Chrysler CEO Sergio Marchionne has once again set his goals high; so high, in fact, that many are saying that the five-year plan he presented today for Chrysler Group is well beyond what is possible. Some say, however, that Marchionne is just doing what he’s done in the past. He makes big promises and delivers big, despite the nay saying.
His sales goal for Chrysler is a rise to 3 million in 2014. Chrysler sales this year total about 1.5 million.
Marchionne has a history of delivering on his promises. In November 2006, he presented Fiat’s five-year plan. Fiat’s auto division was tanking at the time. Marchionne said that Fiat would reach a net profit of $15 million by 2010, and at the time (June 2004), Fiat was losing millions every day. Industry experts and analysts were skeptical to say the least.
At the time, Max Warburton, who was an analyst at UBS in London, compared to Fiat’s hitting the 2010 target to splitting the atom.
In the coming years, Marchionne was able to deliver more than he promised. Up until 2008, Fiat looked to be on track to reach the goal; then the world economy collapsed and put the 2010 goal out of reach. If it had not been for that, the target would probably have been hit right on schedule.
Even with Marchionne’s impressive track record, analysts say that Chrysler may be a completely different story. Regarding the Chrysler/Fiat comparison, Warburton says, ““While superficially there may appear to be some similarities — a damaged brand, a product hiatus, weak quality, low employee morale — there are also some vast differences.”
Warburton also noted that Fiat, even while ailing, still had a huge market share; Chrysler lacks this. The Fiat five-year plan also came along with new key model launches. Chrysler doesn’t have any such surprises waiting in the wings.
One other consideration is the fact that Marchionne came along as Fiat had a massive increase in the Brazilian market. Fiat spent millions investing in the country and has reaped the benefits of its booming economy and strong new vehicle sales numbers.
Chrysler, on the other hand, sells 90 percent of its new cars in the United States. This may be a good position to be in if the U.S. economy rebounds strongly. Morgan Stanley’s Adam Jonas predicts Chrysler’s breaking even when the U.S. market reaches 11 million annual sales.
Some analysts predict 12.9 million in annual sales next year and 14.5 the following year. If U.S. sales numbers do reach these levels, Jonas expects Chrysler to see a $841 million operating profit in 2010 and a $952 million profit in 2011.
In other words, Marchionne’s goals might be more reachable than they seem; as a matter of fact, it could take as little as 30 months to get there.