By on December 7, 2009

In a lengthy, wide-ranging interview with Automotive News [sub], Fiat/Chrysler CEO Sergio Marchionne got an awkward question from AN’s Luca Ciferri.

Your five-year plan forecasts that Chrysler’s operating margin will peak at 7 to 7.7 percent of revenues in 2014. In November 2006, you predicted that Fiat Group Automobiles’ operating margin would peak at 4.5 to 5.3 percent in 2010. How could Chrysler’s post-global recession peak profitability be 50 percent higher than Fiat Group’s pre-global recession assumptions?

Well, Sergio?

Marchionne answers:

For one very simple reason: The Obama administration has done what Europe has been unwilling to do. In November 2006, when I announced Fiat targets for 2010, those margins would have reflected a competitive state of the European car industry which today continues to be unrectified.

In Europe, structural overcapacity has not been addressed, and nationalistic interests continue to prevail over the overall health of the industry. The Obama administration, like it or not, has forced a restructuring on this industry where the emerging companies, post-bankruptcy, are going to be much better suited to drive returns on capital which are adequate with the risks that are being taken.

So I do think that a decent business on the car side which is run efficiently can produce 7 to 7.7 percent in the United States. Is that number possible in the European marketplace given what exists as an industrial landscape? The answer is no.

Too bad then, that Chrysler’s sales have shown no signs of recovery since bankruptcy. After all, Marchionne’s own projections show volume driving profit, and if the volume doesn’t show up, the profit certainly won’t. This lack of volume momentum definitely caught Ciferri’s attention, as he asks

You recently said Fiat and Chrysler together would reach the 5.5-million-unit-a-year level you consider critical for survival. You say Chrysler will be a 2.8 million animal in 2014. When could the 5.5 million target be reached?

To which Marchionne answers:

Certainly before 2014. I mean, the writing is on the wall, right? Half of it is coming out of Chrysler. More [information] on the Fiat side will come on an investors’ day we are planning for the first quarter of 2010.

The only thing the writing is on is Marchionne’s overly-optimistic sales projection, which shows Chrysler adding four percent market share in the US between now and 2014. If you think that’s going to happen, you might be interested in buying a certain bridge in New York. But if the European market is in as bad of shape as Marchionne seems to think, Chrysler might even see stronger growth than Fiat, let alone its troubled Alfa and Lancia brands. Either way, the Fiatsler experiment is in big trouble.

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18 Comments on “Sergio Marchionne Defends Chrysler Profit Plans...”


  • avatar
    Boff

    Fiatsler is doomed…based on a single quarter of sales results? That’s the case being made here?

    • 0 avatar
      Daanii2

      No, the case being made here is that Chrysler’s forecasts seem unrealistic. When challenged on that, Marchionne’s response made no sense. He relies Chrysler being able to take advantage of a revitalized car market in the US. That seems wishful thinking. And in fact the signs we have so far show that is a pipe dream.

      Will Chrysler fail? I don’t know. I don’t have a future-telling crystal ball myself. But I would not invest a penny in the company, if I had any choice about it.  Nor, it seems, would anyone else with any sense. (Including Fiat.)

      Only those who can invest other people’s money with no thought to making a profit — in other words, the United States government — invests in a company like Chrysler. That’s not a good sign.

    • 0 avatar
      Boff

      Too bad then, that Chrysler’s sales have shown no signs of recovery since bankruptcy.

      Could have sworn I read that in the article.

      Maybe Marchionne’s sales forecasts are too optimisitic. But these projections are based on updated product, new product, and the auto market returning to some semblance of health.

  • avatar
    CyCarConsulting

    Judging by the photo, the plan is a lot of praying.

  • avatar
    radimus

    Maybe the unwritten part of the plan is the expectation that GM will implode and disappear before 2014.

    • 0 avatar
      texlovera

      Hmmm.  Chrysler’s future may rely on GM imploding.

      Does GM’s future depend on Chrysler imploding?

      From the perspective of a taxpayer/lessor to both of these firms, I’m not feeling very warm & fuzzy…

  • avatar

    What’s the short German fellow doing in this picture with all the Italians?

  • avatar
    Robert.Walter

    Hope he doesn’t bring Fiat Grande Punto quality to Chrysler …

    This car and it’s steering system has just prompted the largest recall in Fiat’s history (500k units !) for “a possible incorrect tightening of the steering shaft upper joint fixing screw could lead to the breakage of the shaft, with consequent loss of steering control which could lead to an accident”.

