Fresh Start for Chrysler is Near
As early as Wednesday, the judge in charge of Chrysler's historic Chapter 11 bankruptcy case could approve a new life-saving partnership with Fiat - a move that signals the automaker could emerge from bankruptcy by the end of June, as originally planned.
It also ushers in a new era of Italian leadership at the Auburn Hills automaker.
Fiat Chief Executive Officer Sergio Marchionne, who has said he would be Chrysler's next chief executive officer, already has been hard at work shaping the new Chrysler, from accelerating settlement of labor agreements to tweaking designs of new vehicles.
So, Chrysler workers, who were led by German officials from Daimler for much of the past decade, will now have to make another cultural adjustment.
"Should Chrysler people expect to see a large number of Fiat executives taking over?" asked Pierluigi Bellini, who has studied Fiat closely for IHS Global Insight in Milan. "Maybe not many of them, but they will be in critical positions to determine new solutions."
Fiat CEO starting changes already
If Chrysler is given approval to join with Italian automaker Fiat this week, the company's official launch likely won't come until a closing that could happen in mid-June.
But already, the new company is taking shape and bears many of Fiat's fingerprints.
Robert Kidder, the head of a Columbus, Ohio, investment firm, will be the chairman of the new Chrysler, a decision that was made by the U.S. Treasury. Eight other Chrysler directors will be named soon - three by the U.S. Treasury, three by Fiat, one by the oversight committee of the UAW's retiree health care trust fund and one by the Canadian government.
Fiat's Sergio Marchionne has said he expects to be Chrysler's next chief executive officer. A Fiat spokesman declined to comment on when Marchionne or other Fiat leaders are to occupy important positions in Auburn Hills.
But offices in Chrysler's executive tower are being prepared for people transferring from Turin, and Fiat managers are already making their mark in Auburn Hills.
Measuring pluses and minuses
Sources inside the company say Marchionne has been looking at future designs as recently as two weeks ago, and he and his team already have examined the good, the bad and the ugly of Chrysler's financial condition.
According to recent court filings, for example, Chrysler only made a profit before taxes and interest payments on two of its 20 vehicle lines last year: Jeep Wrangler and the low-volume Dodge Viper.
It even lost money on its Ram and Dakota pickups and the Chrysler 300 and Dodge Charger, according to an analysis conducted by Chrysler's bankruptcy consultant, Capstone Advisory Group. Traditionally, pickups and larger cars have been profit leaders.
Last month, Marchionne, a skilled negotiator, also jolted the Canadian Auto Workers by threatening to walk away from the partnership if the union did not make greater sacrifices.
Within two days, the CAW agreed to freeze wages, take shorter breaks and give up vacation time. The UAW followed suit two days later, matching most of the CAW's concessions and agreeing not to strike through the fall of 2015.
Fiat stylists also have begun working with their Chrysler counterparts, tweaking design cues on new Chrysler, Jeep and Dodge models coming in the next two years. The first Fiat model to be sold in the United States since the 1970s, the petite 500, won't reach showrooms until late 2010 at the earliest.
Quick and tough
Experts familiar with Marchionne's first days of leading Fiat in 2004 say he emphasized speed and punished internal bickering.
"When he arrived, Fiat had been run by a club of people who had been there forever," said Pierluigi Bellini, an analyst with IHS Global Insight's Milan office. "He brought in a lot of younger people both from inside and outside. He gave them power and responsibility. He is a very quick decision-maker."
Marchionne told the Economist magazine earlier this year that the most important accomplishment in his early days at Fiat was dismantling an organization "that lay outside any proper understanding of market dynamics."
"We tore it apart in 60 days," he said.
In 2005, Marchionne pushed General Motors Corp. to pay Fiat $2.5 billion to get out of an option that would have required GM to buy all of Fiat.
A lawyer and an accountant by training, Marchionne was born in Italy, but raised and educated in Canada.
How much and how fast Fiat can change Chrysler will depend on whether it acquires GM Europe's Opel and Vauxhall brands.
As in its Chrysler bid, Fiat is offering no cash. But it faces competing bids from Canadian supplier Magna International and New York-based buyout firm Ripplewood Holdings LLC.
If he wins the GM brands, however, Marchionne will have his hands full trying to meld at least three new companies and cultures into Fiat.