Final Inspection

Marchionne Goes All In

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When Fiat offered to take a stake in Chrysler last year and assume management control, CEO Sergio Marchionne made one thing clear: Not a lira of Fiat money would go into Chrysler.

I wonder, had Marchionne known then what he knows now, would he have been so tight with the purse strings?

In unveiling Fiat’s 5-year plan last week at a marathon backgrounder in Turin, Marchionne reveals just how much the Italian auto maker’s future has become inextricably tied to its American counterpart over the last nine months.

No less than 10 vehicle programs for Fiat, Lancia and Alfa Romeo will emanate from Chrysler’s engineering department, and Chrysler’s distribution muscle is being counted on to resurrect the Alfa brand in North America.

As Marchionne put it: “Without Chrysler, Fiat would continue to be marginal player for the rest of its life.”

Now, it’s possible Marchionne knew all along exactly what he was getting in Chrysler and how big a role it would play in the new combined company.

But he appeared genuinely surprised at the level and pace of cooperation last week when he said the partnership – although borne out of failure – could be the realization of a dream he’s had since joining a struggling Fiat in 2004 to create a top-tier, high-volume global auto maker.

“This team that runs Chrysler understands the problems and is now on a corrective path to fix the issues,” he said. “The frank and rational discussion…that has gone on (is) an indication of the level of collaboration possible,” he added, noting even support coming from the UAW has been beyond expectations.

“There’s been not a single objection from the UAW about bringing (Chrysler) forward,” he said.

He also chastised analysts, saying those who continue to predict gloom and doom for the auto maker are missing how much has fundamentally changed at Chrysler since the Fiat takeover.

The fact Chrysler made money in the first quarter on an operating basis “is an indication of how low we’ve dropped operating costs,” he said.

So added all up, either the pace of Chrysler’s turnaround and the shotgun marriage with Fiat is going much better than even Marchionne could have imagined or the CEO is an awfully good poker player, willing to risk the chance at realizing his vision had the U.S. government balked at his no-cash bid to assume control of Chrysler.

Or, more likely, it’s a little of both.

Fiat’s boss has shown before he knows how to play the game, having separated $2 billion from GM as compensation for a messy divorce in 2005.

But this time it appears even Marchionne may be at least a little surprised at the size of the pot he’s been able to rake in.

The key will be how well he plays the next hand, now that he appears ready to go all in.

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WardsAuto editors share insights and observations on the global auto industry.

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Dave Zoia

As Editorial Director, I oversee much of what goes into WardsAuto.com, enjoying a ringside seat that lets me observe up close just about every facet of the industry worldwide. I have covered the...

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James Amend is an associate editor at WardsAuto.com, covering day-to-day business and product news at General Motors. He also leads coverage of regulatory and environmental issues, as well as the...
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