    This latest recall comes on the heels of two similar recalls in 2006 (21k units, RHD in UK – Look-out Cammy C.) and 2008 (44k units, LHD)!

  • avatar
    mjz

    Yet another Fiat/Chrysler bashing article. This is becoming tedious. How can you possibly predict that Chrysler won’t achieve their profit projections 4 years from now? You are basing your judgements on a few months of slower than expected post bankruptcy sales. Chrysler hasn’t even ramped up production on all their 2010 models yet (example: Caliber), and they’ve just started to advertise again. They have a huge number of new and revised products coming out beginning in about 6 months time. How the heck do you know how well these new products will be received by the marketplace? Unless you are psychic, it is simply ridiculous for you to bash their profit projections for 2014 based on the current circumstances.

    • 0 avatar
      RNader

      “huge number of new and revised products”

      LOL!

      The well earned bashings are almost, but not quite as tedious as the laughable/ridiculous cheer-leading /out and out misinformation by the likes of you.

      And what do you think the competition is doing while Chrysler scrambles for the last Hail Mary ?

  • avatar
    mjz

    By 2014, Chrysler will have replaced virtually their entire line-up with all-new products. New 300/Charger/Grand Cherokee will be introduced summer 2010, Fiat 500 follows, with heavily revised Sebring/Avenger/Minivans to follow 4th qtr. This will then be followed by all-new Fiat platform cars/suvs/trucks thru 2014.

    Just how is this laughable/ridiculous/misinformation?

    Chrysler had the liveblood sucked out of them by Daimler, was then left for dead by Cerebus. Why don’t you see what the parnership with Fiat delivers before you bash them?

  • avatar
    dan

    The Nation wide BOYCOTT of Chrysler is getting stronger by the day and month. As last months sales have PROVEN without doubt that Chrysler is FINISHED.

    November 2007 sales 161,088
    November 2008 sales    89,813
    November 2009 sales    63,560 (Fiat) Fix It Again Tony) WOW almost 100,000 less sales from just two years ago.

    As you can see the FACT is the Nation wide Boycott of chrsyer is getting stronger by the day . The clueless Chrysler cheerleaders can delude themselves all they want. Chrysler is and will always be a  joke.  Fiat is a joke around the world. In the UK , Germany and france JD powers ranks fiat at the bottom. Keep dreaming Chrysler autoworkers.

    • 0 avatar
      Roundel

      Why do you keep repeating the same sad ignorant argument that if you actually thought for a second is nothing more than useless conjecture.  Are you forgetting some variables…. like the economy?
      Trying to compare the likes of Fiat to Cerberus is laughable and makes it clear that you don’t understand the key differences between the companies.
      MJZ’s point is valid and the only one that could stick. We aren’t psychic and its clear we don’t know where the market is headed. But to write it all off know is just taking the lazy route.
      Don’t you want a return on on your money, or would you rather sit and pout and have all of our money wasted over some “principle”

  • avatar
    porschespeed

    While I don’t think anyone would disagree that Daimler cleaned them out, and the nasty puppy was even worse,  they are the walking dead.

    I love optimism, but there’s nothing in Chryco’s portfolio that will carry the company for the next 2 years, let alone 4. Other than Uncle Sugar money, of course.

    One does not need to be psychic to know the economy is not going to be significantly better 4 years from now. So, as the sales environment is not getting any rosier, how’s Chryco grabbing market share?

  • avatar
    NickR

    Wait, there is hope!  I sat in a Camaro and didn’t fit, and Ford pissed me off (not the dealer, the company), and I fit in a Challenger.  One sale in the offing. Woot!  Woot!

  • avatar
    mjz

    porschespeed:

    Chrysler will have all-new versions of some of its highest volume and most profitable products in about 6 months time: new 300/Charger/Grand Cherokee. A year from now heavily revised Minivans/Sebring/Avenger. Plus Fiat 500 intro. How can you say they will have nothing new to sustain them for the next two years? That is just completely inaccurate.

    And you claim to know that 4 years from now, the market will not be significantly better. Really? And just how have you devined this information? I don’t think anyone can predict out 4 months from now, let alone 4 years.

    I am really sick of all the Fiat/Chrysler bashing when they haven’t had a chance to execute any of their plans yet. This biz requires months/years to make revisions and create new products. Fiat has just recently taken the helm, and everyone expects a miraculous turnaround in a few months. That’s just completely unrealistic. If their new products, when they hit the market, are absolute crap, I’ll be the first in line to call them on it, but let’s at least give them a chance.


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