90 Million Unemployed Americans
2015-05-23 19:04:17 UTC
In the middle of March, Mary T. Barra, the chief executive of
General Motors, received a lengthy and unusual email from one of
her direct competitors, Sergio Marchionne.
Ms. Barra had never met Mr. Marchionne, the C.E.O. of Fiat
Chrysler Automobiles. And she was in no way expecting their
first contact to be an offer to discuss a potential blockbuster
of a merger.
The email, according to two people with knowledge of it and
reported for the first time here, laid out in detail how global
carmakers needed to consolidate to save money and suggested that
a combination of G.M. and Fiat Chrysler could cut billions of
dollars in costs and create an automotive superpower.
This analysis did not interest Ms. Barra or other G.M.
executives and board members. Instead, Mr. Marchionnes request
for a meeting on the subject was flatly turned down, according
to people with knowledge of the situation who spoke on the
condition of anonymity.
It was a rare rejection for Mr. Marchionne, the mastermind
behind the merger between the Italian automaker Fiat and
Chrysler, the American car company that required a government
bailout to survive the last recession.
Mr. Marchionne, however, is not one to be put off by rejection.
So a month later, on April 29, in a routine analyst conference
call, he doubled down. Instead of following the usual script, in
which chief executives discuss the current state of their
operations, Mr. Marchionne stunned the Wall Street analysts by
devoting the entire call to his sudden and intense appeal to
automakers to merge.
I think it is absolutely clear that the amount of capital waste
thats going on in this industry is something that certainly
requires remedy, he said. A remedy in our view is through
consolidation.
Its not often that a chief executive announces to the world
that his company is eager to find a merger partner. Some might
even consider it a sign of weakness and, in fact, F.C.A.s stock
dropped about 10 percent over the next two days. Rather than
rally support, Mr. Marchionnes passionate appeal only
highlighted the difficulties that lie ahead for Fiat Chrysler.
Mr. Marchionne has had remarkable success in blending two
struggling car companies into the worlds seventh-largest
automaker. F.C.A.s sales in the United States have doubled
since 2009. But it still sold only 4.6 million cars and trucks
worldwide in 2014, about half as many as competitors like G.M.
and Volkswagen. Its valuable brands, like Jeep sport utility
vehicles and Ram pickups, dont compensate for the fact that it
makes less money than its rivals, lags in China the worlds
biggest car market and barely invests in alternative-fuel
vehicles that are critical to meeting the coming tougher federal
rules on fuel economy.
Mr. Marchionne says he has a detailed plan to improve F.C.A.s
performance, but his current obsession seems to be playing the
automotive Cassandra, warning of disastrous consequences if
companies continue spending unabated. He has no patience for
subtlety or delicate phrasing.
The bigger the issue, in fact, the louder he becomes. He
irritated the National Highway Traffic Safety Administration by
defiantly defending F.C.A.s response to safety issues with
older Jeep models. N.H.T.S.A. just last week scheduled a hearing
to examine the companys follow-through on recalls, something it
rarely does. Mr. Marchionne also appears headed for a
confrontation with union leaders in this summers contract
negotiations because of F.C.A.s rampant hiring of lower-paid
workers. Alone among auto chiefs, he wants to end the current
two-tier wage system by phasing out the top wage rate as veteran
employees retire.
Detroit hasnt seen a C.E.O. as provocative and unpredictable
since Lee A. Iacocca, Chryslers previous savior, in the 1980s.
And as with Mr. Iacocca, confidence is never a problem for Mr.
Marchionne.
Not From the Ranks
When in the United States, Mr. Marchionne, 62, works out of a
tiny office in a wing of the sprawling Chrysler Technical Center
in the Detroit suburb of Auburn Hills. He prefers to spend time
among engineers and product planners rather than in the lavish
suite of executive offices in the nearby headquarters tower. In
March, as he settled in for an interview at a small table, a
window giving a view over a service drive, he downed the first
of several espressos and silenced his four cellphones. Though
smoking is forbidden elsewhere in the building, in this
sanctuary he lit up one Marlboro after another.
