Sergio Marchionne has earned the right to boast about his turnaround of Fiat, the Italian auto company. "We are the Apple of car-makers," he says, "and the Fiat 500 is our iPod." And while the veteran executive is making no early boasts about his stewardship of Chrysler, where he has been behind the wheel for the past 18 months, the US group is showing just a hint of a similar revival in its fortunes. If he is successful at Chrysler, too, then Mr Marchionne may well reach the demigod status of Apple's Steve Jobs. It is already proving an interesting ride.
Chrysler went bust last year, but is still making cars thanks to loans from the US government, which engineered its exit from bankruptcy and the alliance with Fiat which led Mr Marchionne to add the Chrysler chief executive role to his responsibilities at Fiat. "We've been given an opportunity to fix this house," he said, unveiling Chrysler's financial results yesterday, "and people have responded well beyond anyone's expectations."
Having shed billions of dollars in liabilities in the restructuring during last year's pitstop in Chapter 11 bankruptcy protection, the company is now operating at a profit, before accounting for the interest on US and Canadian government bailout loans – Chrysler pays about $300m (£186m) a quarter in interest. It has clawed back some of the market share it lost in the US, thanks to a much-praised revamp of its Grand Cherokee Jeep. Last month, it posted a 37 per cent increase in vehicle sales, compared with a year ago. In all, Mr Marchionne has managed to prepare 16 new or revamped vehicles for launch since he arrived at Chrysler, and many of those new models – such as the forthcoming Dodge Charger, a souped-up sedan – have been generating a buzz in the industry.
Manufacturing efficiencies have brought down the level of sales Chrysler needs to break even, at the same time as everyone in the battered auto industry is maintaining what executives call "price discipline" (that is, they are not starting a price war with steep discounts). The outcome of this was a $239m operating profit for the three months to 30 September, taking the total to $565m for the year, and far outpacing the conservative estimates set by Mr Marchionne. After interest and other costs, the bottom-line loss for the quarter was $84m, down from $172m in the previous three months – a trajectory that should see it back in the black imminently.
Stuart Pearson, an analyst with Morgan Stanley, says people "forget the speed with which Mr Marchionne was able to introduce new product and revive Fiat's market share in Europe. Brand management and time to market are now Fiat fortes in our view, and ones we believe will transfer well to Chrysler". He has been telling clients that Chrysler looks now like Ford looked a year ago: "Ford is a case study of what can happen when improved product meets recovering demand on a restructured cost base."
Mr Marchionne was making no grand boasts about yesterday's results, calling them "decent" and "satisfactory", but warning much depends on how forthcoming vehicles are received. A habit we are trying to bring over from Fiat, he said, is under-promising and over-delivering.
The bespectacled 58-year-old, whose family transplanted from Italy to Canada when he was 14, had established a formidable reputation for turning round ailing companies even before he got to Fiat. As well as an attention to detail, he is also credited with imbuing his companies with a sense of urgency and firing up morale – and it was a skill he demonstrated yesterday when he launched an attack on the Obama administration's former "car Tsar", Steven Rattner. Mr Rattner, who oversaw the bailouts of Chrysler and General Motors, has written a book on the subject, called Overhaul, in which he criticises both companies for bloat, moribund corporate cultures and management incompetence – the sins, he says, that had driven them to the point of insolvency even before the credit crisis finished them off.
"The most offensive thing about the book is the level of disrespect it shows to Chrysler as a house," Mr Marchionne said. Some bad managers had taken disastrous decisions, but "to brush the whole organisation with the same level of incompetence is unfair."
The scale of Chrysler's indebtedness to the US taxpayer means that it remains a de facto ward of the state, although the government never swapped its loans for equity and only holds about 8 per cent of Chrysler, compared with the 60 per cent stake it has in General Motors. GM accelerated plans for a stock market flotation that will reduce government involvement, and will be selling shares on the New York Stock Exchange as early as next week, but Chrysler will not follow for perhaps another year – even though it said yesterday it would learn a lot about investor appetite from watching GM.
Fiat has a 20 per cent stake and the option of increasing it to 51 per cent. The company has also put in for up to $10bn in federal loans to invest in fuel-efficient technologies, and analysts think it might get up to $3bn. That could help Chrysler retire some of its $7bn bailout loans, at a stroke eliminating the punitive interest-rate burden that has kept it in the red.
Financial restructuring will only take it so far, of course. Ultimately, Chrysler's fortunes – and Mr Marchionne's reputation – rests on the quality and the popularity of the new Jeeps, Dodges and Chryslers that come out of its factories over the next few years. But on that score, too, hopes are rising. In just 16 months since exiting bankruptcy, the company has put a lot of treacherous road behind it.