Marchionne Speaks Out Now that New Management Team Has Been Named

Sergio Marchionne appears to plan on remaining the top boss as Chrysler/Fiat until at least 2015. Appearing Wednesday at the 2011 CAR Management Briefing Seminars, Marchionne pulled out all sorts of references — from quoting a French philosopher to depicting how geese fly — to describe how the automaker has rebounded from the brink of extinction.
Marchionne’s speech began with him pointing out that while Chrysler’s history traces back four decades further than the conference, the current version of Chrysler is only 26-months old.
“It was born as a less than riskless response to a traumatic crisis and linked, since inception, to a strategic global alliance with Fiat,” Marchionne conceded.
“Some of you who regularly attend this gathering may recall that Chrysler sent no speakers to the conference in 2009,” he continued. “It’s not that we had anything against the Center for Automotive Research, or the conference or the beautiful community of Traverse City.
“We did not come because we had nothing to say,” the CEO acknowledged. “We were completely immersed in a brutal self-assessment of our strengths and weaknesses. We were charting a future course, having lost all our traditional points of reference that, throughout the crisis, had proved out to be of little or no use. Nothing less than our survival was at stake.”
The thought of just surviving brought Marchionne to his first non-automotive analogy. He quoted French philosopher Albert Camus who wrote, “At the beginning of a pestilence and when it ends, there’s always a propensity for rhetoric. It is in the thick of calamity that one gets hardened to the truth.”
That mindset is what the Chrysler CEO points to when thinking about how close the automaker came to closing up shop for good when the economy spun into an extended recession in the latter part of 2008.
“But now, as we emerge from the events that almost wiped us out, we must heed Camus’ warning: We need to stay away from the rhetoric that usually follows a crisis. We need to resist the tendency to let old habits return,” Marchionne cautioned.
“A crisis, as unnecessary as it may seem at the time, is a terrible thing to waste,” he suggested. “The truth of the matter is that the auto sector was already sick before the economic crisis forced it into intensive care.”
Marchionne contended that persistent problems such as industrial inefficiency, production overcapacity and value-destroying market strategies went unchecked.
“As long as markets maintained their relative equilibrium — precarious as it may have been — U.S. and European automakers managed to operate beyond their means and hide the true extent of their structural deficiencies,” Marchionne told Wednesday’s assembly.
“When the global crisis shattered that precarious equilibrium, however, it became undeniable that things had to change and that finding solutions to those problems could no longer be postponed,” he continued.
As a result, Marchionne insisted U.S. industry, government, labor unions and financial institutions worked together side-by-side to do more than “merely save the auto sector.” That point brought the Chrysler and Fiat boss to another unique analogy — how geese fly.
Marchionne asked conference attendees to consider how geese fly in a formation shaped like a V. He explained each bird as it flaps its wings creates an updraft that benefits the bird flying behind. As a result, Marchionne thinks the entire flock gains an estimated 70 percent greater flying range than if a goose was flying solo.
“This sort of teamwork helped create what was dubbed ‘The New Green Deal,’ the focus of a leaner, restructured and competitive auto industry which is seriously targeting a significant reduction in greenhouse emissions and fuel consumption,” Marchionne emphasized.
“Today, the automotive sector in the U.S. is on a more solid foundation for sustainable growth,” he continued.
“It is an example of what can be done when all parties honestly and openly come to grips with the inefficiency of an economic model and realize that ultimately the realities of competition go beyond national borders. It proves that when we all come together in good faith, we can achieve something solid and long lasting,” Marchionne went on to say.
How Long Will Marchionne Run the Company?
During a question-and-answer session with reporters after his speech, Marchionne was probed about how long he will oversee both Fiat and Chrysler.
In a report published by the Detroit News, Marchionne, 59, shared that he hopes the Fiat-Chrysler alliance will be one of the five or six global players in the auto industry.
“It’s going to be up to the guy after me I think — after 2015, hopefully. Maybe a year later,” he told the newspapers at the event. “Chrysler will be here after me.”
In dialogue that happened moments later, the Detroit News report indicated Marchionne softened his stance on leaving in 2015 or later.
“I technically can go beyond 2015,” adding he will “leave later or earlier as the case may be. I wouldn’t focus on the date. I would focus on the process.”
Importance of Fiat Integration
With Chrysler, in essence, financially flat-lining and in bankruptcy, Marchionne left little doubt that he would not have been at Wednesday’s event had the relationship with Fiat not developed.
“Chrysler’s global alliance with Fiat is an example of a positive, international creative response to our new realities. It offers the opportunity for efficiencies in development, engineering, purchasing, manufacturing and distribution,” Marchionne explained.
“This urgency for this partnership came from the global economic crisis that erupted toward the end of 2008, which closed capital markets and forced Chrysler to seek government assistance in order to survive and restructure,” he emphasized.
