No. 803,
July 1, 2015

About The Autoextremist

What do you do when when you've been immersed in all things automotive since before you took your first steps? When you're the scion of an automotive family in an automotive town in its very own automotive universe? When you've forgotten more about cars and motorsports and everything and everyone involved in the business than most people will ever know? When cars aren't just in your blood, but also in your bones and your brain and the very air you breathe? If you're Peter M. De Lorenzo, you ramp it up a bit further. National commentator, industry consultant and author (as well as former superstar ad man), De Lorenzo's daily (and nightly) focus for the past 15 years has been Autoextremist.com, a weekly Internet magazine devoted to news, commentary and analysis of the auto industry and the business of motorsports. Translation: De Lorenzo likes to tell the truth about what's really going on behind the scenes in the car business. And sometimes, things get ugly. Real ugly. But he is as passionate with his praise as he is with his critiques, and Autoextremist has become a weekly "must read" for leading professionals in all industries. De Lorenzo is considered to be one of the most influential voices commenting on the business today. It's the very definition of a high-octane life. And it's what fuels De Lorenzo to keep the pedal down - hard. He won't stop because he can't stop. A bit tired, perhaps? No way. De Lorenzo is one of the most untired people we know.

De Lorenzo's latest book is Witch Hunt (Octane Press  witchhuntbook.com). It is available on Amazon in both hardcover and Kindle formats, as well as on iBookstore. De Lorenzo is also the author of The United States of Toyota.

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The Autoextremist - Rants


Sunday
Jun072015

BROTHER SERGIO’S TRAVELING SALVATION SHOW IS RUNNING OUT OF GAS.

By Peter M. De Lorenzo

Detroit. Ever since he arrived on the scene here and was gifted Chrysler by the Obama administration, Sergio Marchionne’s mission has been to not only bail out the perpetually flailing Fiat “dynasty,” (at least what’s left of it) while personally reaping untold millions for himself in the process ($150 million and counting, according to some estimates), but to forge a historical legacy as The Smartest Guy in the Room – any room – when it comes time for people to consider the pantheon of historical auto industry heavyweights.

Not just content to suck the life out of the True Believers out in Auburn Hills, we had to endure the endlessly tedious pontifications of this self-proclaimed “genius” as he used countless press events and analyst calls to lecture and cajole other industry executives, Wall Street analysts and even the keyboard-stained wretches in the media about how the auto business worked and why his “vision” was the only one that mattered.

Never ones to go out on a limb and often content to take the path of least resistance, too many in the mainstream automotive media bought into the persona of Sergio the Great, as crafted by his personal PR bag man, Gualberto Ranieri, hook, line and sinker. Ranieri managed to convince the laziest members of the press corps that they were indeed in the presence of greatness, and that Marchionne’s altruistic mission was only to save the poor unfortunates at Chrysler and do right by Detroit. Sadly, too many in the press corps not only bought into it, but perpetuated it with countless stories about the “brilliant” Marchionne.

But after you’ve been around this business long enough, you come to realize that creatively manufactured “personas” are just that, and that true colors often surface soon enough. In Marchionne’s case, it just took some industry watchers a little longer to wise up, unfortunately.

Yes, Marchionne is a consummate deal maker, and if the word “brilliant” could be assigned to anything he does, it should start and end right there. The rest of the grandiose story telling about who he is and what he’s really about is basically unmitigated bullshit, and thankfully all of that is coming unraveled all at once.

The ugly reality of “Sergio the Great” has come to the fore with renewed fervor recently, as he continues his vain attempt at projecting his “visionary” solution for all of the auto industry’s troubles in the form of engineered consolidations, whereupon the industry would benefit from untold savings by sharing the crushing, behind-the-curtain development costs involved in making vehicles. The kind that the average person wouldn’t care about anyway.

But in true Marchionne fashion, he couldn’t just make his thoughts known quietly behind the scenes in the form of confidential overtures that would have at least a modicum of gravitas attached. No, Sergio being Sergio, he had to lash out on analyst calls about the blatant stupidity rampant in the industry and that if only everyone would see it his way and do his bidding, we’d all be better off for it and we could thank him later in the form of a giant statue erected in his honor.

So now we have to watch as Brother Sergio's Traveling Salvation Show careens around from one event to the next, urging reporters to spread his message of auto industry salvation through consolidation. Recently, at a dealer event in Oakville, Ontario, Brother Sergio again was in high dudgeon, pleading for large automakers to combine and share costs. “We need to find a way to get this done,” he exhorted the assembled media types. “If they think these comments are going to deter me from the objectives, I’ve got news for you: It just reinforced my conviction it needs to happen. I haven’t had a guy tell me it’s not true. Not one.”

This, of course, was classic Sergio. What he really meant to say is that while talking to himself in his Magic Mirror, no one disagrees with him, ever, so of course it all makes perfect, logical sense and rings true with authority. “I could give you list of reasons as to why you would be scared of doing it, I get it,” he said. “But you have to be able to take leadership. You have to be able to stand alone when you make these calls. Make the bloody call. That’s what they pay you for. They pay you to lead. Not to execute somebody else’s will.”

