Marchionne Lays out Goals for Chrysler Group
AUBURN HILLS, Mich. — Earlier this week, Sergio Marchionne, chief executive officer of Chrysler Group, announced that the automaker intends to break even this year.
And by 2014, Chrysler is expected to have its operating profit increase to $5 billion.
"We believe sales will reach 2.8 million total units by that date as well," he said at the Automotive News World Congress. "Our goal is $65 to $70 billion revenue by 2014, driven by a 20-percent compound annual growth rate. And when this rebuilding period is through, we intend to have paid back every penny we've borrowed from EDC and TARP — whether that penny boasts a profile of Queen Elizabeth or President Lincoln."
He went on to point out, "Five years to reach those goals — the same amount of time that separated Fiat's obituaries from Fiat's record-breaking resurgence."
However, before pushing forward to substantial revenue in 2014, Marchionne indicated that Chrysler and the industry as a whole, still has some big challenges to overcome in 2010.
"And the greatest of ironies may be the fact that a recovery is approaching — and it could remove our industry's foremost imperative for change, while restoring our foremost excuse for inaction," he explained.
"Few of us are prepared to declare a recovery yet. But many see one in the distance. … How close remains unclear. But there is no denying this: Even the possibility of a macroeconomic recovery is sufficient to stimulate hope in an industry deprived of it for too long," Marchionne said.
And apparently, this is what concerns him.
"Please don't misunderstand. The crisis has caused too much suffering for too many people not to greet some sunlight with celebration. I welcome the signs of a macroeconomic recovery — stabilizing incomes, loosening credit, consumer confidence that may be inching upward, or whose free-fall has at least ceased. But recovery, with apologies to Karl Marx, is the opiate of dysfunctional industries. What remains unclear is whether our industry will remain one. Time will tell; our choices will decide the matter," he stressed.
"And I believe history will look to this moment, here and now, as the decisive one — the moment when we chose, finally, to remake ourselves as a muscular, viable, independent industry, or when we were content to relax as a macroeconomic recovery concealed, for what would likely be the last time, deep and unsustainable structural flaws," Marchionne continued. "That choice, this moment of decision, is my topic today."
He believes the industry's structural flaws have been around for decades, through both the good times and bad.
"The only variable has been their visibility. Our industry has destroyed billions of dollars in value, and we have been at that task year after year. The financial crisis that peaked in the last 12 months did not cause the problems we face. It unmasked them — laid them bare — and deprived us of any pretense for denial," Marchionne told the audience.
Ultimately, it comes down to one choice, he said, "a temporary uptick that defers our demise, or an enduring renaissance that delivers value to customers and shareholders alike."
He encouraged the industry to think in terms of strategic partnerships that can help improve efficiency and lower costs instead of automakers simply getting bigger.
"That's what we're striving to accomplish through the Fiat-Chrysler partnership. There are those who say a trans-Atlantic alliance is bound to fail — that Chrysler cannot Americanize Fiat and that Fiat can't succeed as a schoolmaster in Detroit. Were that our intention, they'd be absolutely right," Marchionne explained.
"But this relationship is about partnership, not patronizing. It's about listening, not dictating. Any alliance forged across cultures must be, because attempting to impose answers across cultures doesn't just fail. It antagonizes. It builds higher walls," he noted.
And while he said this approach doesn't always show immediate results, results that are achieved can be long-lasting.
"And those are the kinds of results we aspire to achieve through the Fiat-Chrysler partnership," he said.
More specifically, Marchionne said the management team is seeking to combine Fiat's smaller car expertise with Chrysler's knowledge in the medium and large segments to achieve economies of scale that benefit both companies.
Furthermore, the CEO stressed that Americans do not buy vehicles on price alone, but they do buy on quality, brand equity and total service experience.
"To improve in all those areas — which we must — we must flatten corporate structures. We need to be able to respond quickly, whether it's to customer complaints or customer needs. Any new idea condemned to struggle upward through multiple levels of rigidly hierarchical, risk-averse management is an idea that won't see daylight until dusk — until it's too late," Marchionne claimed.
"And it's a model that cannot keep pace with consumer needs. We need to make better cars, we need to back them with absolutely top-flight customer service, and we need to execute both tasks rapidly and consistently. Until we do, it won't matter how much consumers have in their pockets. When we do, customers will start buying again," he stated.
He even went so far as to say American car companies are in some cases in better shape than those based overseas. He noted that European automakers do not close plants because they're often paid not to.
"The last time a German plant shut down, World War II had yet to begin," Marchionne highlighted.
He also said, "More than half a century has passed since the Treaty of Rome was signed, yet European governments continue to act as nursemaids to their domestic automakers while discriminating against those of other countries."
On this side of the water, however, he sees a different story.
"The U.S. response to the crisis has put the North American sector on a more promising track than Europe's. Chapter 11 has both forced and facilitated structural reorganization," Marchionne said.
"We have begun to restructure in a serious and encouraging way. But North American automakers have overcome temporary crisis with temporary changes before. Only time will tell whether the restructuring we're beginning to see reflects a genuine, long-term change in culture. That's why the most important choice we must make is this last one: We can change to survive this crisis — or we can adopt a culture of relentless change," he told the audience.
Finally, Marchionne concluded by saying, "We can be sure that an economic recovery will take hold, and we can be equally certain that a recession will someday follow again. But great industries do not live at the mercy of macroeconomic forces. They are affected by them, of course, but they are not controlled by them.
"Great industries create destinies rather than going along for the ride. This is our moment to craft ours. We need to seize it. And that is the only, true imperative for all of us," he stated.