Fiat boss lays out ambitious Chrysler road map

Paul A. Eisenstein

The auto industry loves to find miracle workers. Thirty years ago, Lee Iacocca worked his magic by convincing Congress to deliver a package of loan guarantees that kept Chrysler from going broke. A decade ago, Carlos Ghosn was recruited to save struggling Nissan. Now Sergio Marchionne is being asked to pull together a miracle for the second time.

Nearly six years ago, he was tapped by the floundering Fiat, turning it into one of Europe’s most successful automakers. Now he’s got an even tougher challenge ahead of him as the new CEO of Chrysler Corp.

Chrysler is the corporate equivalent of a manic depressive. Since being founded by the eponymous Walter P. Chrysler in 1925 it has had numerous runs of rich profits, but it’s also come close to catastrophe many times. Early this year, its final chapter might have been written had it not been for a multibillion-dollar bailout cautiously approved by the Obama administration.

The government loans carried some significant caveats, among them that the “new” Chrysler would no longer be an independent manufacturer but would rather fall under the control of Fiat. The Italian automaker started out with a 20 percent stake that could grow to 35 percent if meets a series of goals.

On Wednesday, Marchionne and a largely new senior management team outlined how they’d not only meet those goals but pull off what could become one of the biggest turnaround stories in automotive history.

“Nobody’s promising a miracle here,” Marchionne cautioned during a briefing that took more than eight hours to unfold. But he also stressed that his plan was “comprehensive, serious and … ambitious.”

Rebecca Cook / Reuters The Fiat 500 compact will soon be offered in the U.S. market as part of Chrysler's turnaround plan.

Skeptics might have reason to gape when first hearing the proposed results. Insisting Chrysler already has slowed its cash burn to a flicker, the Italian-born, Canadian-educated executive said he expects the maker to post an operating profit next year and go into the black on a net level in 2011. More spectacular, if he can pull it off, Marchionne believes Chrysler will generate $14 billion in earnings by the time a new five-year plan is needed, in 2014.

Considering the uncertainty of the economy and continued weakness of the U.S. auto market — which has been struggling through its worst recession in decades — that might seem hard to swallow. But the ever-cautious, always opinionated Mike Jackson, CEO of the country’s largest dealership chain, AutoNation, calls himself “a believer” and sees “a big margin for error built into the plan.”

Indeed, a closer look shows that Marchionne and his planning team have based most of their expectations on U.S. sales projections well below industry consensus. 

Of course, a turnaround is more than just a numbers game. Chrysler has some serious problems that need to be fixed — so many, in fact, that it might overwhelm an executive just thinking about them.

The previous CEO, former Home Depot boss Bob Nardelli, lasted less than two years in the post after being installed by the company’s former owners, Cerberus Capital Management. Nardelli stepped down this year after Chrysler completed its bankruptcy reorganization and emerged under control of Fiat and the U.S. government.

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