Chrysler Group LLC employees on Wednesday officially met the new boss — and he’s not like the old boss — nor does he intend to run the automaker the same way.
In his first day on the job, CEO Sergio Marchionne announced sweeping changes including his senior management team and a reorganization that will force every brand to be profitable on its own.
Wednesday was day one for the new company formed by combining the assets of bankrupt Chrysler LLC with technology and management expertise from Fiat SpA. The way for the deal was cleared when the U.S. Supreme Court put an end to the appeals of a group of Indiana pensioners late Tuesday.
About 4,000 employees gathered in Auburn Hills on Wednesday afternoon to hear from Marchionne, who is also CEO of Fiat and will move from a makeshift office in a conference room to a real office as he intends to spend a lot of time in Metro Detroit.
Over the course of an hour, they also heard from Robert Kidder, who will chair the nine-person board of directors.
The low-key start of operations was in contrast to the event that included bungee jumping off the headquarters when Cerberus bought Chrysler in 2007 or the taking over of the New York Stock Exchange in a giant celebration on the first day of trading when DaimlerChrysler was created in 1998.
But the times are different. The pall of bankruptcy has barely lifted, thousands of jobs have been lost and plants closed.
The new management team was frank: The American icon has been given a second chance, but it cannot be squandered because there won’t be a third, people who were at the event said. Marchionne encouraged those still with the company to ensure the sacrifices of their colleagues were not for naught.
Already, Marchionne has announced a new team of 23 who report to him, including at least three colleagues from Fiat. Some top Chrysler officials, including the heads of product development, sales and the chief financial officer are not part of the new company. Among the changes: former Chrysler LLC Vice Chairman Jim Press becomes deputy CEO and special adviser to Marchionne; Fiat Chief Financial Officer Richard Palmer takes on the same position at the new company; and ousted Chrysler CFO Ron Kolka will oversee the wind-down of the bankrupt Chrysler still in court.
Chrysler Group is being reorganized around four brands: Chrysler, Jeep, Dodge and Mopar, the parts division. The heads of each report directly to Marchionne, and each division is accountable for its own profits and losses, with back office functions being put in place to support this new way of doing business, mimicking how Fiat is organized. It’s a good strategy, said analyst Jim Hall of 2953 Analytics in Birmingham.
Unlike the marriage to Daimler, “this is not a merger,” said Joe Phillippi of AutoTrends Consulting Inc. in Short Hills, N.J. “This is a sale out of bankruptcy, one of the first in the modern era.”
And “the Germans didn’t want to share their technology with a volume carmaker,” Phillippi said, whereas that is the motivation for Fiat.
No qualms on badging
Unlike with Daimler, Fiat has no qualms about badging Fiat vehicles as Dodge or other brands.
When the new tiny Fiat 500 is sold in the U.S. within two years, Hall expects it to be called just the 500 with no brand name attached.
Whether the new Chrysler can survive until then will depend on the economy, and Hall does not see Chrysler as more disadvantaged than its competitors in that respect.
The vehicles that will sustain Chrysler in the interim are the high-volume, high-profit Dodge Ram and minivans. Adding luster, Hall said, but not necessarily volume because they are in shrinking segments, will be the new Jeep Grand Cherokee next year followed by the new Chrysler 300 and Dodge Charger.
Chrysler also will benefit from Fiat efficiency in manufacturing, especially engines where the Italian automaker is “astonishingly good at engine production,” he said.
“We intend to build on Chrysler’s culture of innovation and Fiat’s complementary technology and expertise to expand Chrysler’s product portfolio both in North America and overseas,” Marchionne said.
The new CEO said the Chrysler plants, which have been idled since Chrysler filed for bankruptcy April 30, “will soon be back up and running, and work is already under way on developing new environmentally friendly, fuel-efficient, high-quality vehicles that we intend to become Chrysler’s hallmark going forward.”
Production to resume
Most Chrysler plants are expected to resume operations later this month, if demand warrants given slow sales.Fiat starts in the new company with a 20 percent stake in the partnership. According to bankruptcy court documents, the U.S. government owns 9.85 percent; Canada owns 2.46 percent; and a United Auto Workers retiree health care trust fund gets a 67.69 percent stake. Fiat can eventually increase its stake to 35 percent.
The White House praised the deal in a statement, calling it a “proud moment in Chrysler’s storied history. The Chrysler-Fiat alliance has now exited the bankruptcy process and is poised to emerge as a competitive, viable automaker.”
The U.S. and Canadian governments are financing the Chrysler sale with $2 billion and are loaning the new company $6 billion for operations.
Outgoing CEO Robert Nardelli said he thinks the new Chrysler will be successful.
“What I have learned along the way is that Chrysler people also have the resolute heart of a scrappy underdog. This is a company that has been knocked down many times, but never knocked out,” he told employees in an e-mail.
He also praised the local community.
“I also want to express my deep appreciation to the entire Detroit-area community for welcoming and accepting me during my time with Chrysler. In my many years in business, I have worked in 14 different cities,” he said. “Detroit and the auto industry have done so much to shape our country’s history, and I feel tremendously proud to have been a part of this dynamic community and a company so committed to its revitalization.”