Marchionne is a believer in city of Detroit

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COVER STORY ◆CHRYSLER'S FEARLESS GENERAL
WWW.FREEP.COM
SUNDAY, JAN. 8, 2012
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Marchionne is a believer in city of Detroit
H
ere’s what Italian-born,
Canadian-educated Sergio
Marchionne, the CEO of Chrysler and Fiat, thinks of Detroit:
“This town has got nothing
to apologize about. The quality
of life here is underestimated,
and the quality of the work that
goes on here … is underestimated,” he told the Free Press
in a wide-ranging interview.
Last week, Marchionne
backed up that talk with action,
announcing a third shift and
1,100 new jobs at Chrysler’s
Jefferson North assembly
plant in Detroit, plus 150 jobs to
reopen the nearby Conner
Avenue plant and build the
2013 SRT Viper.
Oh, and he signed on to
chair the 2012 fund-raising
campaign for the United Way
for Southeastern Michigan.
Next move: Look soon for
Chrysler to occupy office
space in downtown Detroit and
move 50-70 people there, mostly sales staff to work with its
dealer network in the Great
Lakes region. Chrysler is in
“the final stages” of concluding
a deal for that space, said
spokesman Gualberto Ranieri.
He declined to name the location because the contract has
not been signed.
Preserve and build
Marchionne isn’t trying to
tout himself as some sort of
savior for a downtrodden city.
He knows that a few dozen
office jobs in downtown Detroit are a drop in the bucket
TOM WALSH TALKS WITH
CHRYSLER CEO ABOUT
HELPING THE MOTOR CITY
compared with the massive
out-migration of Chrysler’s
corporate campus from Highland Park to exurban Auburn
Hills two decades ago under
then-CEO Lee Iacocca.
And Marchionne is definitely not leaving the gleaming
504-acre Chrysler Headquarters and Technology Center in
a quixotic crusade to rescue
Detroit’s distressed core.
“We’re looking for ways in
which we can make a contribution,” he said, when I asked him
how Chrysler — now majorityowned by Italy’s Fiat — came
to embrace the “Imported from
Detroit” theme in its celebrated marketing campaign.
Post-bailout Chrysler, he
suggested, has the ideal underdog culture for carrying the
banner of Detroit.
“We’re the scruffy guys,
right?” he said. “We’re the
guys that have got sort of this
mutt DNA because of the fact
that we ended up being here
and a lot of people thought that
we shouldn’t be here, right? I
mean we were sort of usurping
somebody else’s right to live.
“We found ourselves totally
legitimate in sort of defending
this town because a lot of the
people are incredibly skeptical
of the ability of this town to
really make a comeback.
“It’ll never be what it was,”
he said of Detroit. “I mean,
don’t go back and try and relive
history. It won’t happen. But
preserve what’s preservable
and build on it.
“Our people have always
believed,” Marchionne said,
“and we need to make an effort
because I think we can help.
It’s a worthwhile cause.”
Stick your face in it
Marchionne, a classical
music buff, said he attended a
Detroit Symphony Orchestra
performance of Handel’s “Messiah” in mid-December and
“IT WOULD BE GREAT IF, FROM A
CORPORATE STANDPOINT, A LOT OF
PEOPLE … SAID, ‘YOU KNOW WHAT, I’M
GOING TO GO DOWN AND DO SOMETHING
IN DOWNTOWN DETROIT.’ ”
SERGIO MARCHIONNE, Chrysler and Fiat CEO
2009 PHOTO BY JOE WILSSENS
Chrysler CEO Sergio Marchionne addresses employees at the Auburn Hills headquarters. Chrysler has
embraced Detroit with its “Imported from Detroit” ads and will soon move some workers downtown.
was wowed by the quality of
the orchestra, the venue’s
acoustics and a choir that was
as good “as any European choir
I’ve heard — any.”
Interestingly, Marchionne
isn’t the only European auto
executive perplexed by the
long-term exodus of people and
investment from Detroit.
Dieter Zetsche, Chrysler
CEO from 2000-2005, when the
company was under German
control, told me in 2003: “I’m
always surprised that people
don’t understand and just do
not care about Detroit. I think
that is very wrong.”
He noted that suburbanites
didn’t seem to worry as long as
things were OK in Oakland
County.
