What's the future for Chrysler? Fiat?

"Reborn Chrysler gets a European makeover" is the headline at the Detroit Free Press.  Now that Fiat is in charge, can we expect Chrysler to turn around?

There is no doubt Chrysler has been severely Challenged.  But that alone did not Disrupt Chrysler - you can be challenged a lot and still not Disrupt Lock-ins.  On the other hand, the new CEO appears to have stepped in and made significant changes in the organization structure, as well as the product line-up at Chrysler.  We also know that bankruptcy changed the union rules as well as employee compensation and retirement programs. These are Disruptions.  That's good news.  Disruptions precede real change.  No matter the outcome, the level of Disruption ensures the future Chrysler will be different from the old Chrysler.  Step one in the right direction.

But, the Fiat leadership under Sergio Marcchione appears to be rapidly installing the Fiat Success Formula at Chrysler.  The organization, product, branding and manufacturing decisions appear to be aligned with what Fiat has been doing in Europe.  So this makes our analysis a lot trickier.  Companies that effectively turn around align with market needs.  They meet customer requirements in new, better ways.  For Chrysler to now succeed requires that the American market needs are closely enough aligned with what Fiat has been doing to make Chrysler a success.

If this gives you doubts, you're well served.  It's not like Fiat has been a household name in America for a long time.  Nor have I perceived Fiat was gaining substantial share over its competitors in Europe.  Nor do I have awareness of Fiat being noticably successful in emerging auto markets like China, India or Eastern Europe.  They aren't doing as badly as Chrysler, but are they winning?

The new management is rolling in like Macarthur's team taking over Japan.  They clearly have already made many decisions, and are now focused on execution.  What worries me is

• what if the product lineup isn't really what Americans want?
• what if dealers don't make enough margin on the new lineup?
• what if the cost/quality tradeoffs don't fit American needs?
• what if competitors match their product capabilities?
• what if competitors have lower cost?
• what if competitors have measurably better quality?
• what if competitors bring out new innovations, like electric, hybrid or diesel, change the market significantly from what Fiat has to offer?
• what if customers simply have doubts about Fiat quality?
• what if customers like the Charger, Challenger and 300 more than they like the new Fiat products?

I don't have to be right or wrong on many of these questions and it portends problems for the new Chrysler/Fiat.  And that's the problem with having such a tight plan when you start a turn-around.  What if you get something wrong?  How will you know?  What will tell you early you need to change your plan fast, and possibly dramatically?  Nowhere in the article, nor elsewhere, have I read about White Space projects being created that would produce an entirely new Success Formula.  Only how Chrysler is being converted to the Fiat Success Formula.

I want the best for the new owners, employees and vendors of Fiat.  I'm really happy to see the level of Disruption.  But until we see White Space, more discussion of market testing and experimentation, as well as greater discussion of competitiors, I'd reserve judgement on the company's future.

If you read about White Space at Chrysler/Fiat please let me know.  This is a story worth watching closely.  Americans have a lot riding on the outcome - good or bad.  So if you read about Disruptions or White Space share them with me or here on the blog for everyone.

PS - Don't forget to download my new ebook "The Fall of GM" for additional insight on managing Success Formulas in the auto industry.

PPS - There have been a lot of great comments related to recent blogs.  I appreciate the personal notes, but don't hesitate to blog directly on the site.  Also, keep up the comments.  I don't feel compelled to re-comment on them all.  Suffice it to say that the quality is excellent, and comments make the blog all that much more powerful.  So please keep up the responses.

Comments

[Bob Lewis]

Meaning no offense, my friend: When you say, "Nor have I perceived Fiat was gaining substantial share over its competitors in Europe," perception has nothing to do with it.

The fact is that Fiat is gaining marketshare in Europe, and was the only European manufacturer to increase sales in Europe (http://finance.yahoo.com/news/Fiat-hits-10-pct-market-share-apf-15240700.html?.v=2).

The question is this: Is Fiat's success formula in the U.S. going to be based on the techniques it used to figure out how to grow marketshare in Italy and Europe, or on the results of those techniques - the conclusions it drew, applied unaltered in the U.S.

If it's the former, it's going to win big here. If it's the latter, it will win by accident.

[dvd-rw]

I am completely agree with that they are continue to import its home-grown management to run Chrysler's U.S. operations, Tuesday naming another Fiat executive to a key Chrysler management position.