Chrysler Plan Promises Glad Tidings

Meet Chrysler Group LLC CEO Sergio Marchionne — both Santa Claus and Scrooge.

He has scampered down the chimney of Chrysler headquarters with a big bag of small-car platforms and advanced powertrain technology from Italy-based Fiat Automobiles SpA.

These products are expected to revitalize Chrysler as it struggles to erase the ugly memory of its bankruptcy last spring and help the auto maker repay the billions it borrowed from the U.S. Treasury Dept. as a lifeline.

But the hard-charging executive, who also leads Fiat, reveals a flinty side that rubs key stakeholders the wrong way. Demonstrating the discipline he used to save Fiat from the brink of disaster earlier this decade, Marchionne has declared Chrysler will not “chase share.”

A year-end incentive campaign that features 0% financing or cash rebates of up to $4,000 is a “big step in the right direction,” says Chuck Eddy of Bob and Chuck Eddy Chrysler Dodge Jeep in Youngstown, OH. And that thinking needs to continue.

Says Eddy: “What Sergio has to understand is that in America…it takes a deal. We have very good product. But it's aged.”

Like last year's Christmas presents. Between now and mid-2010, when the auto maker's bankruptcy-induced partnership with Fiat is scheduled to ramp up some four redesigned vehicles and nine freshened models under four brands, Chrysler has confirmed the introduction of just two new products — the '10 Heavy Duty Ram pickup, currently on sale, and the '11 Jeep Grand Cherokee midsize SUV.

In October, Chrysler's average total incentive cost per-vehicle was $3,219, second only to General Motors Co., according to Edmunds.com.

Still, Chrysler's dealer council has been aggressively lobbying the auto maker to further loosen the purse-strings. And if the OEM ever closes that door, “there's going to be trouble,” Eddy warns.

“We'll quit ordering cars. I agree with (Marchionne's) philosophy. But the reality is we've got to have something that bridges us between now and the new product next fall.”

It is an inauspicious beginning for the 5-year plan Chrysler recently revealed during a briefing hosted by Marchionne. The plan indicates Chrysler showrooms, by 2014, could feature up to 21 new or redesigned vehicles.

A dozen products either would be sourced from Fiat or inspired by the Italian auto maker and built by Chrysler. Conversely, Marchionne says Chrysler could produce some 270,000 vehicles for Fiat.

“The future of Fiat's car business and of Chrysler, are now inextricably intertwined,” he tells an assemblage that included hundreds of journalists, analysts, dealers, politicians and even the great-grandson of Walter P. Chrysler.

Central to the plan is a strategy that divides responsibility for product development. Fiat is tasked with small vehicles and small-displacement engines, while Chrysler handles larger-scale programs.

“The proliferation of architectures (at Chrysler) has been my pet peeve,” Marchionne says.

“It just causes an incredible strain.”

To alleviate the problem, Chrysler will see its total architecture count reduced to seven from 11.

Two Fiat platforms will cover A- and B-segment products — markets where Chrysler does not currently compete — while Fiat and Chrysler each will deliver a platform that will cover the C/D segment.

Eddy particularly is encouraged about the prospect of selling vehicles with Fiat lineage. As a former Alfa Romeo dealer, he is confident despite the outdated reputation for poor quality that dogs Italian cars in the U.S.

American car buyers have “an insatiable appetite for something new,” he says.

Three Chrysler platforms will blanket the E-segment while one Chrysler platform will cover its truck-market interests.

Based on the assumption the market will recover from what Marchionne describes as one of the most difficult years he's seen, Chrysler's plan calls for total sales to more than double from 2009's estimate of 1.3 million to 2.8 million in 2014.

The auto maker envisions its U.S. sales will approach 2 million units in 2014, compared with this year's anticipated 950,000.

Arguably, the most significant gains Chrysler forecasts are in overseas markets. Michael Manley, lead executive of Chrysler's international organization, expects deliveries will increase to 500,000 from the current-level of 150,000.

The added volume will come in the A, B and C segments where Chrysler is not competitive internationally, Manley says.

These segments account for 50% of the global market's new-vehicle sales.

More than two years removed from his role atop Chrysler's organization chart, Daimler AG CEO Dieter Zetsche admits to having a soft spot for the auto maker.

“I continue to be emotional about this company and crossing my fingers,” Zetsche says during a recent media briefing in New York.

“Realistically, we have to acknowledge that the U.S. market is a very tough market as far as pricing is concerned. (Because) Chrysler is almost exclusively depending on that market, you are really under the most difficult circumstances.

“All together, there are quite a number of positive changes going for Chrysler,” he adds. “But certainly, the environment continues to be very tough, and the competition isn't forgiving at all.”

Through November, Chrysler's U.S. sales lagged like-2008 by 38.9%, according to Ward's data, against a total light-vehicle market that was down just 25.3%.

In the trenches, Chrysler is transitioning to Fiat's World-Class Manufacturing System, which emphasizes worker engagement and management accountability.

“Most of the processes are pretty much the same; it's just amped up,” says Mark Taylor, president of United Auto Workers Local 140, which represents hourly employees at Chrysler's flagship pickup assembly plant in Warren, MI.

“With any change, there's always a little bit of resistance,” he adds. “But the membership understands what's at stake.”

Further up the product pipeline, Chrysler has disbanded its dedicated advanced-technology engineering group known as ENVI. The unit was tasked with launching an electric vehicle next year — a project now shelved.

Engineers assigned to the group have been absorbed into Chrysler's larger organization and given the added responsibility of developing EV technology for Fiat.

Marchionne promises a plug-in hybrid minivan and hints that an electric version of the Fiat Doblo small commercial truck could come to North America.

But Chrysler's new approach to EV development has its detractors. Cyrus Ashtiani, EnerDel chief technical officer, suggests the auto maker is fooling itself.

“The new kind of vehicles, the new kind of applications require a different organization and a different type of thinking,” he tells Ward's.

But EVs are well down the road and not on the radar of people like Anthony Viviano, chairman of Sterling Heights Dodge Chrysler Jeep in Sterling Heights, MI.

“What they've got coming, if you sit back and study it, it makes sense,” Viviano says. “What they have to address, and they have not addressed, is what do you do for the next 12-14 months?”

But Marchionne has his own Christmas wish. All he wants is a little patience.

“In the last five-and-a-half years, Fiat has been able to reacquire trust and confidence from its customers,” the CEO says. “I ask you to extend the same credibility to (Chrysler).”