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Chrysler's Marchionne: Candid, or crying wolf?

John Elkann Harald J. Wester Sergio Marchionne

John Elkann, Harald J. Wester, Sergio Marchionne,

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Updated: February 8, 2013 1:03PM



To judge by Chrysler Group's growing U.S. sales and market share, you'd think the automaker is in a zone, rocking down the highway of success since Fiat took over.

In fact, Chrysler's "the best-performing car company in the U.S. the last two years," says Jesse Toprak, veteran industry analyst at TrueCar.com.

But listening to Sergio Marchionne, CEO of Chrysler and of Fiat, majority owner of Chrysler, you'd think that the car company is the industrial equivalent of one paycheck away from homelessness.

According to Marchionne, the company's woes remain large and legion. In his view, for instance: The ballyhooed Dodge Dart is a flop, at least temporarily. The Jeep Grand Cherokee re-do cost so much it bumped back three other products planned this year. And despite a case full of awards, Chrysler is dangerously close to complacency that'll douse the fire in its belly.

It's a drum he beats to keep the Detroit car company stirred up and frantic to avoid an encore of the 2009 bankruptcy reorganization that put Italy's Fiat, and Marchionne, in control.

"Typically, senior executives at car companies put the best spin on things, but Sergio is known for his off-the-cuff candor. Sergio has been able to leverage a sense of crisis as a motivation tool, but this is also part of who he is," says Edmunds.com Vice Chairman Jeremy Anwyl.

Marchionne, in his own charming way, is as blunt-spoken as famous and less-charming former Chrysler CEO Lee Iacocca, who birthed the minivan that helped save, temporarily, the company in the 1980s and who got the government to co-sign loans that kept Chrysler alive.

Marchionne whipped through a list of issues facing Chrysler, and some confronting Fiat, at a recent session with journalists here, painting a picture bleak enough that one might wonder how much was crying wolf, when the beast is an angry dog instead -- still a threat, but perhaps not one that'll eat you alive.

"There is some element of wanting to keep people hungry, and they need to stay hungry. By no means is the fight behind," says Rebecca Lindland, director of research for consultant IHS Automotive.

Too, the European management ethic that Marchionne knows best is "We're never good enough," while in the U.S., "We congratulate every little thing; everybody gets a trophy," says Toprak, who grew up in Europe and has lived in the U.S. 20 years.

European style can fuel continuous improvement, but it also can be demoralizing, Toprak notes.

The always-sweater-clad CEO poured it on, though he usually also offered the hint of a solution to each problem he listed.

His dire outline

- Dodge Dart has the wrong powertrains (engines and transmissions), too many features and too high a price, so its launch in the compact-car market has stumbled instead of shining brightly enough to draw a new generation of entry buyers who might be turned into Chrysler Group loyalists.

"True: Dodge Dart is a disappointment. There was a lot of hope for that product, and the powertrains did not live up to expectations," Lindland says.

Dart was launched in June, and even allowing for some baby steps in showrooms at first, it's still averaging fewer than 5,000 sales a month. The segment's big dogs, Chevrolet Cruze, Ford Focus, Toyota Corolla and Honda Civic, are snagging an average 20,000 to 26,000 buyers a month.

"If it's a mismatch to consumer expectations, you're going to pay the price , and we have" as buyers shunned first the manual-transmission Dart, then the dual-dry-clutch automatic that's good for mpg but bad for driving smoothness. A conventional six-speed automatic is a place-holder until what Marchionne sees as the real answer: a nine-speed automatic coming later this year.

Dart "was born loaded" so is hard to discount and keep profitable, he frets. "I'm certainly not happy with the (profit) margin performance of the Dart, but it's simply because of the fact that, I think, the car has got so much content."

- Chrysler's Ram full-size pickup won the prestigious North American Truck of the Year Award ahead of the Detroit auto show last week -- "exceptionally good news," the CEO said -- and is the Motor Trend Truck of the Year, which he called "helpful."

But get over it, he said, scolding Chrysler folks for "too many smiling faces." That, he fears, is a harbinger of complacency when they should be remembering that "the competition ain't stopping."

Sounding like hard-driving Alabama football coach Nick Saban after beating Notre Dame early this month to become No. 1, Marchionne said awards are worth about five minutes of celebration, then "it's over." Marketing people should flog the awards as proof of a good product, but others in the company should return to "selling cars and moving on."

- Staying current with infotainment technology boosted the cost of the Grand Cherokee update for the coming 2014 model that was unveiled at the Detroit show last week. The cost run-up helped push three other models set to make their debuts this year off the table -- two small cars and a small crossover SUV.

"None of those are coming in 2013," Marchionne said. "The level of money that's been spent on this Grand Cherokee ... this is a brand new car." He added that "every time I look at the infotainment" features demanded in each new generation of vehicle, "I get really concerned about the amount of cost" added.

"It's not just him," Lindland says. "IHS estimates that electronics -- all electronics, not just the (infotainment features) -- can be 30 percent to 50 percent of the cost of a vehicle."

- Fiat's sporty Alfa-Romeo brand, meant for reintroduction into the U.S. with a first car late this year, isn't ready. "Our quality people, our technical people were trying out the car (earlier this month). The car is not where it needs to be before it comes to the U.S."

That U.S. relaunch is "the beginning of the resurrection of Alfa," he said. "I cannot come up with a schlock product. I just won't. So you won't get an American engine in that car -- with all due respect to my American friends, it needs to be an (Italian) engine, right? Let's be absolutely honest, right?"

An Italian engine is necessary, he said, to evoke the Italian hallmark brand, Ferrari, also owned by Fiat. An Italian personality, Marchionne said, must "sit at the heart of the revival."

And if the relaunch of Alfa tanks, so does the brand. "This undertaking to try and bring Alfa back is a one-shot deal. We're not going to do this twice."

- Chrysler's well-known minivans are on the way out, replaced by two products. One will be a new van with sliding side doors, and the other will be a "people mover" with car-style, swing-open doors.

Regardless of whether Marchionne's overstating Chrysler's challenges, he has an overflowing plate. He knows as much: "This is not for the fainthearted. If you suffer from heart palpitation, do not get into the car business."



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