In 2011 Chrysler climbed out of bankruptcy
protection (Chapter 11), thanks to Italian-born Canadian Sergio Marchionne, CEO of FIAT Group.
That’s the bare facts, now the background.
Marchionne, born in the Abruzzo region of
Italy in 1952, moved to Toronto, Canada with his family in 1966. He has a
Bachelor of Commerce degree, a law degree, and an MBA. He’s a pretty smart guy.
From 1983 until 2002 he held a number of
senior executive positions in Canada and Europe, and in 2003 he was elected to
the FIAT board in Italy. By 2004, he was appointed CEO of FIAT Group.
Marchionne is widely
recognized for turning around FIAT Group to become one of the fastest growing
companies in the automotive industry, returning it to profitability in 2006, less
than two years after taking the helm.
In 2009, he was
instrumental in FIAT Group forming a strategic alliance with the ailing US
automaker Chrysler, with the support of the US and Canadian governments and
trade unions.
Less than two years
later, following its emergence from Chapter 11, Chrysler returned to
profitability, repaying all government loans. In 2014, FIAT and Chrysler merged
into a new holding company, FIAT Chrysler Automobiles.
Fine so far. However,
to get there, and to realize his ambitious product plans for both FIAT and
Chrysler takes a lot of money. So, currently FCA has a net debt load of more than
USD$11 billion!
Whilst many Chrysler products, and FIAT Group products, have both increased sales and market share in
the past couple of years,
The savvy New York
finance guys have looked at this scenario and see it as representing more risk,
than rational thinking.
Never mind the Chinese high-rollers
in Macau, Sergio may be the biggest gambler in the world right now.
Markets remain
volatile; the auto industry likewise, and all of this debt has to be
refinanced!
Most Americans, in fact most of the global community, rarely understands progress using debt. Sure, FCA is a big international conglomerate with global operations, but today its cash position, relative to most of its competitors is very shaky.
Borrowing money is a
great way to grow your business, but to succeed you have to be sure of several
things.
Maintaining overheads at a manageable level; increasing sales; reducing interest charges; and managing positive cash flow. It’s a very complex game, in fact it’s just a balancing act; and even
though Sr. Marchionne sleeps only four
hours a night, it’s going to be a huge pressure on him; and his minions, to achieve the outcome they are seeking.
Just his plans to elevate Alfa Romeo to a premium image in
the car business is at risk, let alone all of the FIAT Chrysler marques.
In 1859 Charles Blondin successfully walked a tightrope across Niagara Falls, between Canada and the USA.
It'd be sad to see an automotive fizzle out and die on account of its finances so it's a good thing they've got a second lease of life with this Fiat collaboration. Let's hope it doesn't get squandered!
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