Leadership & Strategy: First, Fix the Toilets

Sergio Marchionne on why rebuilding a major manufacturer involves more than just tooling.

June 6, 2014

3 min read

Robots work on the underbody sealing of a 2015 Chrysler 200 inside the paint shop at Chrysler Group39s Sterling Heights Mich assembly plant Slated for closure in 2010 the plant was transformed in a nearly 1 billion investment involving a new paint shop body shop and retooled assembly linePhoto CHRYSLER — Robots work on the underbody sealing of a 2015 Chrysler 200 inside the paint shop at Chrysler Group's Sterling Heights, Mich., assembly plant. Slated for closure in 2010, the plant was transformed in a nearly $1 billion investment involving a new paint shop, body shop and retooled assembly line.

Photo: CHRYSLER

In March 2009, Fiat CEO Sergio Marchionne entered into a process that would result five years later in the Italian automaker taking full ownership of Chrysler, the iconic U.S. auto giant that had filed for bankruptcy.

As Reuters Managing Editor Paul Ingrassa pointed out at a recent examination by the Brookings Institution of the auto bailouts of Chrysler and General Motors (IW 500/5) ("The Global Manufacturer"), Marchionne is the only auto CEO to have saved two companies, Fiat (IW 1000/30) a dozen years ago and then Chrysler.

What Marchionne found when he got control of Chrysler, he told a Brookings audience, was "worse than I thought," including a manufacturing environment that "had been neglected for years." From 2009 to 2013, the company spent $8 billion on retooling Chrysler's production lines.

But it wasn't only the engine and transmission lines that Chrysler invested in. Marchionne said the company also made sure to spend money on the parts of the plant that touched employees more personally -- bathrooms, lunchrooms, parking lots and reception areas. Why?

"The state of disrepair, of neglect of the work environment that these people were offered to make a high-quality product that was supposed to compete internationally with the best of the best, right?" said Marchionne. "You can't do that when you can't walk into the bathroom at one of the plants because they're just not presentable." Marchionne knew he had to have Chrysler's workforce with him if he was to successfully turn the company around. Along with retooling and good leadership decisions, he said, the success of Chrysler "was due to the unwavering commitment of a group of people who make up the blue-collar force of Chrysler."

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Chrysler's products were barely competitive when Marchionne took over but the company had neither the time nor the resources to come out with a completely new line of cars and trucks. Dealers told him that the Chrysler Sebring was the worst car in the line, so as a stopgap measure Chrysler invested $100 million to give the car a facelift. "[We] fixed all the noise and vibration, all that stuff that could be done on that architecture," he recalled. The car was rebadged as the Chrysler 200. In a month, he noted, it sold more than it had in a year because of the quality improvements and the risky brand relaunch based on an ad using Eminem. By January 2011, Chrysler had introduced 16 new or improved products. Some were much more substantial investments than the Chrysler 200; Marchionne said the company spent $3 billion on the revamped Ram truck lineup. Asked if he would build a new auto plant today in the United States, Marchionne answered that there was no "standard answer," but he said unlike five years ago, he now would have "no objection to building one here" because the operations and culture were so different from what they had been. "I mean, if you took a Japanese guy into our plant today, he'd be impressed," Chrysler's CEO asserted.

About the Author

Steve Minter

Steve Minter, Executive Editor

Focus: Leadership, Global Economy, Energy

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An award-winning editor, Executive Editor Steve Minter covers leadership, global economic and trade issues and energy, tackling subject matter ranging from CEO profiles and leadership theories to economic trends and energy policy. As well, he supervises content development for editorial products including the magazine, IndustryWeek.com, research and information products, and conferences.

Before joining the IW staff, Steve was publisher and editorial director of Penton Media’s EHS Today, where he was instrumental in the development of the Champions of Safety and America’s Safest Companies recognition programs.

Steve received his B.A. in English from Oberlin College. He is married and has two adult children.