Chrysler-Fiat Merger Under Consideration, Says CEO Marchionne

Chrysler Group LLC CEO Sergio Marchionne confirms a merger with alliance partner Fiat Group Automobiles SpA is among “alternative scenarios” under consideration as Chrysler prepares its initial public offering.

A combined company might be based in the U.S., says Marchionne, who also heads Italy-based Fiat. “It wouldn't be a bad idea,” he tells the J.D. Power International Automotive Roundtable that is tied to the NADA convention.

Marchionne has said Chrysler must record two consecutive profitable quarters before the auto maker will launch its bid to become a publicly traded company once again. The CEO also has said he expects such results could be achieved this year.

Legacy costs form a key hurdle to a merger. “The retirees of the (United Auto Workers union) need to be monetized,” Marchionne tells journalists following his speech.

But another obstacle, operational integration, largely has been overcome.

Chrysler is benefitting from Fiat powertrain technology and next year introduces a new Dodge car based on a Fiat-designed platform.

Meanwhile, Fiat is expected to adapt Chrysler's large-vehicle platforms, the first of which — based on the Dodge Journey cross/utility vehicle — will be unveiled next month at the Geneva auto show.

Displaying a forthright manner and self-deprecating sense of humor, Marchionne charmed a large crowd of dealers who gathered here.

His message: CEOs must make hard choices. “The recent crisis has swept away many of the old notions about how to operate in this industry,” he says. “The inevitable outcome of the deep recession was a seismic shift in market conditions and, of necessity, the operating models we were accustomed to.”

Last month, prior to a landmark vote by unionized Fiat workers, Marchionne floated the notion of shifting production from Italy to the U.S. But the workers accepted concessions and Marchionne responded by awarding new product programs to their plant.

He promised cash to United Auto Workers members as a thank-you for sacrifices that helped pull Chrysler out of bankruptcy — a development aided by the Fiat alliance.

Marchionne suggests Chrysler would not be any less “American” if it merged with the giant Italian auto maker.

“Any attempt to dominate (one culture over another) is going to stifle the creative element of that organization,” he says, noting this attitude contributed to the collapse of DaimlerChrysler AG, which merged Chrysler with the German auto maker now known as Daimler AG.

Marchionne describes a booklet distributed to Chrysler executives by their former German supervisors. It outlined product-development methodology and every important term was in German, not English.

“If you think that there were English equivalents of a word that you use in German, you're nuts,” he says, prompting laughter and applause from the crowd, many of whom were Chrysler dealers during the Daimler days.

Marchionne also downplays his importance to the Chrysler organization, saying the auto maker is “building leaders (to) come after me.”

He offers no date for his departure as Chrysler CEO, but intends to keep the top job “until we get everything done.”

Chrysler dealers now are seeing the fruits of a massive overhaul that has refreshed 75% of its product offerings.