Marginal: Beyond The Crisis

Sergio Marchionne, Chrysler Group CEO, made a speech on June 3 at the annual Mackinac Policy Conference that's organized by the Detroit Regional Chamber of Commerce on Mackinac Island, Michigan.

Sergio Marchionne, Chrysler Group CEO, made a speech on June 3 at the annual Mackinac Policy Conference that's organized by the Detroit Regional Chamber of Commerce on Mackinac Island, Michigan. Although Mackinac is an idyllic place, he didn't sugar-spin his message, pointing out that whether it is a state or an industry: "The reality is that it often takes a crisis to stir us to change." And therein lies a problem: We wait until there is a crisis before we act. We wait until there is a bonafide oil spill in the Gulf of Mexico before we think, "Hmm... maybe we really ought to look at safety protocols and how we would handle things in the event that one of these things went pear-shaped fast." Marchionne went on to observe that although there are improvements in the economy, he cautioned: "While we all welcome the signs of recovery, we can't afford to fool ourselves into thinking that everything is in order."

We can't afford the complacency that that would lead to. The crisis continues.

Marchionne: "We must take lessons from our crisis, and look ahead for new solutions instead of trying to preserve old reference points that are no longer valid."

In fact, these old reference points are not merely no longer valid, there is some question whether these reference points, as they've existed for the past several years, have been valid for a long time, despite many people in the industry—many of whom are no longer in the industry because of their hewing to something no longer tenable—holding onto them with a death-like grip.

He deserves quoting at some length, because he is speaking truth in a way that is all too uncommon, even now, after the industry has been transformed in a manner unthinkable even five years ago.

Speaking of the global economic crisis that took hold at the end of 2008 and then accelerated in short order, an event that lead to Chrysler and Fiat creating Chrysler Group, he told the assembled politicians and business leaders: "The shockwave it set off around the world was so severe that nothing short of a war could have been more devastating. It took so many victims—including thousands of individuals in Michigan and elsewhere around the world still unjustly bearing the brunt of a crisis they did not create—that it is difficult to view it purely in Schumpeteran economic terms, as the normal by-product of ‘creative destruction.'"

Here's where it gets closer to home: "Over the past 30 years, automakers worldwide, with the exception of the Japanese, have rigorously, methodically and significantly underperformed in the market. The industry, especially in North America, has destroyed billions of dollars in value. Our industry embarked on M&A sprees and excursions into other businesses. We consolidated brands and consolidated companies and consolidated the consolidations. These efforts made automakers into rambling ranch houses onto which one room after another was added—with no rational architecture uniting the whole."

In effect, the automakers spent more time gaming their businesses than in making great cars and trucks, with one notable exception, which has gained significant market share during the past 30 years while other vehicle manufacturers—yes, Chrysler among them—have lost it.

While part of the solution could be to focus on cars and trucks, there's more to it. Marchionne talked about principles that they're embracing at Chrysler, including such things as being competitive and working to provide best-in-class products. The usual stuff. But this is critical: "We deliver what we promise: we acknowledge that we are accountable." He didn't just mean deliver cars and trucks, but deliver benefits to society as a whole. He acknowledged that when Chrysler took money from the U.S. and Canadian governments went beyond being a financial transaction and created a commitment "to give a new life to the automotive industry." To create value not merely in terms of numbers, but value for the men and women whose livelihoods depend on the viability—the authentic viability, not the gamed one—of the industry: "But whether as a company or a nation, we cannot limit ourselves to the pursuit of indiscriminate growth, believing improvements in numerical indicators to be an end in and of themselves. Growth must be rooted in merit and the respect for human dignity."

Marchionne said early in his speech, "I am neither a professor nor an economist. My calling is much more humble: I am a man of industry." And once industry was more about things like the pride of workmanship and the value of craft than about off-shoring and shortcuts. Maybe Marchionne can lead an industrial Renaissance.