Mr. Marchionne doesnt look like a typical car executive. His
uniform is a black sweater over a button-down shirt with black
pants, and you get the sense he cant be bothered to find a
hairbrush. Unlike Ms. Barra or Mark Fields of Ford Motor, both
of whom rose through the corporate ranks, Mr. Marchionne never
even worked for a car company before taking the top job at Fiat
in 2004.
Born in Chieti, Italy, a small city on the Adriatic Sea, he
moved to Canada with his family as a teenager. He earned degrees
in philosophy, law and business administration before joining an
accounting firm at 30. From there, he spent most of his career
bouncing through executive posts at unglamorous Canadian and
European chemical and industrial companies.
He was an obscure board member at Fiat when the Agnelli family,
which controlled the Italian automaker, picked him to reverse
its long decline. He moved fast, firing executives, flattening
the companys bureaucracy, eliminating slow-selling models and
paring production to match market demand. In a warm-up for
Chrysler, he also fostered an entrepreneurial culture in which
executives were given wide latitude to meet internal targets.
Since he cut the deal with the Obama administration six years
ago to take control of Chrysler, his moves have confounded an
industry that tends to adhere to tried-and-true formulas. When
other companies streamlined their brand lineups, Mr. Marchionne
created new ones, such as splitting off Ram trucks from the
larger Dodge division. Rather than glossing over Chryslers
battered image, he embraced it with soulful advertising
campaigns that extolled the tenacious spirit behind vehicles
that were imported from Detroit.
Ive always had this incredible sense of urgency, he said.
Ive always had this desire not to let things fester and to
really seize the moment, because its serendipity.
He paused. You create the conditions for it, and it just keeps
producing outcomes or opportunities for you to pick, he said.
And if you dont pick them, then its your own damn fault.
He saw that kind of opportunity four years ago when he took
advantage of Chryslers precarious financial condition to
negotiate a favorable contract with the United Automobile
Workers union. That deal allowed him unlimited use of workers
paid on a lower scale about $19 an hour compared with $28 for
veteran employees.
The arrangement opened the door for Fiat Chrysler to go on a
hiring spree of cheaper labor in the United States. Today, more
than 40 percent of the companys 36,000 American factory workers
earn entry-level wages, compared with about 20 percent at G.M.
and 27 percent at Ford.
Before he could benefit from his lower-wage work force, Mr.
Marchionne had to strip down Chryslers production after its
2009 bankruptcy.
He also retooled Chryslers organization by replacing veteran
executives with a cadre of younger, unproven managers. While he
set ambitious sales and financial targets, he gave his new team
free rein to achieve them.
He creates an environment that I call the pressure cooker
approach, said Bernardo Bertoldi, a business professor at the
University of Torino in Italy, who helped write a recent Harvard
Business School case study on Mr. Marchionne. He provides the
goals and gives them their freedom, but the pressure is on
getting results.
And after years of dysfunction under the ownership of the German
automaker Daimler and then the private equity firm Cerberus
Capital Management, Chrysler took off. Once Chrysler joined with
Fiat, the combined company began posting double-digit annual
increases in revenue, reaching $109 billion last year. And after
absorbing losses as it paid back more than $5 billion in loans
from American taxpayers, F.C.A. has become solidly profitable,
reporting $717 million in net income in 2014. The bulk of its
income comes from the Chrysler side of the business.
Chryslers revival hinged on streamlining its manufacturing base
and pouring resources into its strongest brands, in particular
Jeep, which has a cultlike status in this country as the most
rugged and stylish of American S.U.V.s and a worldwide appeal
dating back to World War II.
He saw the future with Jeep, said Mike Manley, the brands
chief. I remember talking to him early when we were targeting
sales of a half-million, and he said we can do a lot more.
