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Marchionne: There's No Excuse for Ignoring China

Aug. 3, 2011
China, the world's largest producer of cars, poses an 'enormous' threat to automakers in their home markets.

Sergio Marchionne believes American and European automakers are facing a "day of reckoning" with China, and that day may be coming soon.

China, the world's largest producer of cars, makes vehicles mostly for its burgeoning domestic market.

But China harbors "significant" ambitions for exporting vehicles in the future, Marchionne said earlier today at the Center for Automotive Research's (CAR) 2011 Management Briefing Seminars in Traverse City, Mich.

"Even assuming China were to export only 10% of what it produces, the risk we face in our home markets is enormous," Marchionne said.

Marchionne, the CEO of Chrysler and Fiat, called China "one of the greatest challenges" facing American and European automakers.

Marchionne: 'We cannot afford to be unprepared for the ascent of China.'
"We cannot afford to be unprepared for the ascent of China, reassuring ourselves of our invincibility," he said.

"The excuse that we did not understand or that we underestimated the scale will serve no purpose.

"Rather, we need to continue to work to make our industrial base more competitive, because the day of reckoning is inevitably coming."

Marchionne acknowledged that China and other Asian markets present considerable opportunity for Western automakers, noting that "it has become fashionable these days to place greater and greater reliance on the performance of our Asian subsidiaries and ventures."

However, Marchionne asserted that when Chrysler accepted bailout funds from the U.S. government, it made a commitment to help revitalize the U.S. auto industry.

"It is important that we keep in mind the key elements of the social contract and the long-term nature of the joint commitment we made -- both automakers and organized labor -- to establish the foundations for a lasting renaissance of the automotive industry in America," he said.

Accelerating the Chrysler-Fiat Integration

With that commitment in mind, Chrysler needs to quickly complete its integration with Fiat, Marchionne said.

He called Auburn Hills, Mich.-based Chrysler and Turin, Italy-based Fiat "perfect partners for integration."

"Chrysler will be able to expand its offerings to include A and B segments, where it was not previously present," Marchionne said, while noting that the partnership also will help Fiat fill a void in its product portfolio by entering larger segments.

He called the "match-up in engine technology" a "win-win combination."

"Fiat is recognized for its technological know-how and commitment to sustainable mobility, as well as its ability to introduce fuel-efficient powertrain technologies, including diesel and CNG, to the North American market," Marchionne said.

"These advanced fuel-saving technologies will provide Chrysler a significant advantage in developing solutions to meet future regulatory standards, with a fleet-wide improvement in fuel economy of at least 25% expected over the five-year period that ends in 2014."

He predicted that Chrysler and Fiat will combine for global sales of 6 million vehicles by 2014.

'We Are Special People'

Marchionne noted that Chrysler did not send any speakers to the long-running CAR Management Briefing Seminars in 2009, "because we had nothing to say."

"We were completely immersed in a brutal self-assessment of our strengths and weaknesses," he admitted.

After posting a profit in the first quarter of 2011 -- its first since emerging from bankruptcy reorganization in June 2009 -- repaying its loans six years ahead of schedule and delivering 16 new or updated vehicle models to the market, the automaker has plenty to talk about.

"My colleagues and I at Chrysler are survivors. We have collectively found the strength to fight against the death sentence placed on our company from the very beginning," Marchionne said. "We found within ourselves the courage to act and reverse our fate.

"And now we are living, day by day, a new life based on what we have learned from that experience.

"For that reason, we are special people."

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