Sergio Marchionne was interviewed by a group of electronic media representatives at the Detroit Auto Show in January 2013 (stay tuned for the show overview next week). Our transcriber got to work as the event was webcast live by Chrysler Communications. We have made minor changes to “clean up” the spoken words.
Good afternoon, Mr. Marchionne. Lisa Guiten from 13 ABC in Toledo, and as we all know there’s a fabulous new vehicle coming out of Toledo. I know that you won’t say much about it, but what can you tell us about that vehicle and the workforce in Toledo?
It is the best D-SUV [mid-sized SUV] that’s going to be available on the market. Certainly, the most technologically advanced. It’ll be the first application of the newest transmission that we have [words lost], it’ll hold a 9-speed transmission which is the first application. The commitment to the workforce is that we’re going to try to sell as many as we can build. It is certainly the largest segment in the SUV market in the US, and so I have a lot of hopes that we’ll make a significant dent. It’s been probably the weak flank of Jeep now for the last four years.
The Liberty, as you know, was a car that was built together with the Dodge Nitro because people before me couldn’t decide whether we should have a Jeep or a Dodge, so we decided to build both. I think we have provided some clarity to the choice by making an unwavering commitment to Jeep. I think it’s a much better bet. In less than 90 days we’ll launch it, and then we’ll start producing as quickly as we can. We’ve been out of the DSUV market now for the last probably five months since we stopped making the Liberty, so I need the car. So when you go back to speak to your people in Toledo, tell them to get ready. We’re going to try to push it as hard as we can. [Next generation Liberty/Cherokee news, rumors, spy shots]
Rod Maloney, Channel 4, Detroit. Let’s talk a little bit about the Ram, Truck of the Year. Your guy, Mr. Diaz, got quite emotional about it because he admitted that they were within a hair’s breadth of not being here, and yet three years later the Ram wins.
3 ½ years later. It makes a huge difference, trust me.
He said that your attitude was go big or go home. Could you talk a little bit about that and what the Ram meant to what you wanted to do, and could you talk a little bit about assembly and what you’ve got going on there?
Well, it’s an interesting rendition of the strategy. When we looked at Ram, we made two decisions: One to carve out Ram from Dodge because we thought that the disassociation was actually not helpful, and I realize that for this one we’re going against the grain. Ford has decided to go with an oval strategy across the whole range and we’re the only ones that keep on carving up or have carved up our brand name portfolio into more distinct pieces. But our ambitions for Ram was to build on that pickup heritage and effectively expand it into a commercial vehicle lineup. So you’ll see a van coming out with a Ram badge [Ram ProMaster] later on this year. This is part of the collaboration between Fiat and Chrysler.
So there’s more coming for Ram and for that… to create the identity – to create the true professional sort of commercial lineup of products, we needed to create a separate identity which had nothing to do with a Durango or with a Journey or with a new Dart. And so there was one… the initial set of considerations, but then when we looked at the pickup portfolio, we did a very thorough analysis of where we were short compared to the competition. So we looked at the other guy in town. My dear friend Alan, who’s done a tremendous job with Ford and I compliment them again for all the things that he’s done, and I’ve been public on this, whenever I look at his margins I drool. I drool because I like what he does with the F-150, and we knew exactly where the benchmark in performance was being set, and we said fine. If that’s what he’s going to play, then I think we need to do better than that.
The Ram 1500 is a unique product in an incredibly competitive space with the other two guys in town, and I’m not trying to diminish the value of the imports and their relevance in terms of that marketplace, but certainly this is a market that belongs to the Americans. And so the introduction of the 8-speed transmission, the air suspension, things that were designed to make the product unique, nobody else has it. Nobody else has an 8-speed transmission in any of these vehicles. The availability of the V6, the refinements that have been brought onto the truck, the increased capabilities in terms of weights and towing capabilities, these are all things that were designed to distance the Ram 1500 from the rest of the pack.
It wasn’t just a 1500 decision. It was done on the 2500 and the 3500, across the whole range of Ram offerings. And what you’re going to see hopefully starting now is a series of product launches that will continue to try to distance ourselves from the competition. I know that while we have been busy doing this, my friends in town have not been resting. So we’re going to see things coming out from them that again will try to distance themselves from us, and I think the race is on. We need to continue to improve the quality of these products. I can tell you I’ve driven the 8-speed with a V6 in it and it’s a superb machine. The level of response of that transmission with the air suspension is a unique experience.