Fiat Chrysler has opened new plants in Italy and Brazil to
accelerate Jeep sales in international markets, and a Chinese
factory is coming next. Last year, F.C.A. sold about one million
Jeeps globally. Mr. Marchionne is shooting for 1.9 million in
2018, and the success of the brand will be critical to the
companys overall results.
You cant help but be impressed with what Sergio has done so
far, said David Cole, former chairman of the Center for
Automotive Research in Ann Arbor, Mich. But the question is
whether he can achieve the kind of scale necessary to keep up
with automakers twice his size.
If all his growth targets are achieved, Mr. Marchionne expects
Fiat Chrysler to hit seven million in sales in three years.
That plan is predicated on a whole pile of things I want to
execute flawlessly, he said. But in the next breath, he
admitted that external events such as fluctuating oil prices and
economic downturns could scuttle those ambitions quickly. If I
look at the history of this thing over the last 10 to 20 years,
he said, weve always had something that came out of left field
and made us very, very uncomfortable.
A Union Showdown
Mr. Marchionne might be feeling pretty uncomfortable this summer
when Detroit automakers enter contract talks with the U.A.W.
When Chrysler last negotiated a contract in 2011, the carmakers
were able to win concessions because Detroits auto industry was
just beginning to recover from its financial collapse during the
last recession. Now, however, F.C.A. and the other car companies
boast of their robust finances, and the unions are determined to
share in the bounty. That could mean an end to Mr. Marchionnes
unfettered use of lower-tier workers.
One of the unions priorities is to raise wages for new workers
and possibly place a cap on the number of lower-paid employees
hired. Ford, for example, is required under the current contract
to bump entry-level hires to full-wage status when their overall
percentage at the company hits certain thresholds. Fiat
Chrysler, however, has no such restrictions.
Union workers in its plants say the two-tier system has created
rifts on the factory floor. You can feel the separation in the
plant and the animosity, said Scott McGinnis, who is part of a
team that trains workers for the assembly line at a plant in
Sterling Heights, Mich. He says lower-tier hires like him resent
that they have no way to reach the top of the wage scale, as
workers do at Ford. Im very fortunate to have a job, he said.
But with a wage progression system, I would at least know Im
working up toward something.
Many veteran workers earning top wages are just as supportive of
scaling back or eliminating the two-tier system. It has created
an us and them mind-set where theres some mutual resentment,
said Martha Grevatt, a skilled-trades worker at a plant in
Warren, Mich., who was hired in the 1980s. Its all very
detrimental to union solidarity.
Mr. Marchionne, who last year earned more than $30 million, is
unapologetic about his voracious hiring of lower-paid workers.
Ive just responded to business needs, he said. I needed to
make cars, and we hired people.
He defends taking advantage of the two-tier system, but Mr.
Marchionne admits that the pay gap among workers creates seeds
of instability. He advocates a standard wage throughout the
plants. The $28-an-hour wage that veteran workers now make
should be reset at a lower level when they retire, he proposes.
Union workers, however, hate this idea and are instead arguing
for wage increases across the board in the coming contract.
Mr. Marchionnes aggressive use of the two-tier system is
characteristic of his forceful style, which has been known to
backfire. Two years ago, he challenged federal regulators on
their intention to seek a broad recall of older-model Jeeps.
Those Jeeps had rear-mounted gas tanks that could catch fire in
high-speed rear-end collisions. In a stunning departure from the
protocol for resolving car safety issues, Mr. Marchionne
requested a private, face-to-face meeting with Ray LaHood, then
the transportation secretary, and managed to limit the number of
vehicles recalled.
Now, however, N.H.T.S.A.s new administrator, Mark R. Rosekind,
has signaled that the agency will be much stricter in how it
handles recalls. Last week, N.H.T.S.A. said it would hold a
public hearing in July on whether Fiat Chrysler was doing enough
to fix the 10 million vehicles it had recalled in a variety of
safety actions, including the 1.5 million Jeeps with vulnerable
gas tanks.
