TRAVERSE CITY, MI – The heads ofand the United Auto Workers union get along, but and Chrysler CEO Sergio Marchionne rejects the idea of “co-determination.”
The German method of union-management relations, in which union members sit on company supervisory boards, has UAW President Bob King’s support.
Marchionne rejects it on principle.
“The best intervention that the unions or labor or organized labor can bring to the party is a support for the choice of the right leader to lead the organization,” Marchionne tells journalists after he and King make presentations at the Center for Automotive Research’s Management Briefing Seminars here.
“I understand Bob. I understand what he’s saying (but) we have to be very careful that we don’t exaggerate the value of co-determination,” Marchionne says.
“For multinational companies, it becomes almost impossible to find the right mix of labor representation to effectively stand in for the labor force across the group.”
has six or seven unions in Italy, but half the workers in the auto maker’s plants are not organized at all, Marchionne says.
Fiat also has plant workers in Brazil and will have them in China, when a joint venture with Guangzhou Automotive Industry Group goes into production with a new C-segment sedan next year.
“Co-determination gives rise to two decision-making bodies,” Marchionne says. “The executive board makes decisions. And the unions sit on supervisory boards, one of which is the choice of the CEO.
“The most fundamental and difficult decision that a board makes is the choice of a CEO. If you make the right choice, issues with labor unions will not arise.”
Marchionne, 59, indicates he might retire around 2015. “We’ll leave earlier or later, as the case may be. There’s going to be a guy after me, I guarantee you.”
He says he believes his successor should come from the inside and that Fiat-’s new Group Executive Council of 22 members from nine nations “is designed to be a proving ground for people to sit and manage.
“It’s more than likely that my successor will come from that structure, not necessarily from the operating role.”
Besides choosing a CEO, Marchionne says, company boards “have an obligation to maintain a level of equilibrium” in pay levels between executives and workers, to make “the management of human resource part of the organization doable.
“I’m not sure we are there today,” he says.
The gap between executive and worker pay is causing indignation here and in other countries.
“That is something that I think over time will move to more normal levels. But it will take time. I also think senior executives need to be rewarded for what they do. This is an incredibly competitive market.”
Chrysler will do well this year in a U.S. market of 12.7 million units, Marchionne predicts, and has potential for significant profits next year. He also says the auto maker will continue to thrive even with sales of well below 15 million in 2014.
“We have hit bottom,” Marchionne says of the American economy, and Chrysler is “tooled for a gradual recovery” over the next three or four years, rather than the past pattern of booms followed by busts.
Fiat likely will control 59% of Chrysler shares by the year’s fourth quarter, but a stock offering is unlikely before 2013, Marchionne says.
The CEO is proud to have broken with past practices in which Detroit auto makers “cried wolf” over efforts to raise corporate average fuel economy, but ultimately met the targets.
Marchionne says he and the CEOs ofand – also non-Detroiters – looked at the discussions leading to the CAFE agreement on 54.5 mpg (4.3L/100km) in 2025 as businessmen. They agreed they could meet the target, and embraced it.
“Anybody who surrenders 14 years before the date shouldn’t be in business,” he says.
Marchionne also repeats his determination to take the Jeep brand global, build a commercial-vehicle business upon the Ram brand and get Fiat, Jeep and Alfa Romeo into production in China.
“We need to make choices as to what out of the Chrysler world is exportable,” he says. “To make the Dodge brand a mainstay in Latin America is, in my view, a mistake.
“To take the Jeep brand and make it a mainstay in Latin America is a good thing. To take that brand and take it everywhere else in the world is a good thing.”
Marchionne says the Fiat joint venture with China’s Guangzhou Auto will go into production next year with a new C-segment sedan, “which is absolutely current, both in terms of powertrains, architecture, transmissions.
“We have two other objectives in China,” he adds.
“One is, obviously, to continue to import as required the other Chrysler brands, but more importantly is how to develop both Jeep and Alfa Romeo. These are the two global brands, together with Fiat, that will form the basis for our involvement in China.”