“The common opinion at the time was that Chrysler was doomed and that government assistance amounted to throwing good money after bad. For a while, there seemed to be a competition to write the most-clever obituary before the body had turned cold,” he went on to say. “I don’t want to dwell today on the factors that brought Chrysler to the edge of extinction. I prefer to talk about what we have done to change the conversation.”
Government Intervention and Resulting Performance
Beyond the relationship with Fiat, Marchionne again was quick to point out funds from the U.S. and Canadian governments were vitally instrumental in getting Chrysler back on track toward rebounding financial and sales performances.
“The governments of the U.S. and Canada gave us a second chance and the opportunity to build a future,” Marchionne declared. “They showed leadership and political courage by demonstrating faith in the people of Chrysler, even though it was it was not a universally popular decision.
“For nearly two years, we lived every single day mindful that we owed a debt of gratitude to those who allowed us to survive and conscious of the moral responsibility to repay not just the loans but the faith placed in us,” he continued.
“I remember how analysts and the press reacted when we announced that within a very short period of time we would fully renew our product range and get our financials back into shape. I remember the skeptical and patronizing looks on their faces. Well, we didn’t give up,” Marchionne told the conference attendees.
Marchionne reiterated that back on May 24, the automaker paid back loans with interest to the U.S. and Canadian governments six years ahead of schedule. And just last week, Chrysler reported strengthening numbers generated during the second quarter of this year.
After achieving a net income of $116 million in the first quarter of the year — Chrysler’s first quarterly net income since the company began operations in June 2009 — Marchionne recapped the OEM ended up with a net income for the second quarter of $181 million, excluding a non-cash, non-recurring charge of $551 million from the repayment of government loans.
The CEO also highlighted worldwide vehicle sales climbed 19 percent versus the second quarter of last year, and “our sales growth is outpacing the market.”
In the U.S., Chrysler’s second quarter market share settled at 10.6 percent, up from 9.4 percent a year earlier. And in Canada, the automaker’s market share climbed to 14.9 percent in the second quarter, compared with 12.9 percent in the same period in 2010.
Marchionne believes that vast improvement stems from 16 all-new or significantly refreshed units coming into the market during the past 19 months.
“We have undertaken a profound transformation of our organization, introducing a new culture based on meritocracy and accountability,” Marchionne insisted.
“This transformation goes all the way to the manufacturing plant floor, where our processes are designed to free up employees to use their abilities and experience to eliminate waste.
“The people that work at Chrysler today have acquired the courage to strive for greatness. They have embraced the challenge of competition. It is a notion that is cherished and nurtured. It is a mindset that has produced results,” he went on to say.
Cautious Approach as Labor Talks Begin
While the majority of Marchionne’s comments stressed the rebound Chrysler has made, it all brought the CEO to a potential pitfall — negotiations with United Auto Workers.
Marchionne stressed that he was not using the conference platform to engage in public negotiations. However, he did acknowledge the early tone of contract dialogue has been productive.
“The leadership teams of both Chrysler and the UAW are committed to crafting a future path that rewards employees for the success of the company while ensuring Chrysler will be able to remain competitive.” Marchionne noted.
“Given our experience over the past few years, our near-death experience, we have a duty to acknowledge our responsibility to the American public, to the Obama administration and to all employees whether hourly or salaried,” he continued.
“The obligation that sits squarely on our shoulders is to craft a responsible agreement that preserves and safeguards the ongoing competitiveness of Chrysler while allowing our people to share in the potential wealth that a viable carmaker can ultimately yield,” he added.
Staying Focused on the Future
In closing his speech, Marchionne emphasized Chrysler has learned to look at its future quite differently because of the turmoil it has endured during the past couple of years.
“We have a level of awareness and understanding of the world that is different from anyone else’s, that makes every moment rare and precious,” Marchionne explained. "And we should never forget the experience we have been through, but rather, we must treasure it every day.
“Being survivors has not only empowered us to pull out the best in ourselves, in our work and for the company, but it also has had an impact on our personal lives and, in the end, made us better people,” he added.
Continuing with his theme of analogies beyond the auto industry, Marchionne tried to compare Chrysler’s resurgence to other events he believes are even more noteworthy, such as Lou Gerstner’s resurrection of IBM, Robert Oppenheimer’s experiences with the team that built the atomic bomb in the Manhattan project and Bill Clinton’s victory in the 1992 presidential race.
“But the common element with all of them is that they leave an indelible mark on the formation and growth of leaders. They are changed forever,” Marchionne pointed out.
“We have changed forever, because we now know that ultimately, regardless of the circumstances, we have the power to refuse our consent,” he continued.
“We have an obligation to refuse our consent to decay, to disengage from competition, to industrial neglect, to wasteful activities, because ultimately, consenting to these things is a denial of our right to live and to our obligation to protect the welfare of our people,” Marchionne concluded.
The entire text of Marchionne’s speech is available here.