The Jeep fire issue is clearly a sore point with Mr. Marchionne.
He contends that the S.U.V.s met all federal crash standards
when they were built more than a decade ago and that F.C.A.s
agreement to install trailer hitches to mitigate the effect of
an accident is a fine remedy.
While safety advocates have criticized the trailer-hitch remedy
as insufficient, N.H.T.S.A. said this week that it would not
reopen the Jeep investigation to explore other possible
remedies. Still, F.C.A. could be facing enormous legal
liabilities for gas tank fires. A jury in Georgia awarded $150
million in damages in April to the family of a 4-year-old boy
who was killed in a Jeep fire in 2012. Fiat Chrysler has asked
for a new trial in the case.
Courting Apple and Google
A few weeks ago, an aide to Mr. Marchionne called and said the
C.E.O. wanted a follow-up discussion for this article. He had
already sat for an extensive interview, but was steaming over
the reaction to his consolidation manifesto in April. And he
wanted to vent about it.
He consistently declined to comment publicly about his overture
to G.M. or Ms. Barras unwillingness to meet with him about it.
But during the follow-up interview he became visibly irritated
by the suggestion that he had made Fiat Chrysler available for
sale by broaching the topic.
Look, if I wanted to sell I would have called a banker, he
said. I wouldnt have done an analysis on return on invested
capital and margins that talk about the fact that were all in
the same hole.
As he did in an earlier interview, he seethed about how the
escalating costs for new technology and products were driving
me nuts. He contends that automakers waste billions duplicating
efforts in developing new engines, safety technology and
alternative-fuel vehicles. The conference call outcry was for
the good of the entire auto industry and not because Fiat
Chrysler was more vulnerable to rising costs than its bigger
competitors.
Mr. Marchionne calculates that a combination with a larger
automaker, such as G.M., can save several billion dollars a year
by sharing costs for new vehicle platforms and parts.
Its fundamentally immoral to allow for that waste to continue
unchecked, he said.
No other auto executive has seen fit to agree him, publicly at
least.
Skeptical Wall Street analysts are hard-pressed to envision
interested suitors. Ford has stated that it is not looking at
mergers. Ms. Barra, in her only public comments on the topic,
said that doing a big deal would be a distraction for G.M.
Volkswagen is said to have had interest in the past in F.C.A.,
but its management has not addressed the subject outright.
Adam Jonas, a Morgan Stanley analyst, wrote in a research note
to investors that auto companies rarely seek merger partners
willingly unless times are desperate. Yet he did not discount
the possibility that Mr. Marchionnes position might encourage
activist investors to push another auto company to consider a
merger with F.C.A. We have no knowledge of how all this will
play out, Mr. Jonas said.
Since opening the door for a possible merger with another car
company, Mr. Marchionne has broadened his discussion about the
industrys future to include tech giants like Apple and Google.
Mr. Machionne recently made a three-day visit to California to
meet with executives there, including Apples C.E.O., Timothy D.
Cook. (An Apple spokesman declined to comment.) The trip
underscored the evolving relationships between technology giants
and traditional automakers. Fiat Chrysler and other car
companies are potentially large customers for advanced
communications and navigation equipment. But Google and Apple
are also developing their own cars, and may one day need to team
up with big automakers for manufacturing or marketing. If and
when that happens, Mr. Marchionne will be eager to participate.
For now, he praises the companies as disrupters who will help
redefine how cars are developed and operated, and that includes
autonomous vehicles. These things are real, he told reporters
after a recent speech in Toronto. Its not science fiction.
Theyre coming.
That Mr. Marchionne expresses enthusiasm for disruption of his
industry should come as no surprise. Few believed that he could
marry a bankrupt Chrysler with broken-down Fiat and create a
viable car company. But he did. Like it or not, the big gesture
is the only kind Mr. Marchionne is willing to make.
http://www.nytimes.com/2015/05/24/business/detroits-chief-
instigator.html?_r=0
General Motors, received a lengthy and unusual email from one of
her direct competitors, Sergio Marchionne.
