The new owners of Chrysler have had a busy week. Many folks may not know that they have cobbled together a couple of great old brands in the farm and construction machinery business – Case and New Holland – and formed a company called CNH that is second to Deere in terms of sales. They are slowly running it into the ground by focusing way too much on equipment financing and not nearly enough on equipment value. It is losing money (due to the economy they say, although Deere is making money in the same economy) and owes its parents at Fiat $5 billion. Fiat had this diseased elephant go out and borrow a billion so it could pay back some of the loans because Fiat needs the dough to pay for its Chrysler deal.
Over at Chrysler, it is worthwhile to see what the Italians plan to do with the billion bucks they squeezed out of the tractor folks. To be fair the last three owners of Chrysler (Cereberus Capital, Daimler and Chrysler itself) did their level best to run it into the ground, however the government rightfully dumped those losses on the lenders and investors who backed them, and virtually handed Chrysler's few remaining 'good assets' to Fiat on a platter. Now it is Fiat's turn to se if they can finish the job and kill Chrysler for good – and this week they got off to a rip-roaring start.
For starters, "Chrysler Group LLCsaid Wednesday that it is dropping its lifetime powertrain warranty in favor of a 5-year, 100,000-mile guarantee. Rick Deneau said the decision was driven by market research that showed consumers prefer warranties with a fixed time period. Powertrain warranties typically cover repair or replacement of transmission and engine parts." That market research must have been conducted in a college bar, very late on a Friday night, in between rounds of the beer pong tournament. The boys in Turin should be told, however, that market research notwithstanding and while folks may feel differently in Italy no sane, sober American 'prefers warranties with fixed time periods over lifetime warranties'. More important, announcing to your customer base that the new owners do not intend to make cars that will run as long as those made by the management that went bankrupt is not particularly smart.
The warranty deal and shuffling money from the tractor company to Turin to Chrysler doesn't really matter compared to the next bit of news. Jim Press is out and the new Chrysler is in the hands of a financier and lawyer. Jim Press, as you know, was the guy from Toyota brought over by Cereberus to fix things shortly before the bankruptcy. Apparently his failure to work miracles in two years while working for the Bob Nardelli of GE and Home Depot infamy, under the control of Cereberus whose vision for Chrysler was to make a ton of money from Chrysler Financial and GMAC was not good enough for the Italians. They want Sergio Marchionne to run the show.
Jim Press worked for Toyota for 37 years, was the first non-Japanese President of Toyota USA, led their sales, engineering and manufacturing operations, and was critical to their success from their entry into the US market in 1970 to their passing of GM. The Italians don't want a guy like that to run the show. To them, apparently, knowledge of automobiles and knowledge of the American market is not terribly important.
Instead, they want Marchionne with all of five years in automotive, all of it in puny Fiat, and none of it in the USA. His claim to the throne is that he 'turned Fiat around' – a euphemism for chopping heads and stopping the flow of blood. He has grown nothing.
Loot the tractor company, cut the warranties, and can the Toyota guy in favor of a lawyer – some board of directors you guys got going for you over there at Fiat. Good luck in the American automotive market.