“Unfortunately,” Marchionne told the Free Press,
“there are a number of people
that have made a lifestyle
choice to live on the fringes of
the problem and not in the
problem. I think it would be
great if, from a corporate
standpoint, a lot of people stuck
their face in it and said, ‘You
MARCHIONNE: CEO is auto exec of the year
FROM PAGE 1A
The man is juggling more titles than
most people could remember: CEO of
Chrysler, CEO of Fiat and chief operating officer of the NAFTA region. He also is chairman of Fiat Industrial and
chairman of CNH Global, an affiliate of
Fiat Industrial.
Marchionne is a lawyer and accountant by training who took the reins at
Fiat in 2004 as it languished near death.
He had run a Swiss-based pharmaceutical company, Lonza Group, and engineered the sale of Algroup to Alcan
when he was CEO of the Swiss aluminum manufacturer. But he had no prior
automotive management experience.
He had been on the Fiat board of directors since 2003, where he impressed
John Elkann, the heir of Fiat’s founding
Agnelli family.
It has been nearly eight months
since Chrysler repaid $7.6 billion in
loans from the U.S. and Canadian governments.
Now, Marchionne is shooting for
combined annual sales of nearly 6 million cars and trucks for Fiat and Chrysler by 2014. If he achieves his goal, Marchionne will have saved two automakers in less than a decade.
“Without Sergio Marchionne, America’s No. 3 automaker would almost
surely not exist today,” Steven Rattner,
former head of President Barack Obama’s automotive task force, wrote in a
2011 profile of Marchionne in Time.
Marchionne has a tremendous capacity to devour new ideas and data,
said Ralph Gilles, Chrysler’s design
chief and CEO of Chrysler’s newly
formed SRT brand.
“He’s got some kind of a mega Pentium processor in his brain,” Gilles said.
The Battlefield
Marchionne talked to the Free Press
about his management style, Chrysler’s future products and its progress
since bankruptcy from the company’s
conference room 4E, which he calls
“the Battlefield.”
The U-shaped room is equipped with
flat-screen computer monitors and
movable microphones for each executive. An espresso machine sits off to the
side. Executives, or at least the CEO,
are allowed to smoke here.
On the wall above Marchionne’s
chair and slightly off to the side is a
poster for Dodge that says, “Give a
SHIT,” a battle cry adopted by Gilles
and Dodge’s advertising agency to signify the difference between the preand post-bankruptcy Chrysler.
Chrysler’s espresso culture
In a little more than two years, Marchionne has drawn the best from Fiat’s
technology and Chrysler’s design-driven heritage with a finesse that Daimler
never approached in the decade it
owned Chrysler.
He has sped up decision making by
introducing an organizational structure that gives executives two jobs: one
that is brand specific and another that
involves an operational role.
“We designed an organization that
has two objectives,” Marchionne said.
“One is to breed my successor, and se-
know what, I’m going to go
down and do something in
downtown Detroit.’ ”
Easy to say, perhaps, for a
globe-trotting executive who
spends much of his time on
airplanes.
But to anyone who doubts
Marchionne’s intent or ability
to make an impact in Detroit,
just remember, there are legions of people who thought
both Fiat and Chrysler would
be corporate corpses by now.
❚ CONTACT TOM WALSH: 313-223-4430 OR
[email protected]
Sergio
Marchionne
unplugged
Fiat and Chrysler CEO Sergio
Marchionne took time in early
December to talk to the Free
Press about Chrysler’s comeback
and other issues. Here are some
highlights.
Question: Did you get more
involved in the planning of
the Dodge Dart than you normally would for most vehicles?
Answer: Yes, because it was the
first rollout of the Fiat endowment of architectures, and so the
execution of that transfer of technology was crucial.
MAY 2011 PHOTO BY JARRAD HENDERSON/DETROIT FREE PRESS
Chrysler CEO Sergio Marchionne is leading the automaker’s rise from its 2009 bankruptcy, with soaring sales and the early
repayment of government loans. He’s on the way to saving two automakers in less than a decade, having already saved Fiat.
TONY DING/ASSOCIATED PRESS
condly, one that will survive me.”
Marchionne is known for taking
control of small details while granting
his management team wide-ranging responsibilities.
“You get a huge amount of rope here
when you sit on the management
team,” Marchionne said. “The rope
comes back incredibly quickly the minute that you start falling off the tracks.”
Fiat 500 fiasco
Marchionne pulled that rope back in
November when Laura Soave, head of
Fiat North America, left the company.
Chrysler had hoped to sell 50,000
Fiat 500s in North America after the
brand’s 28-year absence here, but sold
only 26,294.
“We kept on getting information
back that the dealer network was coming on stream,” Marchionne said.
Delays in licensing, building permits and renovations delayed the opening of many Fiat stores until late 2011,
as well as a national ad campaign.