Ms. Barra had never met Mr. Marchionne, the C.E.O. of Fiat
Chrysler Automobiles. And she was in no way expecting their
first contact to be an offer to discuss a potential blockbuster
of a merger.
The email, according to two people with knowledge of it and
reported for the first time here, laid out in detail how global
carmakers needed to consolidate to save money and suggested that
a combination of G.M. and Fiat Chrysler could cut billions of
dollars in costs and create an automotive superpower.
This analysis did not interest Ms. Barra or other G.M.
executives and board members. Instead, Mr. Marchionnes request
for a meeting on the subject was flatly turned down, according
to people with knowledge of the situation who spoke on the
condition of anonymity.
It was a rare rejection for Mr. Marchionne, the mastermind
behind the merger between the Italian automaker Fiat and
Chrysler, the American car company that required a government
bailout to survive the last recession.
Mr. Marchionne, however, is not one to be put off by rejection.
So a month later, on April 29, in a routine analyst conference
call, he doubled down. Instead of following the usual script, in
which chief executives discuss the current state of their
operations, Mr. Marchionne stunned the Wall Street analysts by
devoting the entire call to his sudden and intense appeal to
automakers to merge.
I think it is absolutely clear that the amount of capital waste
thats going on in this industry is something that certainly
requires remedy, he said. A remedy in our view is through
consolidation.
Its not often that a chief executive announces to the world
that his company is eager to find a merger partner. Some might
even consider it a sign of weakness and, in fact, F.C.A.s stock
dropped about 10 percent over the next two days. Rather than
rally support, Mr. Marchionnes passionate appeal only
highlighted the difficulties that lie ahead for Fiat Chrysler.
Mr. Marchionne has had remarkable success in blending two
struggling car companies into the worlds seventh-largest
automaker. F.C.A.s sales in the United States have doubled
since 2009. But it still sold only 4.6 million cars and trucks
worldwide in 2014, about half as many as competitors like G.M.
and Volkswagen. Its valuable brands, like Jeep sport utility
vehicles and Ram pickups, dont compensate for the fact that it
makes less money than its rivals, lags in China the worlds
biggest car market and barely invests in alternative-fuel
vehicles that are critical to meeting the coming tougher federal
rules on fuel economy.
Mr. Marchionne says he has a detailed plan to improve F.C.A.s
performance, but his current obsession seems to be playing the
automotive Cassandra, warning of disastrous consequences if
companies continue spending unabated. He has no patience for
subtlety or delicate phrasing.
The bigger the issue, in fact, the louder he becomes. He
irritated the National Highway Traffic Safety Administration by
defiantly defending F.C.A.s response to safety issues with
older Jeep models. N.H.T.S.A. just last week scheduled a hearing
to examine the companys follow-through on recalls, something it
rarely does. Mr. Marchionne also appears headed for a
confrontation with union leaders in this summers contract
negotiations because of F.C.A.s rampant hiring of lower-paid
workers. Alone among auto chiefs, he wants to end the current
two-tier wage system by phasing out the top wage rate as veteran
employees retire.
Detroit hasnt seen a C.E.O. as provocative and unpredictable
since Lee A. Iacocca, Chryslers previous savior, in the 1980s.
And as with Mr. Iacocca, confidence is never a problem for Mr.
Marchionne.
Not From the Ranks
When in the United States, Mr. Marchionne, 62, works out of a
tiny office in a wing of the sprawling Chrysler Technical Center
in the Detroit suburb of Auburn Hills. He prefers to spend time
among engineers and product planners rather than in the lavish
suite of executive offices in the nearby headquarters tower. In
March, as he settled in for an interview at a small table, a
window giving a view over a service drive, he downed the first
of several espressos and silenced his four cellphones. Though
smoking is forbidden elsewhere in the building, in this
sanctuary he lit up one Marlboro after another.