We need to continue to do this across the whole range. I know this is going to be disturbing to Alan, but we are engaged in competition, and I expect them to come up and try to outdo us in the next launch, and life will go on. But I think it’s for the mutual benefit of the competitors and ultimately for the consumer. I’m delighted at what will happen. But we are not going to ignore pickups, because they are profitable. Believe it or not, we can make decent money from the business. We all do. But you need to be precise.
People who buy pickup trucks buy it on technical capabilities, not just interiors. You can fool some of the people some of the time. Remember you can put leather and a variety of other things in them, but at the end of the day they need to be functional, working tools. The Ram 1500 is so far superior to what’s available out there that it should… I think today, to be honest, and I say this with all humility, although I wasn’t expecting to win deep down in my heart I think that we deserved it. But if we had lost it, life would’ve gone on anyway. But I think it’s a recognition of the work that’s gone onto the truck. These people have really worked their bums off to get us there. So get ready. The Ram season just opened, so we’ll see what happens.
Tom with WXYZ in Detroit. If you could a little bit more reflect on kind of the last 3 ½ years and how emotional it is to see the progress – the incredible progress of Chrysler, and also maybe you could talk about the performance of the Dart. Has it met your expectations?
Let’s deal with the tough question first. Well, let me finish answering his question which I didn’t answer which has to do with the implications of Warren. As you well know, we’ve announced the third shift, and this is sort of a continuation of a trend that we started with Jefferson when we brought in the third plant. We’re going to run flat out of Toledo. We’re running flat out from the Wrangler plant and now we’re going to do the same thing with the Liberty’s successor. Warren is the third one to be brought onto the three shift pattern.
You know, we’re fortunate that we can sell everything we make. I wish I had more branch hierarchies out of Jefferson to sell globally. I can’t make enough. I’m hoping to get the same thing done with Warren Truck. But I can guarantee you we’ve looked at the truck plants. I think that the suppliers are willing to back us in case we have to go to the wall. So if we do well, it’ll be… if the truck does as well as I expect it to be, I think that we’ll have full employment levels at Warren pretty quickly.
The more difficult question that you asked is on the Dart, am I happy with the way we launched them? The answer is no. I made the comment today for the press and I take full ownership for the – at least not the perfect execution that I wanted. We decided for a variety of reasons, including the desire to prove that we could get phenomenal mileage out of the car and we can – that we would rely on technology that is not common in the United States. And so we introduced the dual direct clutch transmission on the car as part of the initial offering.
The 9-speed transmission which is going into the Toledo solution was unavailable when we launched the Dart. And so we decided to go with a manual to do a direct clutch. We did not have an automatic transmission solution for the car until later in the launch, and there was really a remedial action because we could not access the 9-speed. So the combination of the power train solutions we offered was less than ideal, so it slowed the progress down of Dart into the marketplace. I’m still satisfied with the numbers that it’s pulling. I think that it could’ve done more. And we’re in the process now, once we deal with the demand requirements of the Liberty’s successor, to devote our resources to the installation of the 9-speed in the Dart and move it on.
I think we need to move that car one level higher in terms of offering, and I think at that point in time we’ll probably see a better performance in the marketplace of the Dart than what we’ve seen so far. The car is certainly… it’s certainly an over – you know, the car is over-equipped for the money that you get to be perfectly honest. It’s a hell of a steal. You’re almost getting a D segment sedan for the price of a C. So the car is there. We need to complete the power train offering and then I think we’ll be fine.
It’s difficult for me to look at 3 ½ years in hindsight and say it’s been a hell of a ride. I’m proud of the kids that are out there today, the ones that presented the car. I’m proud of Fred Diaz who got emotional when he got the award. These are people that have committed a large portion of their lives over the last 3 ½ years to get us here, and the credit is theirs. I happen to have a weird position in the kitchen but I think we’re all cooking and the meal so far is not too bad. Let’s not screw it up.
Deborah Salazar from CBC Windsor. When it comes to the minivan production line, can we expect to see any kind of investment? And also now that the Canadian government has committed to the innovation fund, what do you need to see from the province – I’m looking for a dollar amount here – when it comes to supporting you?
