Marchionne Lays out Chrysler’s Future in Detroit

Chrysler held its annual fleet preview last week in Detroit, and Sergio Marchionne, Fiat and Chrysler's CEO was in town to address the audience of fleet professionals and customers. What a difference a year makes-the product pipeline is open, bankruptcy is behind the company and the company turned a profit in the first quarter.

Marchionne is born from a financial pedigree, not automotive. With a soft spoken delivery, unkempt hair, glasses and trademark ruffled black pullover, he comes across as professorial. But he is charismatic, and he speaks (in perfect English, educated in Canada) with conviction that imparts, "I'm steering this ship; trust in me, we'll make this plan work." If the usual three-pane teleprompter was on he wasn't using it.

As a Detroit outsider, he spoke candidly about Chrysler's recent issues, including overproduction, too-high incentives and product quality, and humbly in regards to the U.S. government bailout. But that was the old Chrysler, and it's a new day. "We told people we'd break even in 2010," he said. "We made a profit in the first quarter. It wasn't a lot of money, but it's black, and it's from selling cars. From what I can tell we'll do significantly better than zero this year."

In the "have confidence in me" department, Marchionne recounted becoming CEO of Fiat in 2004, when the company was losing $5 million a day and bankruptcy loomed, to achieving the highest profit in the history of the company in 2008 during a bad economy. His message: "I've always hit my numbers, and I will with Chrysler's five-year profitability plan."

Marchionne underlined Fiat's close working relationship with Chrysler and distanced the company from Daimler's management style. ("I've seen residue of Daimler ownership and it's nothing to be proud of.") Every decision at Chrysler is supported by Fiat resources, he said, with 100 staff members working on Chrysler at Fiat. Fiat technology was made available to Chrysler immediately after the partnership was announced on June 10, 2009.

Though he counted a lot of doubters from the beginning, he said separately neither company could have reached a sales goal to be a successful auto manufacturer. That target is 6 million units, which will be achieved by 2014, he said. That should translate into $5 billion in operating profit. The company is looking to open up Chrysler sales in new markets such as Russia and South America.

The company is under a new cost structure, which means it is not forced to pump out cars when demand isn't there. "We've toned down the machine," said Marchionne. "We're now sized to make sure we don't bleed when volumes are not what they should be."

"The industrial machine will be shut down if the numbers deviate," said Pete Grady, vp of network development and fleet.

Fleet sales were up substantially in the first quarter, though a greater percentage was due to the re-fleeting of aging rental fleets. Marchionne fittingly recognized fleet's importance. "Regardless of how successful we are in retail, fleet is integral to everything we do," said Marchionne. "Loyalty and recognition are important, and we have a commitment to be there when you need us."

When asked about financing, Marchionne believes liquidity will be restored when the debate ends on Wall Street reform. "Wall Street is spooked right now," he said. Marchionne would not comment directly on reports that General Motors is interested in buying back its former automobile financing business, now known as Ally Financial, which is the preferred lender for both GM and Chrysler at present.

Product and technology specifics in next blog post.

Originally posted on Business Fleet