Chrysler 'intertwined' with Fiat as it lays out recovery plan

Sergio Marchionne, Chrysler chief executive, declared "a new day."
Sergio Marchionne, Chrysler chief executive, declared "a new day." (Gary Malerba/bloomberg News)
By Peter Whoriskey
Washington Post Staff Writer
Thursday, November 5, 2009

AUBURN HILLS, MICH. -- After coming closer to annihilation than either of its U.S. rivals earlier this year, Chrysler laid out its recovery plan Wednesday, with company officials saying they intend to repay the government bailout loans by 2014 and restore to glory this "great American brand."

In its first major announcement since exiting bankruptcy protection earlier this year, the company projected that it will double its sales over five years and that it will break even by 2011.

But the future of the automaker, as executives described it, now hinges on Fiat, the Italian manufacturer that has managed and partly owned Chrysler since its reorganization.

Company officials said that by 2014, about half of Chrysler's cars will run on Fiat platforms and about 40 percent of Chrysler engines will be based on Fiat technology.

Already, Chrysler is borrowing Fiat's quality-control practices and manufacturing system, they said, and the new partners are sharing suppliers.

Moreover, aside from Sergio Marchionne, the charismatic Fiat boss who is now Chrysler's chief executive, the Fiat executives in Chrysler's top ranks now include those leading Chrysler's brand, powertrain, finance and parts-and-service operations.

"Chrysler and Fiat have become inextricably intertwined," Marchionne told an audience of hundreds of industry analysts and reporters. "The work that we have done in the last five months has widened the scope of cooperation."

The new ownership at Chrysler is largely the creation of the Obama administration, which earlier this year pushed the crippled U.S. automaker into bankruptcy proceedings and, eventually, into the arms of Fiat.

The U.S. government has put up $12.5 billion for Chrysler over the past year and now owns 10 percent of the company. The other major owners are a United Auto Workers union health trust, which owns 55 percent of Chrysler, and Fiat, which owns a 20 percent stake that could grow to 35 percent if the Fiat managers achieve performance objectives.

The United States has won a promise that at least some of Chrysler's future success would benefit U.S. workers. Under the financing agreement with the government, either Chrysler must manufacture 40 percent of its U.S. sales volume in the United States or its domestic production must be at least 90 percent of its 2008 U.S. production volume.

Marchionne is credited with turning around Fiat's sagging fortunes, but the situation now facing Chrysler is dire.

Just months ago, Chrysler was almost left for dead by the Obama administration as it weighed whether to aid General Motors and Chrysler.

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