We’re never going to negotiate this on the air, so why don’t we stay away from numbers? I can only tell you that certainly we have the best intentions vis-à-vis Windsor. I think that we have done all the work that needed to be done to make sure we had the right architecture for the minivan. That’s done and completed. So we’re now in the process of finalizing style choices for the minivan. In an ideal world, if we could get all our ducks lined up, we could start as early as 2013 to start industrializing the plant. So it could happen as early as this year.
What would you like to see from the Province? You won’t give a dollar amount, but what would you like to see in an ideal world?
Assistance that will make sure that this is the least costly solution to the problem that Chrysler has in terms of replacing the minivan. We are obviously in discussions.
Tim Miller from WTOL in Toledo. With the success of the Wrangler, do you foresee any more jobs in Toledo? You said Toledo should get ready, 90 days for the new launch. If you could expand more on that?
May 23rd is the day the car goes into production, so if you want to write that down or tattoo it on your arm. I’ve got it tattooed on my private parts and I won’t tell you where. I have all my product launches tattooed in private parts. It’s going to be busy.
But the other issue is in terms of the Wrangler itself, we’ve asked the people of Toledo to work through summer shutdowns, Christmas shutdowns, to try to deal with demand. I can’t ask for more. There are some severe structural limitations to the assembly plant because of the way in which it runs and the ability of suppliers to stay behind the demand curve. We keep on running and pushing the capacity limits of that plant beyond what it was designed to do. So one of the things that we’re looking at is to find ways in which we can actually physically expand within the Toledo environment whether it’s through the new Liberty successor plant or the current plant that makes the Wrangler to try and give us some breathing room.
All of this is being done with a very clear expectation that at some point in time we need to invest in Toledo to rejuvenate the architecture without losing any of the capabilities of the current Wrangler. So that’s not an immediate problem because it’s not going to happen until 2013 at the earlier. But that’ll give us an opportunity to look at the production cycle and see if we can effectively bring more people on to produce more.
This is a car that’s had a phenomenal success, as I’m sure you know, not just in the United States, but globally. It is recognized as being sort of the symbol of Jeep globally and I think we need to continue to invest in the nameplate and continue to make it as unique and as capable as it has been now for the number of years that it’s been in the marketplace. But I can tell you, we’re delighted with the market reaction to all the new models that we’re launching. And this thing, as you well know, we have had more versions of the Wrangler in the marketplace over the last 3 ½ years than we’ve had of any other nameplate that we own.
I was in China for the Auto Show a while back and we launched the Dragon version of the 2012 Wrangler and, since I was also born in the year of the dragon, I decided to get one for myself. The car is like the Swiss army knife. It’s capable of giving you every type of version and [can be] adapted to any market requirements. So the fact that we could come up with a Chinese application of the Wrangler is an intriguing concept, but it tells you what the brand can do. We need to continue to build on this and move it on. I don’t know if it’s encouraging or not but I can sell everything we can make.
May 23rd production, when can that vehicle be available?
If you speak to our supply chain guy they will tell you they need more than 60 days. If you listen to me, you’ll be able to buy some within 30. But you need to find the right dealer who gets the car. But we’ll probably be able to see them realistically in the marketplace in the month of July.
Octavio Blanco with CNN. I was wondering if you might be able to speak us about your plans in China?
We have a plant that’s gone up and running now, with the Fiat Viaggio, that is proceeding well. I think it’s become clear that we need to continue the penetration of Jeep into that marketplace. We’ll continue to ship in Wranglers and Grand Cherokees, but there’s some point in time in which we’re going to have to localize production for the middle range and that needs to happen relatively quickly so that’s our next objective.
Paul Immo with In the Pits Media and Moparpalooza. With the CAFE standards becoming stricter and stricter as time goes on, do you see an end to the horsepower wars and V8 engines going in cars in the future?
Sorry, what was the question? You just described Hell and I get it.
Do you see an end to V8s, V10s, V12s going into production cars in the future with the stricter CAFE standards in the United States?
I think that the problem with the commitments to V8s, 10s and 12s is they’re going to be defining a thinner and thinner tail-end of the distribution because every time I build a V10 I trade the equivalent of five V6s in terms of CAFE standards. So it’s going to become a margin evaluation as to whether I make the five cars with the V6s or I make one with a V10, right? And then if I make more money out of selling the V10, people will make the one V10 and go home and be happy.
