Chrysler on a Comeback Track

Chrysler Group LLC is on a turnaround. Since it filed for bankruptcy protection in 2009, it has found new vigor under new leadership. When Sergio Marchionne, Chrysler’s detail-driven Chief Executive, took control over management, Chrysler dramatically narrowed its losses in the fourth quarter and 2010. Now it’s predicting it would post a net income of US$200 million to US$500 million this year.

Who is Sergio Marchionne and how did he do it? Firstly, he’s a 58 year-old Italian. He didn’t rise from the ruins of Pompeii, but instead received his education in Canada. He has a knack for leadership by managing the smallest of details to the point that he chooses which music to play for company presentations.

Secondly, Marchionne replaces executives who don’t deliver. He’s like a henchman of sorts, but it seems in a good way. He has brought back the speed and the drive that Chrysler used to have. The result: Chrysler vehicles are starting to look and drive better. More importantly, the company’s costs are under control.

Sergio Marchionne
Sergio Marchionne

Only last year, dealers of Chrysler, Dodge and Jeep were in sales and marketing limbo. They were afraid they could never get it through the year. Sales were down and the company sunk. The company needed a US$12 billion government bailout just to survive in 2009. For many years debts were taller than the proverbial Mt. Everest and there were no new cars produced and only very few hit cars. The future was bleak.

Marchionne, when he stepped on board the sinking Chrysler ship, didn’t take this sitting down. He pushed engineers and designers to make big changes, to make new technology and designs, something that never happened under the company’s previous management. That encouragement led to 16 new or revamped models last year. That’s including new 11 models in the fourth quarter alone. Of the 16, five were rebuilt from the ground up in under two years, much faster than the normal three or four years. They include the 300 big sedan, the Jeep Grand Cherokee and Dodge Durango SUVs, Dodge Charger muscle car and the Fiat 500 minicar.

Just to give you a feel of how Marchionne sees the urgency of revamping models, the Chrysler 200, a midsize car, has new features such as LED headlights and a quieter mounting system. This is a big improvement in terms of quality when compared with the 200’s predecessor, the Chrysler Serbing. Together with this eye for quality, he pushed the 200 to come out faster. He approved the car’s interior in three days much faster than the two weeks it normally took previous CEOs.

Chrysler’s new Jeep Grand Cherokee’s sales rose to 70 percent last year since it came out in June.

However, the quest for profits has not yet been totally reached. Unlike its rivals Ford and General Motors from Detroit, Chrysler hasn’t posted a quarterly net income since it left bankruptcy in June of 2009. Chrysler reported a US$199 million in losses during the fourth quarter and a loss of US$652 million in 2010. But this is an improvement way better than the US$8 billion it lost the previous year.

Lastly, Marchionne aims to make Chrysler profitable before its stock can be publicly sold. Just like a phoenix rising from the ashes of Pompeii, Chrysler’s goal is to achieve that for the end of this year. This is crucial because it will allow the US government to unload its stake in the company, which is currently at 9 percent, the percentage Chrysler got in exchange for the bailout.

To accomplish that, Chrysler needs to produce more new cars and trucks with help from its friend – Fiat. Although Chrysler has upgraded many of its older models, and that they perform better, they still look old.

Chrysler is on a comeback, a momentum that any company needs. But will Marchionne be able to achieve the projected US$500 million net income? We don’t know, but gold is purified by fire.