Which gave us all a fascinating, albeit rare glimpse into one of Sergio's personal pep talks in front of said mirror, which was quite illuminating, especially given the fact that he has been paid handsomely by the remnants of the broke-ass Fiat dynasty to save their collective asses.

But a funny thing has happened on the way to Brother Sergio’s coronation and soon-to-be statue unveiling. No other auto company CEO is interested in having any dealings with Unctuous Prick University’s most outstanding graduate, and they’ve rebuffed his public overtures in a cloak of indifference meted out by wanly disinterested PR statements or even worse, silence.

The public rebuffs have only served to fuel Marchionne’s frenzy, which admittedly has been wildly amusing to watch. In fact he has gotten even more exercised in recent days, publicly pounding the table even harder, railing against the rampant stupidity on display in the industry. The implication being, of course, that the other company CEOs are too stupid for their own good.

Except that those other auto company leaders aren’t stupid. And though there might be some cost savings to be gleaned through shared development costs on a limited, project-by-project basis - as GM and Ford have done on joint automatic transmission development programs, for instance – the ugly reality for Marchionne is that these companies have enough on their plates as it is, and they’re not interested in what he’s selling. At all.

But there’s more to this story. There always is in this business, isn’t there? Marchionne’s pontificating on industry consolidation is masking one very ugly High-Octane Truth, and that is for all of the gaudy month-over-month sales increases courtesy of Jeeps and Dodge Ram pickups flying off of dealer lots at a prodigious rate, the fact remains that FCA is in serious cash-flow trouble because they just aren’t making enough money.

Marchionne’s brilliant deal to pay $6 billion for all of Chrysler could be called brilliant because the Jeep brand alone was worth at least that much. But the downside of him being gifted Chrysler is that he still had to account for propping up Fiat, which, except for Ferrari, is a marginal enterprise, at best. And there just aren’t enough Jeep and pickup sales to carry that load.

The beauty of this town is that the auto business is all consuming. Everyone is either in on it, already has some sort of piece of it, or wants in. And the other beautiful thing is that people involved in this business like to talk. Especially to me. About everything. And right now my moles out in Auburn Hills are in a state of furious outrage. Why? Because future product updates are being put on hold, and as one person put it, “we’ve got nothing in the pipeline past 2018. People are starting to get worried about the future of this place. Again.”

But there’s more to that story too. Why are Marchionne and his espresso-swilling minions deferring spending money on future product programs to conserve what little cash flow they have? Because Marchionne is pouring everything he’s got into Alfa Romeo.

Let me revisit that because the true meaning of it resonates to a level of flat-out stupidity that is simply impossible to comprehend. Marchionne is delaying future Jeep, pickup and Chrysler product updates – and putting some on hold altogether – so that the company can execute his “vision” for Alfa Romeo.

You remember Sergio’s Alfa Romeo “folly,” right? This is the one where he repeatedly stated that Alfa’s sales target was 70,000 in the U.S. market. In fact he promised with classic Sergio bluster that Fiat dealers would be swimming in Alfas – and Alfa profits – by 2016. Except that never happened. And Fiat dealers who were promised that – and who were urged to spend real money on brick and mortar to construct new stores - were then told that not all of them would be able to sell Alfas.

But it gets worse.

The latest chapter in Marchionne’s “folly” has him insisting that Alfa Romeo will be the next Audi, not only in terms of brand stature - which, considering it has taken Audi 30 years to get where they are today, is a level of delusion that is jaw-dropping even for this town - but also in actual sales, as in real live market share. In fact, Marchionne is promising that FCA will be selling upwards of 75,000 Alfa Romeo cars in the U.S. By 2018.

Think about that for a long and hard moment. Pinning the future of FCA on having the Alfa Romeo brand going from zero-to-Audi in less than three years is not just “folly,” it’s pure, unadulterated, egomaniacal absurdity.

Marchionne and his espresso-swilling posse have had a good run. They absconded with Chrysler’s assets for a song and they rode on the backs of the True Believers out in Auburn Hills, turning their tremendous efforts on Jeeps and pickups into pure gold. But now, Brother Sergio’s Traveling Salvation Show is running out of gas. FCA is bleeding cash by the bushelful despite selling Jeeps and pickups hand-over-fist. The margins are razor thin to non-existent, and the whole thing is teetering on the edge.

In fact Marchionne’s hand-wringing and cajoling over consolidation has a very distinct air of desperation about it, because if FCA doesn’t find a partner and soon (Sergio wants to retire to take his accolade-laden victory lap in 2018), Marchionne will have his back against the wall with nowhere to turn. And FCA will be sagging on the ropes.

Time of your life, eh, kids?

And that’s the High-Octane Truth for this week.