Perhaps lost amid all the recent and very loud buzz about Chrysler becoming essentially a government-free car company was news of a major management shuffle with long-term implications. They beg the question: is Chrysler's leadership becoming burned out?
It's a good and fair concern. Rebecca Lindland, an analyst at Lexington, Mass.-based IHS Automotive, told the Detroit News: "People at Chrysler have been working non-stop for two years to revitalize these brands. The stress, the dedication - they have really been paying their dues, and [Chrysler CEO] Sergio (Marchionne) may be looking for a little bit of a fresh start. You want to avoid burnout."
In what seems to be an initiative to avoid just that, Canadian Ralph Gilles is out as head of the Dodge brand, though he will continue to oversee all Chrysler design activities for all the brands and also take on responsibility for a new brand - Street and Racing Technology or SRT which had been nothing more than an in-house engineering group.
This makes some sense. Gilles has plenty on his plate running design, but he's also a gearhead of the first order and loves fast cars and racing in all its forms. SRT will build low-volume, high-performance vehicles for Dodge, Chrysler and Jeep. By this fall, the Auburn Hills, Mich., auto maker will grow the SRT line from one model now, based on the Dodge Challenger, to four this fall by adding SRT versions of the Dodge Charger, Jeep Grand Cherokee and Chrysler 300C.
Then there is Canadian Reid Bigland. He is keeping his job as CEO of Chrysler Canada, but is adding CEO of the Dodge car brand and also responsibility for U.S. sales. Bigland may never see his Windsor, Ont., home again, he'll be on the road so much with his three jobs.
With other moves at the various Chrysler brands - up to five now with Chrysler, Dodge, Jeep, Ram and SRT, not to mention Fiat - Fiat-Chrysler CEO Marchionne will have 24 direct reports. That is a huge number, but Marchionne, truly a global citizen of business, seems to thrive with whirling dervish motion, jetting from country to country, continent to continent.
And there is no denying what he and an energetic Chrysler team have accomplished: repaying $7.6-billion (U.S.) in U.S. and Canadian government loans with private borrowing, along with Fiat SpA reaching a deal to pay the U.S. Treasury $500-million to buy its remaining 6 per cent stake in Chrysler. Fiat has also offered $125-million to the Canadian government to acquire its 1.7 per cent stake in Chrysler Group LLC, but as of this writing, no deal had been done.
Even without the Canadian deal, the Italian auto maker essentially has a 52 per cent majority stake in Chrysler. A United Auto Workers trust now owns 45.7 per cent of Chrysler. A merger of Fiat and Chrysler is planned, though not likely this year, Marchionne said on May 25. He has also talked about selling Chrysler shares to the public this year or next, too, though that may not be necessary or even advisable. Fiat also has an option to acquire 40 per cent of the original stake held by the UAW trust.
The reinvention of Chrysler is not finished and it's far too soon to declare "Mission Accomplished." But Chrysler has managed to repay government loans four years early. Not bad. Those who suggested Chrysler and the other Detroit auto makers - particularly General Motors which, like Chrysler, went through a bankruptcy cleansing - should not be bailed out with government help clearly have some explaining to do. Haven't the bailouts worked for Chrysler and GM, at least so far?
Ford, of course, reinvented itself the old-fashioned way - by borrowing $23-billion from the private sector, and deserves extra credit for this. Together, Detroit's auto makers are growing market share lost by a stumbling Toyota and Japanese rivals shaken by the devastating March 11 earthquake, tsunami and nuclear aftermath. Ford and GM are among the most profitable auto makers in the world. Chrysler, with dramatically reduced interest costs running to about $1-billion last year, should now be profitable on a consolidated basis, as well.
No one should underestimate the monumental restructuring overseen by the Canadian-educated Marchionne. While somehow managing to maintain cash flow with sales in an historically weak U.S. car market, he has moved to mould Fiat and Chrysler together. The goal appears to see Fiat-Chrysler run as one company, overseen by a group of 25 or so managers. Trade journal Automotive News suggests Marchionne may announce the group before the end of the year.
Most important of all, Chrysler needs to grow its sales and profits going forward. Bloomberg reports that Chrysler Group global automobile sales in May rose 11 per cent from a year earlier, but that lagged Marchionne's goal for 2011. He wants a 32 per cent growth rate this year. At least, Canada is a bright spot. Chrysler's sales here rose 17 per cent last month to 24,406.
A weaker than expected global economy due to a host of factors has slowed Chrysler's growth plan. Marchionne wants Chrysler to sell two million vehicles this year and turn its first annual net profit since emerging from bankruptcy reorganization in 2009.
As for profits, Chrysler's net profit for the first quarter was $116-million (€78.6-million) - double Fiat's €37-million net profit for the same quarter. Fiat is struggling to make money in Europe, where the overall economy remains a basket case. In fact, it's possible that Chrysler will earn more money this year than Fiat. What a reversal of fortunes.
Marchionne had masterminded the taking over of Chrysler and has consistently argued that the only way for the two companies to survive and thrive is for them together to become the fifth- or sixth-largest auto maker in the world.
If Detroit's smallest auto maker manages this turnaround with its Italian partner, we'll be looking at one of the great business and human interest stories of all time.