Chrysler lays out lofty revival plan

But its Fiat managers face hurdles in achieving ambitious performance and new product goals

Alisa Priddle and Christine Tierney / The Detroit News

Auburn Hills -- Chrysler Group LLC Chief Executive Sergio Marchionne laid out an ambitious, detailed plan Wednesday to revive the struggling Auburn Hills automaker by replenishing its lineup with high-quality and attractive models to more than double sales within five years and start generating profit in 2011.

His bold program for Chrysler, which resembles his turnaround plan for Fiat SpA's Fiat Auto a few years ago, focuses on rebuilding Chrysler's bruised brands. By offering Chrysler immediate and unfettered access to Fiat's engineering, technology and fuel-efficient engines, Marchionne and his team hope to start turning out improved vehicles quickly.

"Seventy-five percent of the current vehicles will have been touched in the next 14 months, and 100 percent will be renewed by 2012," Marchionne said during a full-day presentation here of the five-year plan for Chrysler.

Under the plan, Chrysler is expected to recover lost market share in the United States and dramatically boost overseas shipments, including vehicles that it will build for Fiat. Chrysler's global sales are forecast to grow from 1.3 million vehicles this year to 2.8 million by 2014.

On an operating basis, Chrysler will break even next year and start producing net profit in 2011. By 2014, the last year of the plan, the automaker is expected to show net profit of $3 billion, it will have fully repaid its loans to the U.S. and Canadian governments, and it will have slashed its debts by half to $4 billion.

Marchionne and his management team, a mix of executives brought over from Italy and promising managers at Chrysler whom he promoted, have been working in secret on the plan since Chrysler emerged from bankruptcy in June. "We've laid out our plans and have become accountable for the delivery," Marchionne said.

"Some of you are going to walk out of here totally skeptical and some of you will be outright incredulous. I understand. I've been here before," he said, referring to a similar reaction in 2006 to his plans for Fiat.

As Marchionne embarks on this latest rescue effort for Chrysler, he faces big challenges and strong headwinds. Auto markets are expected to remain weak for years, and most financial analysts anticipate Chrysler's share of the U.S. market will continue to dwindle from today's 9 percent.

Most of Chrysler's rivals have been working for years on improving quality and developing more appealing vehicles and have a solid lead on the smallest of Detroit's Big Three.

Several analysts attending Wednesday's event said the remedial measures were generic. "Everyone's trying to do the same thing," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. Still, Cole was impressed by the logic of the plan and the sense of urgency Marchionne conveyed. In addition, he said, "the youth of the team kind of brings energy and enthusiasm to the process."

Olivier Francois, president of the Chrysler brand, gave an impassioned description of his feelings for that marque, which has lost much of its luster in recent years. "Sometimes you get a clear vision from afar," said Francois, who previously turned around the stylish Lancia brand that will be Chrysler's partner.

All of Chrysler Group's four vehicle brands -- Chrysler, Dodge, Jeep and the new Ram truck standalone brand -- are expected to benefit either by sharing components, platforms, or engines and technology with Fiat vehicles.

But the Chrysler brand will be the biggest winner, said Joseph Veltri, head of product planning. In 2012 and 2013, the Chrysler brand will get four all-new vehicles based on Fiat architecture, while Dodge will get three Fiat-based passenger cars.

Vehicles that aren't slated for a full redesign for a few years will be refreshed with substantial modifications inside and out.

Officials said Chrysler is working hard to improve quality. "We're not in denial in relation to the public perception of quality at Chrysler," said quality chief Doug Betts, who worked previously at Toyota Motor Corp. and Nissan Motor Co. Chrysler now has 1,500 people addressing its poor quality, focusing on manufacturing and "perceived quality" issues visible to the customer, Betts said.

Industry experts were impressed by the forthright emphasis on the issue. "Their quality reputation is dismal right now, and you don't change that in a couple of years," said Jack Nerad of Kelley Blue Book.

The plan did not entail plant closures or layoffs, which were executed before and during Chrysler's bankruptcy earlier this year. But the automaker is rigorously holding down costs. "The parsimoniousness comes from the top down," said Chief Financial Officer Richard Palmer.

Marchionne, hoping to dispel any sense that Chrysler is burning through money, said the automaker had $5.7 billion at the end of September, up from $4 billion at the end of June.

Chrysler also is adopting Fiat's manufacturing system, which resembles the Japanese methods that give assembly line workers more responsibility and focus on eliminating waste.

Union leaders hailed the promise of overhauling how plants operate. The "world class manufacturing" concept also eliminates a layer of management. "We're very excited that we can roll out the concept to all our facilities," said United Auto Workers Vice President General Holiefield, head of the Chrysler bargaining unit. "What Fiat is doing is invigorating."

It's still not clear if any of the eight plants slated to close by the end of 2010 can be saved, Holiefield said. He said the UAW and the automaker are in daily discussions on how to save U.S. plants from being closed.

Plant workers will learn details of the five-year plan starting today. Canadian Auto Workers President Ken Lewenza was impressed Wednesday. "There will be real integration," he said. "There's enthusiasm about the products and great vision."

Chrysler and Fiat will generate big savings from combining purchasing. Chrysler's purchasing budget now is $28 billion; their combined spending is $62 billion. Chrysler will save $3 billion in direct material costs over five years and $400 million indirectly as the companies move to share suppliers. They expect two-thirds of their suppliers to serve both companies by 2013.

Privately held Chrysler does not have to report quarterly financial results but will do so beginning with the fourth quarter of 2009. "We are trying," CFO Palmer said, "to be as transparent as we can."

Staff Writer Louis Aguilar contributed.