Overstating the Obvious at Fiat Chrysler

It’s been a golden couple of weeks for Fiat Chrysler. Its shareholders meeting, held earlier this month, had the feel of a celebration. Executives reflected on five years of success following Chrysler’s near-death and presented ambitious plans for growth.

Additionally, the automaker has enjoyed a shower of positive comparisons to its fellow bankruptcy survivor, General Motors, which continues to plod through a massive recall crisis. Automotive News reporter Larry P. Vellequette opined that Chrysler learned more from the searing bailout experience than GM. Fiat Chrysler CEO Sergio Marchionne happily added fuel to that fire last week, noting, “We had to prove our right to exist. The other guy [GM] who got the injection was guaranteed survival.”

To all this, I offer a hearty, “yes, but…”

Yes, Fiat Chrysler has done extraordinarily well since bankruptcy. Sales have surged 86 percent since 2009 to essentially regain the U.S. market share it had lost during the nadir of the Great Recession. That recovery comes on the back of some excellent products like the All-Star-winning Ram 1500.

But it’s important to note that the automaker has been buoyed by a recovery in truck and SUV sales, upon which it remains more reliant than either Ford or General Motors. Chrysler is working to change that by introducing several new Fiat-based cars and crossovers. Many of them, including the 2015 Chrysler 200, are quite good. But it will likely take decades of consistent effort for the automaker to rival the likes of Toyota and Honda when it comes to small and mid-size cars.

Yes, there’s a whole lot to like in Fiat-Chrysler’s five-year plan, including the clear and consistent branding for Dodge and Chrysler, the rear-wheel-drive resurgence of Alfa Romeo, and the continued overall investment in passenger cars.

But what that plan lacks is a clear strategy for achieving environmental sustainability. Chrysler’s corporate average fuel economy is low relative to its competition, to the point that it is buying carbon credits from other automakers. The plan for the next few years does include few plug-in hybrids and, of course, more efficient gas engines, but the automaker admits it’ll be buying more credits in the future to “provide time to understand the complex business cases associated with new technologies.” Meanwhile, the automaker continues to pooh-pooh the future of electric cars. Chrysler powertrain chief Bob Lee told investors, “Electrification has been overblown by the media.” Marchionne went so far as to urge Americans not to buy the Fiat 500e it builds in order to comply with California regulations: "I hope you don't buy it because every time I sell one it costs me $14,000.” He’s right of course—electric vehicles are generally not moneymakers at present. But they will no doubt play a critical role in meeting future fuel economy requirements. That’s why every serious automaker, from BMW and Mercedes to Toyota and General Motors, is working furiously on electrification.

Yes, Chrysler’s culture is admirable. Even before 2009, it was the nimblest and most creative of the Detroit automakers. Longtime employees—and there are still quite a few of them—revere the fast-paced, initiative-based culture Bob Lutz established in the 1990s. And whereas most of General Motors’ problems leading up to bankruptcy stemmed from decades of poor decision-making, Chrysler’s ills could be traced more to stingy owners—not to the people who work in Auburn Hills, Michigan.

But let’s not overstate the distinction here. General Motors is essentially being tripped up by terrible products it built a decade ago. The cars Chrysler built in those days were no better. And it’s worth noting that Chrysler suffers from a culture problem of its own: a tendency to bounce from crisis to crisis. Chrysler nearly slipped under the waves in the early eighties, struggled again in the early nineties, and then hit the rocks once more in 2009. In the previous cases, the company managed to recover to full health only to lose focus (or funding) and waste away again.

In order to secure its good footing, Fiat Chrysler is going to need to execute its future products—especially the cars—to perfection. Now, I have no question the automaker is capable of doing just that, but I suggest we wait to see that they do before offering any more congratulations.

Doug S
Remember back then when the Hyundai vehicles were like the Hugo last in quality? Today Hyundai with Kia brother has placed on their staff the best design engineers (from Audi of course) and their RD in revolutionary engine development rivals the best.  To top this off the `10yr 100000 mile warranty is second to none with the extended bumper to bumper the least expensive at a mere $1400. Fiat has bold plans and goals not quite attainable.  They want to sell more vehicles, double todays units per year and every person in Fiat realizes this is the impossible dream.  I call this a business misstep from the man at the top.  Fiat is last in quality and until this is remedied the new informed consumer will buy from Toyota. Nissan. Mercedes. Lexus. Honda and of course Hyundai and Kia.  To fire up your employees and have them embrace a new business model the end result needs to have tangible attainable goals.  CEO Sergio Marchionne  must have yes men all around him to embrace his business plan for the next four years.  Quality should be  #1 and once at the top a new business model of doubling car sales could be met with enthusiasm from every employee and the informed consumer will be flocking to the Fiat showrooms. 

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