But the burden of complying with the new CO2 regulations is enormous and so there are two things that need to happen: one, we need to get a lot smarter about managing the larger power plants so that effectively they have ways in which they can shut down the excess emissions, and the way in which we do MDS now on the deactivation of the HEMI is one way in which we deal with this one. The car doesn’t need all 8 cylinders? It’ll shut down and run on 4. We need to try that out on the V6s. It certainly would be helpful if we did it on the V10s and the V12s, right? To try reducing their polluting capability.
But the game is getting tougher and so every time we evaluate projects now… I keep on hearing questions, are we going to do the Cuda? Are we going to do the new Challenger? Every time you do things like this it imposes a huge burden on the rest of the portfolio to make sure that you make up for that sin because, technically, in the new CO2 world, you are committing a sin when you build one of those cars. The other way to look at this is if you want to sin you pay for it, right? It’s like gambling. You can have the vice; just show up at the bar and pay the price.
I keep on telling our people that if they insist on having this in the power lineup then they need to get pricing that effectively incorporates the penalty associated with transgression. The buyer has got to pay it, right? It’s like having a guzzler tax. Now you need to have a CO2 tax which allows you to effectively pollute, which is somewhat unethical in a way but at least it compensates the system for the loss at the portfolio level of other cars that we could’ve sold instead. We’re learning how to do this. If I told you that it’s a perfect solution I’d be lying to you. As you can tell, this is part of a heated debate that goes on at product committees pretty frequently.
David Zatz from Allpar.com. You recently announced plans to expand considerably in India. I’d like to know if part of that would include a version of a Jeep, such as the Wrangler, but a lower-cost, lightweight, stripped down version for developing countries?
Not based on what I know today. I think we need to be very careful about touching Wrangler. I don’t want the cheap version of the Wrangler anyway. The Wrangler is the Wrangler, so if we do anything else – and we will – it’s not going to be a Wrangler. It won’t be… a degradation of the Wrangler brand, of the nameplate. I mean Wrangler is almost a brand within a brand and I think you need to be careful about protecting it for a variety of reasons. But that doesn’t mean that we will not be producing Jeeps in India, and in fact the portfolio that we’re looking at right now in terms of development does incorporate a substantial expansion of the Jeep portfolio in India but through other nameplates which currently exist in our world – within the Jeep world – and some of which will be coming in 2014.
Tyler Lupa, freelance. You’ve brought the MultiAir technology over from Fiat. Will you also be bringing more Multi-Jet technology in diesels, especially since you added the technology to the VM motor that is in the Grand Cherokee? Can we expect more in the future in different vehicles and different platforms?
The answer is yes. I think that you saw the first launch in the US now with the Grand Cherokee, the 3-liter. You’ll see more. You will see more diesel applications in the US, lower than the 3-liter.
Realize that a 3-liter diesel provides enough torque for you to move this building. I realize our ambitions here but I think we have to be realistic about what our needs are. 3-liter is good. 3-liter turbo is a good engine. And you’ll see now, Mike Manley, I don’t know whether he was playing a soundtrack or otherwise, but you heard the sound of the diesel in the presentation. The traditional characteristics of diesels of being noisy and sort of polluting are just absolutely false. I think once people realize what the benefits are of diesel and the fact that you can run more than 700 miles on a Grand Cherokee with a full tank makes an incredibly appealing proposition, especially given the towing capabilities of the truck that the SUV has. So give us some time.
Certainly we have – we have all the wherewithal to make the engines available because Europe is so heavily biased towards diesel that we know how to install it quickly. And we certainly have the engine range.
Do you know when?
No, not yet. We’ll do it a piece at a time. There’ll be another one this year. This much I can tell you. You just have to wait. That I don’t have tattooed. That’s why I won’t give you a date.
Hi, Peter Langel, AM 800, CKLW Windsor. Another minivan question. Are you indicating that you have engineered the next generation and are just making choices about how it will look and anticipate beginning rolling over to that launch as soon as later this year?
