The Marchionne revolution at Chrysler
Can the Fiat CEO repeat Carlos Ghosn's miracle revival at Nissan?
NEW YORK (Fortune) -- Ten years ago, an unknown Renault executive stood in front of a packed audience of analysts and reporters at the Tokyo Motor Show and made a declaration that almost no one believed.
Carlos Ghosn vowed to make Nissan -- which had been losing money for years -- into a profitable, globally competitive company again. Moreover he outlined, with unprecedented specificity, exactly how he planned to do so, and when. Then he promised to resign if he did not meet the financial targets he set out for the company.
The rest, as they say, is history. Ghosn beat his own schedule for making Nissan profitable, and, following a series of three-year plans, made into a serious contender again.
The other day in Auburn Hills, Mich., Fiat CEO Sergio Marchionne took a page out of the Ghosn playbook -- and then improved upon it.
Like Ghosn, Marchionne set out detailed financial targets for the formerly bankrupt Chrysler and said when he planned to meet them. And while he didn't promise to resign should he fail, he made it clear that he is putting his reputation for corporate rescues -- earned with his much publicized turnaround of Fiat since taking charge in 2004 -- on the line.
Then Marchionne did something unprecedented: He revealed his product plans by segment and brand for the next five years. Most companies guard the secrecy of their plans the way the New England Patriots guard their playbooks, but Marchionne was serving notice that he is serious about reviving Chrysler.
In some ways, Marchionne has it easier than Ghosn. Ghosn had a lot of cost-cutting to do at Nissan: He closed plants, laid off workers, divested subsidiaries, sold cross-shareholdings.
At Chrysler, all of that work was done by the bankruptcy court, so Marchionne takes over with one of the cleanest balance sheets in the industry.
And where Ghosn ran Nissan (and still does) with his eye firmly fixed on the profit-and-loss statement, Marchionne plans a more ethereal approach. It is clear that marketing is his first love, and so he expects to boost Chrysler by redefining its brands and revamping its advertising.
Both Marchionne and Ghosn made it clear where the buck stops.
At the Tokyo event in 1999, Ghosn was all but alone on the stage, and he answered all the questions from the audience.
Marchionne called on all 24 of his direct reports to help him answer an hour-plus worth of questions -- and still answered most of them himself.
But where Ghosn remains a numbers-grinder at heart, Marchionne clearly intends to return some romance to the auto business. His sentiment was most evident in his closing statement, which came more than eight hours after the beginning of the Auburn Hills session. Wearing one of his trademark baggy sweaters and a plaid shirt, he elaborated on his plans for Chrysler with quotes from Machiavelli, Bill Clinton, and vocalist Bobby McFerrin.
It was somewhat mysterious, but it effectively set Marchionne -- and Chrysler -- apart from others in the industry with the emphasis on brand and image not just for Chrysler's car lines but for the CEO himself.
At this point in Chrysler's turnaround, Marchionne has won over few supporters with his upbeat story. New products are a long way off and are of uncertain appeal; competition has never been stronger. The notion that Chrysler can more than double its sales volume in five years and add significantly to its U.S. market share seems farfetched to analysts, dealers, and observers.
The auto business has changed significantly in just the past year. General Motors and Toyota (TM), once the leaders, have been humbled, while Volkswagen and Hyundai-Kia are on the rise. China is about to replace the United States as the world's largest single auto market. And the internal combustion engine is on the way out, as electricity begins to replace oil as the principal fuel.
Yet, if there were ever a company ready for a rebirth, it would be Chrysler. It responds well to charismatic leaders like its founder, Walter Percy Chrysler, and its rescuer, Lee Anthony Iacocca. And Chrysler's trimmed down cost structure positions it for a fast rebound.
Like any great leader, Marchionne has made his entrance just when things are looking darkest. He has been holding back on advertising spending and is ready to make a splash. If his timing is correct, historians 10 years from now may be writing about the Marchionne miracle of 2009.