The new Chrysler Group board of directors is scheduled to meet for the first time today, working on an unspecified agenda. While boards traditionally set overall strategic direction, and approve management’s capital spending requirements from previously approved product development plans, the board of the newly formed Chrysler Group is starting from scratch, and must make its initial decisions based on loan covenants dictated by the U.S. and Canadian governments.
Complicating things, it’s not at all clear if the new board understands the products currently in production, let alone has any basis for making the billions of dollars in product decisions required to refresh the aging — and slow selling — lineups of the Chrysler, Dodge and Jeep brands. The new board appointments have experience in finance, corporate restructurings and modifying union contracts in the airline industry. Auto industry experience is, well, scarce, to put it politely.
The board also faces an immediate tactical issue regarding Chrysler’s extremely weak vehicle sales. The smallest of Detroit’s once so-called “Big Three” has been hardest hit by consumer concerns and the Great Recession, with U.S. June sales plunging 42%, the worst of all major manufacturers, but its new head has repeatedly stated that Chrysler needs to move away from the huge sales incentives that put it in — and keep it in — red-ink results.
Chrysler Group is now offering to double the U.S. government’s Cash-for-Clunkers subsidy, which translates for incentives of up to $9,000 on “eligible” Chrysler, Dodge and Jeep products, which include most. This “Double CA$H for Your Old Car” program is the first big incentive campaign since Chrysler emerged from Chapter 11 protection, in June.
The severe challenges the Chrysler Board faces come with Fiat’s own troubles as a backdrop. Both companies are headed by Sergio Marchionne as CEO, although Marchionne said he is spending less than half his time on Chrysler, as he spoke about Fiat’s losses on a conference call with analysts and reporters last week. If you’re looking for a precedent here, think of Carlos Ghosn, the head of both Nissan and Renault, whose alliance is loss-making, as are both the individual car companies he runs.
During the second quarter of 2009 Fiat posted a net loss of $254 million, compared with profits of $918 million a year ago, as the Milan-based conglomerate lost money in its industrial operations, which include Fiat, Alfa Romeo, and Lancia automobiles. Ferrari and Maserati are held in separate companies.