Mr. Marchionne doesnt look like a typical car executive. His
uniform is a black sweater over a button-down shirt with black
pants, and you get the sense he cant be bothered to find a
hairbrush. Unlike Ms. Barra or Mark Fields of Ford Motor, both
of whom rose through the corporate ranks, Mr. Marchionne never
even worked for a car company before taking the top job at Fiat
in 2004.
Born in Chieti, Italy, a small city on the Adriatic Sea, he
moved to Canada with his family as a teenager. He earned degrees
in philosophy, law and business administration before joining an
accounting firm at 30. From there, he spent most of his career
bouncing through executive posts at unglamorous Canadian and
European chemical and industrial companies.
He was an obscure board member at Fiat when the Agnelli family,
which controlled the Italian automaker, picked him to reverse
its long decline. He moved fast, firing executives, flattening
the companys bureaucracy, eliminating slow-selling models and
paring production to match market demand. In a warm-up for
Chrysler, he also fostered an entrepreneurial culture in which
executives were given wide latitude to meet internal targets.
Since he cut the deal with the Obama administration six years
ago to take control of Chrysler, his moves have confounded an
industry that tends to adhere to tried-and-true formulas. When
other companies streamlined their brand lineups, Mr. Marchionne
created new ones, such as splitting off Ram trucks from the
larger Dodge division. Rather than glossing over Chryslers
battered image, he embraced it with soulful advertising
campaigns that extolled the tenacious spirit behind vehicles
that were imported from Detroit.
Ive always had this incredible sense of urgency, he said.
Ive always had this desire not to let things fester and to
really seize the moment, because its serendipity.
He paused. You create the conditions for it, and it just keeps
producing outcomes or opportunities for you to pick, he said.
And if you dont pick them, then its your own damn fault.
He saw that kind of opportunity four years ago when he took
advantage of Chryslers precarious financial condition to
negotiate a favorable contract with the United Automobile
Workers union. That deal allowed him unlimited use of workers
paid on a lower scale about $19 an hour compared with $28 for
veteran employees.
The arrangement opened the door for Fiat Chrysler to go on a
hiring spree of cheaper labor in the United States. Today, more
than 40 percent of the companys 36,000 American factory workers
earn entry-level wages, compared with about 20 percent at G.M.
and 27 percent at Ford.
Before he could benefit from his lower-wage work force, Mr.
Marchionne had to strip down Chryslers production after its
2009 bankruptcy.
He also retooled Chryslers organization by replacing veteran
executives with a cadre of younger, unproven managers. While he
set ambitious sales and financial targets, he gave his new team
free rein to achieve them.
He creates an environment that I call the pressure cooker
approach, said Bernardo Bertoldi, a business professor at the
University of Torino in Italy, who helped write a recent Harvard
Business School case study on Mr. Marchionne. He provides the
goals and gives them their freedom, but the pressure is on
getting results.
And after years of dysfunction under the ownership of the German
automaker Daimler and then the private equity firm Cerberus
Capital Management, Chrysler took off. Once Chrysler joined with
Fiat, the combined company began posting double-digit annual
increases in revenue, reaching $109 billion last year. And after
absorbing losses as it paid back more than $5 billion in loans
from American taxpayers, F.C.A. has become solidly profitable,
reporting $717 million in net income in 2014. The bulk of its
income comes from the Chrysler side of the business.
Chryslers revival hinged on streamlining its manufacturing base
and pouring resources into its strongest brands, in particular
Jeep, which has a cultlike status in this country as the most
rugged and stylish of American S.U.V.s and a worldwide appeal
dating back to World War II.
He saw the future with Jeep, said Mike Manley, the brands
chief. I remember talking to him early when we were targeting
sales of a half-million, and he said we can do a lot more.
