8.
9. Can Fiat really save Chrysler? - Nov. 3, 2009
10. Fiat plans to narrow Chrysler, Dodge brands: sources | Special Coverage | Reuters
11. toledoblade.com --
12. CBC News - Windsor - Chrysler set to unveil 5-year plan
13. The Associated Press: Chrysler: cash up more than $1B from June
14. Chrysler gives Marchionne chance to prove skeptics wrong - Automotive News
15. WWJ Newsradio 950 - Chrysler To Unveil 5-Year Plan
16. Yahoo!Xtra Sports - Blogs
17. Chrysler set to unveil five-year plan to profitability | detnews.com | The Detroit News
18. Report: Chrysler, Fiat merger may take a decade to 'fully bear fruits' | detnews.com | The Detroit News
19. Jeep To Be the Only Chrysler Brand Available Outside N. America
20. Chrysler to introduce new models - The Globe and Mail
21. Marchionne style may boost Chrysler | Industry Summits | Reuters
22. Chrysler may phase out most Dodge products
23. AFP: Fiat chief to present plan for Chrysler's rebirth
24. Chrysler to unveil 5-year plan | freep.com | Detroit Free Press
25. Fiat's Plan for Chrysler
26. Automotive News' coverage of Chrysler's 5-year plan - Automotive News
27. As Chrysler sits on blocks, what will Fiat do to fix it? - USATODAY.com
28. Chrysler Dealers share their predictions for Marchionne's Five-Year plan
29. IT'S A BIG DAY FOR . - The Globe and Mail
30. UAW holds out hope to save Chrysler plants | Special Coverage | Reuters
31. Herald Palladium > Archives > Features > AUTOMOTIVE
32. Marchionne: Man with the plan to rescue Chrysler | freep.com | Detroit Free Press
33. Chyrsler breaks even on operating costs in September
34. STOCKS NEWS EUROPE-Fiat up on Chrysler, sales hopes | Markets | Market Movers | Reuters
35. Fiat plan can't stop at small cars | freep.com | Detroit Free Press
36. October Auto Sales: Chrysler sales fall 30 percent - Forbes.com
37. Jerry York cautious on Chrysler prospects | Industry Summits | Reuters
38. Less culture clash with Fiat, Chrysler | detnews.com | The Detroit News
39. The Fiat 500: Get Ready, America! « Liveshots
40. Chrysler set to quit UK - Autocar.co.uk
41. Live Blog: Chrysler CEO Sergio Marchionne presents 5-year business plan -- Autoblog
42. Chrysler quality chief: 'We're not in denial' | freep.com | Detroit Free Press
43. Chrysler Plans Three New Dodge Cars - WSJ.com
44. Media Channel 2.0 Blog Fiat-Chrysler Marriage Official
45. Automotive World - US: Marchionne to unveil Chrysler turnaround plan today
46. Chrysler To Build Three Dodge Vehicles; Considers Midsized Truck - WSJ.com
47. The Takeaway: Fiat-Chrysler to Announce Five-Year Plan
48. Dodge Shedding Horns?
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