Sergio Marchionne Says Auto Industry Isn’t Sustainable…at an Earnings Call
Fiat Chrysler Automobiles (FCA) CEO Sergio Marchionne has never been a conventional guy, at any stage in his career. His most recent eccentric moves have included hinting at a Toyota-GM merger (to no positive response from Toyota or GM) and a GM-FCA or Ford-FCA merger (to nothing but laughter from GM and Ford) and outright telling customers not to by the Fiat 500e because he was feeling a little P.O.’d about rigid CAFE standards and the idea that we should take care of Mother Earth. He did, however, very likely play the political leaders of Ohio like fools by insisting that Jeep Wrangler production move out of Toledo to accommodate an aluminum body.
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Even taking into consideration his typically odd strategies, his most recent move seems more than a little strange. At a conference with Wall Street’s finest last week, Marchionne said that he didn’t think the auto industry was sustainable. Nay, he didn’t just say, but presented a 25-slide PowerPoint presentation on the lack of sustainability in the industry that his company serves—to the very people who decide whether it’s a smart move to invest in his company and industry.
Many believe it was another attempt by Marchionne to get a buyer. Marchionne firmly believes that one of the mergers mentioned above would truly be beneficial; he’s just struggling to get other automakers to bite.
“We have failed, I think, collectively as an industry to deliver value,” Marchionne stated. He explained that his industry, the automotive industry, spends more funds on product development, especially in the last ten years, yet still delivers less value in those products to customers and shareholders than other industries do with their products. The solution, as far as he sees it, is joining forces, sharing resources, and building superior products—together.
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Marchionne contended that automakers, in the last ten years, have spent insane amounts attempting to reconfigure their design and manufacturing processes to provide more value, but have failed. He even noted that General Motors and his own Chrysler Group had to borrow from the government to attempt this. And even after those ten years, the industry is still behind.
As you might assume, stock in FCA shot down significantly following Marchionne’s presentation. Investors lost 4.7% per share (a 77 cent loss to $15.50 that day), despite FCA’s improved performance in the first quarter of 2015.
Although Marchionne seems to be kooky, dare I say that he might actually be on to something? After all, Fiat and Chrysler Group merged quite well last year. Why couldn’t the newly merged FCA survive another merger, if it meant producing higher value for less money? Marchionne will be someone to watch in the automotive industry over the next few years, for sure.
- Timothy MooreManaging Editor
Timothy Moore hails from Dayton, Ohio, and tries to bring that Midwestern flavor to his writing. (But as it turns out, no one really likes the Midwestern flavor.) He has been covering the auto industry for years, with several national auto shows under his belt, but he’s been writing about lots of other things (like dragons and Mickey Mouse and cows drowning in milk) since he was just a tot. Outside of the land of cars, Timothy enjoys watching The Office and consuming excessive amounts of peanut butter and beer, and is on the board of an up-and-coming Dayton theatre company called The Playground. And when he’s not on stage (or three jars into a peanut butter binge), Timothy spends time with his mischievous dog, Greyson. See more articles by Timothy.