Marchionne Predicts Chrysler to Make Good on Second Chance

NEW YORK – Sergio Marchionne, CEO of Fiat Automobiles SpA and Chrysler Group LLC, tells the National Automobile Dealers Assn./IHS Global Insight Forum here the most unpleasant surprise he has faced since embarking on the remaking of the smallest of Detroit's Big Three is the difficulty of reshaping the brand's dealer network.

The arbitration process decreed by the U.S. Congress has stopped restructuring of the dealer network, he says. “It's unhelpful and is the one thing I wasn't expecting.”

Speaking on the first anniversary of President Obama's announcement of the plan to save Chrysler from almost imminent demise, Marchionne dismisses the doubts he admits still exist in the press and the auto industry. “We are no strangers to skepticism,” he says.

Marchionne reveals Chrysler will break even this year and eventually pay back every penny the firm has borrowed over five years. It’s possible Chrysler may even show a profit in 2010, but he declines to say so categorically.

Marchionne also says he will submit a financial report in three weeks to the Chrysler board

The ocean-hopping executive, whose two company headquarters are separated by 4,200 miles (6,759 km), wasn't expecting to be heckled by a protester here who decried the $14 billion federal bailout Chrysler received. He also was interrupted in the midst of his speech by a fire-drill test in the midtown hotel where the forum is being held.

Marchionne says his most pleasant surprise since taking over Chrysler was the speed of bringing down the auto maker’s breakeven point, which is substantially lower than most on the Chrysler team thought.

Fiat-Chrysler CEO Sergio Marchionne

His immediate focus is getting the launch of the new Jeep Grand Cherokee right. “It needs to be flawless,” he says.

The Grand Cherokee is the most important Chrysler product debut since he arrived at the auto maker’s Auburn Hills, MI, headquarters to take command. Sales of the model have plummeted, and if it is to survive, the new version must be successful in the marketplace.

“We had to bring in a lot of talent from Fiat to get it done,” Marchionne says.

Admitting he can't continue on his current pace forever, Marchionne says he is working seven days a week to run both companies. He has 78 people on both sides of the pond reporting directly to him and feels comfortable with the changes he has made in the Chrysler leadership team.

Marchionne says the Chrysler team is inspired by the efforts of the federal government on the auto maker’s behalf. “We have one last chance to make it right,” he says. “History will look at this moment when we reconstruct our industry.”

He notes it rarely happens in life when a company is given a second chance and insists Chrysler will not waste this effort. “It inspires (our) passion that comes from knowing we are part of an historic undertaking,” Marchionne says. “Chrysler owes a deep debt of gratitude to the (U.S. and Canadian) taxpayers.”

The auto maker must anticipate future changes and adapt to an industry that has a 30-million unit manufacturing overcapacity. “The need for rationalization is undeniable,” he says.

Chrysler has been forced to get smart and redesign its business around a central pillar of efficiency. There's a need to increase the volume for each vehicle architecture in the company's lineup, Marchionne says.

About 40% of the Chrysler portfolio will be derived from Fiat platforms in the next five years. However, Chrysler won't Americanize Fiat nor vice versa, he says. The alliance of the American and Italian auto makers requires each to put national pride aside.