Editorial: Marchionne plan for Chrysler faces uphill battle

Fiat CEO sets benchmarks for Chrysler's success but faces uphill battle on improving quality

The Detroit News

Say this for Fiat's Sergio Marchionne: He has given himself some very clear benchmarks for measuring the success of his team's turnaround plans for Chrysler. We can only wish him success.

As he told reporters this week, "We've laid out our plans and have become accountable for delivery."

The good immediate news is that Chrysler is no longer bleeding cash. Marchionne said Chrysler had $5.7 billion at the end of September, up from $4 billion at the end of June. The Fiat CEO projected a break-even year for Chrysler in 2010, a profit in 2011 and a $3 billion profit in 2014. The firm is projecting global sales of 2.8 million by 2014, more than double its current sales of 1.3 million.

The firm anticipates achieving significant savings through shared automaking platforms and pooled purchasing. Chrysler expects to cut direct and indirect costs by $3.4 billion through sharing suppliers with Fiat, for example.

Ultimately, to achieve its goals and boost its sales, Chrysler will need to entice customers with high-quality, attractive vehicles. To achieve this sales increase, the firm is planning to thoroughly refresh its model line and attack its quality problems head on.

In recent reliability ratings published by Consumer Reports magazine, the firm finished at the bottom of the heap. It will be especially interesting to see how Chrysler tackles this because Fiat itself has quality problems, according to European customers surveyed by J.D. Power.

Fiat scored in the bottom quarter of more than 20 auto nameplates in quality and reliability for 2008 among consumers in Germany, France and Britain who had owned their cars for two years, a J.D. Power official told Automotive News earlier this summer.

So both Chrysler and its parent have a high hill to climb in dealing with quality issues, which could depress purchases even if the auto market rebounds from its current historically low vehicles sales.

But strong management and attractive products have resuscitated Chrysler in the past. Lee Iacocca led a Chrysler resurgence in the 1980s. We hope Sergio Marchionne can do the same thing today.