Turning Chrysler around

A step by step analysis of the implications of the Fiat-managed re-organisation of Chrysler on purchasing and on the supply base

While GM is struggling to exit bankruptcy, the smallest of the Detroit Big Three, Chrysler, is in the process of boosting its turnaround. With the US Supreme Court’s decision on June 9 not to accept the objections made by three Indiana state pension funds to the merger between Chrysler and Fiat, the sale of the good assets of bankrupt Chrysler to a new corporate entity could be carried out. The pre-packaged bankruptcy from which the new Chrysler quickly emerged after 41 days allowed the carmaker to get rid of a significant part of its obligations as well as 25% of its dealer network, equal to 789 dealers. The new Chrysler is owned by UAW's VEBA trust fund with a 67.69% stake, the Italian car maker Fiat at 20%, which will also act as industrial partner, the US Treasury with 9.85% and Canadian and Ontario governments with 2.46%. A long and risky turnaround is what Sergio Marchionne, Fiat’s CEO and “turnaround artista” according to Time Magazine, is set to face. His appointment in 2004 as head of the Fiat Group resulted in the interruption of the 17 consecutive quarters of losses which took the Italian car maker on the brink of bankruptcy. The approach to the overhaul of the American OEM activities is not dissimilar to the one Marchionne took in the Fiat case. By analysing the different steps of this turnaround, it will be easier to understand the implications of the challenge on the purchasing side.