“We launched the car a year early,”
Marchionne said. “That’s the bottom
line.”
Lightning rod
Marchionne is a lifelong poker player and fearless when it comes to highstakes negotiations, according to
“Mondo Agnelli: Fiat, Chrysler and the
Marchionne
talks to thenGov. Jennifer
Granholm at
the 2010 Detroit auto
show. Marchionne is the
Free Press’ auto
executive of
the year in the
inaugural Automotive Leadership Awards.
Power of a Dynasty,” a book by Jennifer Clark.
On Sept. 14, with two hours left before Chrysler’s four-year labor contract with the UAW was to expire, Marchionne issued a letter scolding UAW
President Bob King for missing a prescheduled meeting.
Marchionne had flown back from
Europe only to find King tied up in negotiations with General Motors.
“I know that we are the smallest of
the three automakers here in Detroit,
but that does not make us less relevant,” Marchionne wrote.
He and King mended fences. Chrysler and the UAW hammered out an
agreement that was ratified in October.
Marchionne has since praised King and
exchanged even harsher words with
some Italian unions that Fiat negotiated with in 2011.
Last year, Marchionne pulled Fiat
out of Confindustria, Italy’s powerful
business lobby, and threatened to move
production out of the country without a
favorable labor deal.
The moves have put Marchionne in
the center of Italy’s effort to reform its
labor practices.
“There are many people that think
that Marchionne plans to move the
headquarters — the brains — of the
company outside of Italy,” said Gianluca Spina, dean of the business school at
Politecnico de Milano in Italy.
Chrysler roars back
Aside from the Fiat 500 stumble,
Chrysler is hitting most of the targets
set in November 2009, when hundreds
of analysts, dealers and journalists
gathered in Auburn Hills to hear Marchionne’s team’s grand five-year plan.
Chrysler should finish the year with
about $55 billion in total sales, hitting
the upper end of the forecasted range.
Chrysler is on track to sell 2 million
cars and trucks this year, about 200,000
shy of the 2009 plan.
The plan calls for Chrysler’s global
sales to increase from 1.3 million to
2.8 million by 2014.
‘We’re 20% done’
But survival isn’t good enough. Marchionne predicts 2012 will be the most
challenging year because the Dodge
Dart is the only major new product
Chrysler will launch.
“We’re 20% done because I think
that most of the industrial choices are
behind us,” Marchionne said.
The Dart is Chrysler’s first car
based on a Fiat-engineered underbody
and aimed at the compact segment that
has been Chrysler’s Achilles’ heel for
years.
“The big stuff is coming in ’13,” he
said.
Next year, Chrysler plans to launch
eight new cars, crossovers or SUVs,
possibly including a Chrysler 100 small
crossover. The company also plans to
introduce redesigns of the Chrysler
200, Jeep Liberty, and a Grand Cherokee diesel engine, and also reintroduce
the Alfa Romeo brand to the U.S.
It likely will take until 2013 to completely merge Fiat and Chrysler.
“The worst is over,” Marchionne
said. “Right now, execution is key because the plans are pretty well laid
out.”
❚ CONTACT BRENT SNAVELY: 313-222-6512 OR
[email protected]
Q: As positive a story as it’s
been here on the U.S. side,
you’re facing a crisis in Europe. Talk a little bit about
how that’s going to affect you
and Fiat.
A: What Europe does going forward remains probably the single
largest issue that I and the management team need to deal with.
Q: How does that affect the
corporate convergence of Fiat
and Chrysler?
A: As a general comment, it
speeds it up.
Q: What are your thoughts on
a possible initial public offering and the timing of it at
this point?
A: Still late 2012 or early ’13.
Q: Are you any closer now to
reaching agreement with the
VEBA (the UAW’s retiree
health care trust) on what the
value is of their stake?
A: We haven’t approached the
topic at all. … We have an obligation to try and deal with them by
the beginning of ’13 in terms of
approaching the capital markets. … We’ll start raising the
topic with them at the end of ’12.
Q: The one area where you
have not performed as well as
expected is the Fiat 500 introduction. How much will
that hurt you going into 2012?
A: It hasn’t hurt us. We launched
the car a year early. That’s the
bottom line. … There’s obviously
another car coming, and then we
need to get (dealers) ready for the
Alfa (Romeo) introduction, which
is coming.
Q: Where is Chrysler at now in
terms of its turnaround plan?
A: We’re 20% done because I
think that most of the industrial
choices are behind us. … The
worst is over. Right now, execution is the key because the plans
are pretty well laid out.
— Brent Snavely