Fiat Chrysler has opened new plants in Italy and Brazil to
accelerate Jeep sales in international markets, and a Chinese
factory is coming next. Last year, F.C.A. sold about one million
Jeeps globally. Mr. Marchionne is shooting for 1.9 million in
2018, and the success of the brand will be critical to the
companys overall results.
You cant help but be impressed with what Sergio has done so
far, said David Cole, former chairman of the Center for
Automotive Research in Ann Arbor, Mich. But the question is
whether he can achieve the kind of scale necessary to keep up
with automakers twice his size.
If all his growth targets are achieved, Mr. Marchionne expects
Fiat Chrysler to hit seven million in sales in three years.
That plan is predicated on a whole pile of things I want to
execute flawlessly, he said. But in the next breath, he
admitted that external events such as fluctuating oil prices and
economic downturns could scuttle those ambitions quickly. If I
look at the history of this thing over the last 10 to 20 years,
he said, weve always had something that came out of left field
and made us very, very uncomfortable.
A Union Showdown
Mr. Marchionne might be feeling pretty uncomfortable this summer
when Detroit automakers enter contract talks with the U.A.W.
When Chrysler last negotiated a contract in 2011, the carmakers
were able to win concessions because Detroits auto industry was
just beginning to recover from its financial collapse during the
last recession. Now, however, F.C.A. and the other car companies
boast of their robust finances, and the unions are determined to
share in the bounty. That could mean an end to Mr. Marchionnes
unfettered use of lower-tier workers.
One of the unions priorities is to raise wages for new workers
and possibly place a cap on the number of lower-paid employees
hired. Ford, for example, is required under the current contract
to bump entry-level hires to full-wage status when their overall
percentage at the company hits certain thresholds. Fiat
Chrysler, however, has no such restrictions.
Union workers in its plants say the two-tier system has created
rifts on the factory floor. You can feel the separation in the
plant and the animosity, said Scott McGinnis, who is part of a
team that trains workers for the assembly line at a plant in
Sterling Heights, Mich. He says lower-tier hires like him resent
that they have no way to reach the top of the wage scale, as
workers do at Ford. Im very fortunate to have a job, he said.
But with a wage progression system, I would at least know Im
working up toward something.
Many veteran workers earning top wages are just as supportive of
scaling back or eliminating the two-tier system. It has created
an us and them mind-set where theres some mutual resentment,
said Martha Grevatt, a skilled-trades worker at a plant in
Warren, Mich., who was hired in the 1980s. Its all very
detrimental to union solidarity.
Mr. Marchionne, who last year earned more than $30 million, is
unapologetic about his voracious hiring of lower-paid workers.
Ive just responded to business needs, he said. I needed to
make cars, and we hired people.
He defends taking advantage of the two-tier system, but Mr.
Marchionne admits that the pay gap among workers creates seeds
of instability. He advocates a standard wage throughout the
plants. The $28-an-hour wage that veteran workers now make
should be reset at a lower level when they retire, he proposes.
Union workers, however, hate this idea and are instead arguing
for wage increases across the board in the coming contract.
Mr. Marchionnes aggressive use of the two-tier system is
characteristic of his forceful style, which has been known to
backfire. Two years ago, he challenged federal regulators on
their intention to seek a broad recall of older-model Jeeps.
Those Jeeps had rear-mounted gas tanks that could catch fire in
high-speed rear-end collisions. In a stunning departure from the
protocol for resolving car safety issues, Mr. Marchionne
requested a private, face-to-face meeting with Ray LaHood, then
the transportation secretary, and managed to limit the number of
vehicles recalled.
Now, however, N.H.T.S.A.s new administrator, Mark R. Rosekind,
has signaled that the agency will be much stricter in how it
handles recalls. Last week, N.H.T.S.A. said it would hold a
public hearing in July on whether Fiat Chrysler was doing enough
to fix the 10 million vehicles it had recalled in a variety of
safety actions, including the 1.5 million Jeeps with vulnerable
gas tanks.