No, you got everything right up until the last part. We’re going to start industrializing the new investment in Windsor as early as 2013. The launch won’t happen until sometime at the end of ’14 or the beginning of ’15. You may see it here January 2015. May. But the architecture exists, which is not an inconsequential choice because that architecture inside the minivan today is probably one of the oldest we have within the family and so it needed to be substantially upgraded. We have done all that work from the engineering standpoint; we understand fully what it needs to do.
Maybe I shouldn’t be telling you this. One of the things that we’ve been looking at is a possibility of using a minivan architecture to introduce plug-in hybrids and make that sort of standard fare for the minivan, but it’s still too early to make a call. Certainly the architecture exists and is capable of doing all those things.
And it’ll do all the things the current minivan does? Same number of passengers?
It will do all that and more including ultimately offer all-wheel drive capabilities.
Sergio, one of the things that had been discussed as you took over was that it was going to be about a five year timeframe before the Fiat platforms came into play. How is that transition going, and what is your confidence level that the transition to the new platforms will transform the company and move it still farther ahead?
It’s started doing that now. I mean the Toledo successor to the Liberty has its origins in a Fiat architecture. So that’s happening. The successor to the 200 which is coming out of Sterling Heights has got that architecture. The Dart has it. So we’re slowly moving through and populating everything in the C and D segment with that architecture, so it’s happening.
You know, the Journey’s successor has a better than 50% probability that it will have that architecture. It’s slowly moving its way through. What makes it incredibly appealing is once the architecture has been installed, the application of powertrains becomes by definition much easier because we understand the architecture and we can just slap it on. So 9 speeds, 8 speeds, anything that’s installed once can just be replicated across the whole family. So we’re moving – whether we’re moving at the right speed or not, I don’t know. We’re certainly moving as fast as we can.
The successor to the Liberty is not available yet, but do you have any idea yet about what sort of production numbers you’re expecting? Do you see the potential for three shifts quickly?
Quickly, no, I have no idea to be honest. I mean but it’s being tooled to run off two shifts; we need two shifts. The only thing I can tell you is it’s the biggest SUV segment in the United States. I mean if you look at how many Grand Cherokees I make – and that is not the biggest segment – if I can replicate that success of penetration in the D segment then it quickly will happen.
But you have a chance with the [words lost] of the Toledo complex – that’s some enormous numbers potentially…
Potentially, yes. I mean it will become Jeep Central, between the two. This large. Which is healthy. But let’s see how well the car does. I mean, I have the best expectations for the vehicle but we need to see it tested on the marketplace.
Peter Valdez, CNN Money. Looking at that backdrop behind you, are you happy with the lineup of brands that you have right now?
No, actually I want to buy Volkswagen. Sorry, I’m just kidding before the rumor gets… since you work for CNN Money I wanted to give you a sort of a jolt.
I think I’m going to leave and go write a story.
I thought you were writing it already. He’s buying Volkswagen. No, I’m more than happy with the lineup. I don’t need any more.
And no less?
We have no intention of reducing the number of brands.
Jeff Gilbert from WWJ. I saw a report that you had mentioned that Alfa Romeo wasn’t quite ready for the US market yet?
That’s not what I said. What I said was that our commitment to the development of the premium brands needs to be sequential, disciplined and ordered. So once we finish here, sometime in the next… is it 30 minutes? When does the Maserati launch? 3:00? 4:00. In an hour and thirty minutes we’ll be unveiling the new Maserati Quattroporte. That’s the first commitment that we’re making. There’s another car coming out of the Maserati lineup later this year. There will be an SUV that will be coming out at the end of next year.
While we’re doing all this, we will also progress on Alfa Romeo. But Alfa Romeo and Maseratis are premium vehicles. They can afford absolutely zero degrees of error. Power trains, setup, looks need to be absolutely perfect. And so we’re going to take our time and make sure that we execute across the whole range the commitment that we’re making both on Alfa and Maserati in a backable way. The discussion that I gave you earlier about the dual drive clutch and whether it’s performing in accordance with our expectation and what impact that had on Dart, that kind of miscalculation cannot be repeated on Alfa. We just can’t take the risk. That simple.
Michelle Wingard from spokentorque. I’m wondering if more Fiat products will be available here in the States?
Yes, in the next six months, you should be able to see the 500 L for distribution in the US. That’s the first of the next cars coming.
Also see: 2013 Detroit Auto Show • Other interviews. Thanks, Davis Bynum.
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