As most of you know, IRN has been very optimistic about the future of Chrysler since they emerged from bankruptcy. Their sales numbers in June certainly justified our optimism as they outsold both Honda and Toyota (in the interest of full disclosure, they were obviously helped by the tsunami-induced decline in sales for the Japanese OEMs). Still, at an annualized level of 1.5 million units, this is 300,000 above the target level of 1.2 million established by Chrysler as “necessary for survival” when they emerged from bankruptcy.
In a very interesting article in the Wall Street Journal entitled “Fiat Preps Chrysler Merger,” (July 15, 2011, SUB), the increasing positive results for Chrysler were outlined as well as some prognostications on the future for both Fiat and Chrysler. A few highlights:
• Probably the biggest change in direction is that Chrysler is likely to be completely merged into Fiat as opposed to doing an IPO next year as many analysts anticipated (including IRN). Right now, they are run as two separate companies;
• Chrysler has apparently made great progress in establishing a more positive relationship with the UAW. This was a critical step for the sustainability of Chrysler going forward;
• The combined entities produced almost 3.6 million vehicles in 2010 and they are targeting over 6 million units for 2014. This would make them a very credible global player, particularly with Fiat’s strong presence in emerging markets such as South America and Asia.
So what does this mean to the supply base? It is becoming increasingly clear that more of the design decisions are being influenced/coming out of Italy vs. Auburn Hills. I met with a client last week that was “blind-sided” when they lost a new contract because Chrysler went with a European vs. American design direction. They had no clue this was even an area of concern as their Chrysler buyer/engineers told them the design direction was not going to change on the new model. The problem for the supplier was that their contacts at Chrysler didn’t know and this supplier did not realize they had to influence the decision that was clearly coming from Europe. Chrysler is not a global company yet, but in order to be successful, suppliers working with Chrysler need to start treating them that way.