The Jeep fire issue is clearly a sore point with Mr. Marchionne.
He contends that the S.U.V.s met all federal crash standards
when they were built more than a decade ago and that F.C.A.s
agreement to install trailer hitches to mitigate the effect of
an accident is a fine remedy.
While safety advocates have criticized the trailer-hitch remedy
as insufficient, N.H.T.S.A. said this week that it would not
reopen the Jeep investigation to explore other possible
remedies. Still, F.C.A. could be facing enormous legal
liabilities for gas tank fires. A jury in Georgia awarded $150
million in damages in April to the family of a 4-year-old boy
who was killed in a Jeep fire in 2012. Fiat Chrysler has asked
for a new trial in the case.
Courting Apple and Google
A few weeks ago, an aide to Mr. Marchionne called and said the
C.E.O. wanted a follow-up discussion for this article. He had
already sat for an extensive interview, but was steaming over
the reaction to his consolidation manifesto in April. And he
wanted to vent about it.
He consistently declined to comment publicly about his overture
to G.M. or Ms. Barras unwillingness to meet with him about it.
But during the follow-up interview he became visibly irritated
by the suggestion that he had made Fiat Chrysler available for
sale by broaching the topic.
Look, if I wanted to sell I would have called a banker, he
said. I wouldnt have done an analysis on return on invested
capital and margins that talk about the fact that were all in
the same hole.
As he did in an earlier interview, he seethed about how the
escalating costs for new technology and products were driving
me nuts. He contends that automakers waste billions duplicating
efforts in developing new engines, safety technology and
alternative-fuel vehicles. The conference call outcry was for
the good of the entire auto industry and not because Fiat
Chrysler was more vulnerable to rising costs than its bigger
competitors.
Mr. Marchionne calculates that a combination with a larger
automaker, such as G.M., can save several billion dollars a year
by sharing costs for new vehicle platforms and parts.
Its fundamentally immoral to allow for that waste to continue
unchecked, he said.
No other auto executive has seen fit to agree him, publicly at
least.
Skeptical Wall Street analysts are hard-pressed to envision
interested suitors. Ford has stated that it is not looking at
mergers. Ms. Barra, in her only public comments on the topic,
said that doing a big deal would be a distraction for G.M.
Volkswagen is said to have had interest in the past in F.C.A.,
but its management has not addressed the subject outright.
Adam Jonas, a Morgan Stanley analyst, wrote in a research note
to investors that auto companies rarely seek merger partners
willingly unless times are desperate. Yet he did not discount
the possibility that Mr. Marchionnes position might encourage
activist investors to push another auto company to consider a
merger with F.C.A. We have no knowledge of how all this will
play out, Mr. Jonas said.
Since opening the door for a possible merger with another car
company, Mr. Marchionne has broadened his discussion about the
industrys future to include tech giants like Apple and Google.
Mr. Machionne recently made a three-day visit to California to
meet with executives there, including Apples C.E.O., Timothy D.
Cook. (An Apple spokesman declined to comment.) The trip
underscored the evolving relationships between technology giants
and traditional automakers. Fiat Chrysler and other car
companies are potentially large customers for advanced
communications and navigation equipment. But Google and Apple
are also developing their own cars, and may one day need to team
up with big automakers for manufacturing or marketing. If and
when that happens, Mr. Marchionne will be eager to participate.
For now, he praises the companies as disrupters who will help
redefine how cars are developed and operated, and that includes
autonomous vehicles. These things are real, he told reporters
after a recent speech in Toronto. Its not science fiction.
Theyre coming.
That Mr. Marchionne expresses enthusiasm for disruption of his
industry should come as no surprise. Few believed that he could
marry a bankrupt Chrysler with broken-down Fiat and create a
viable car company. But he did. Like it or not, the big gesture
is the only kind Mr. Marchionne is willing to make.
http://www.nytimes.com/2015/05/24/business/detroits-chief-
instigator.html?_r=0