What's The Italian Word For Insane?

by BILL WADDELL

The new owners of Chrysler have had a busy week.  Many folks may not know that they have cobbled together a couple of great old brands in the farm and construction machinery business - Case and New Holland - and formed a company called CNH that is second to Deere in terms of sales.  They are slowly running it into the ground by focusing way too much on equipment financing and not nearly enough on equipment value.  It is losing money (due to the economy they say, although Deere is making money in the same economy) and owes its parents at Fiat $5 billion.  Fiat had this diseased elephant go out and borrow a billion so it could pay back some of the loans because Fiat needs the dough to pay for its Chrysler deal.

Over at Chrysler, it is worthwhile to see what the Italians plan to do with the billion bucks they squeezed out of the tractor folks. To be fair the last three owners of Chrysler (Cereberus Capital, Daimler and Chrysler itself) did their level best to run it into the ground, however the government rightfully dumped those losses on the lenders and investors who backed them, and virtually handed Chrysler's few remaining 'good assets' to Fiat on a platter.  Now it is Fiat's turn to se if they can finish the job and kill Chrysler for good - and this week they got off to a rip-roaring start.

For starters,  "Chrysler Group LLCsaid Wednesday that it is dropping its lifetime powertrain warranty in favor of a 5-year, 100,000-mile guarantee. Rick Deneau said the decision was driven by market research that showed consumers prefer warranties with a fixed time period. Powertrain warranties typically cover repair or replacement of transmission and engine parts."  That market research must have been conducted in a college bar, very late on a Friday night, in between rounds of the beer pong tournament.  The boys in Turin should be told, however, that market research notwithstanding and while folks may feel differently in Italy no sane, sober American 'prefers warranties with fixed time periods over lifetime warranties'.  More important, announcing to your customer base that the new owners do not intend to make cars that will run as long as those made by the management that went bankrupt is not particularly smart.

The warranty deal and shuffling money from the tractor company to Turin to Chrysler doesn't really matter compared to the next bit of news.  Jim Press is out and the new Chrysler is in the hands of a financier and lawyer.  Jim Press, as you know, was the guy from Toyota brought over by Cereberus to fix things shortly before the bankruptcy.  Apparently his failure to work miracles in two years while working for the Bob Nardelli of GE and Home Depot infamy, under the control of Cereberus whose vision for Chrysler was to make a ton of money from Chrysler Financial and GMAC was not good enough for the Italians.  They want Sergio Marchionne to run the show.

Jim Press worked for Toyota for 37 years, was the first non-Japanese President of Toyota USA, led their sales, engineering and manufacturing operations, and was critical to their success from their entry into the US market in 1970 to their passing of GM.  The Italians don't want a guy like that to run the show.  To them, apparently, knowledge of automobiles and knowledge of the American market is not terribly important.

Instead, they want Marchionne with all of five years in automotive, all of it in puny Fiat, and none of it in the USA.  His claim to the throne is that he 'turned Fiat around' - a euphemism for chopping heads and stopping the flow of blood.  He has grown nothing.

Loot the tractor company, cut the warranties, and can the Toyota guy in favor of a lawyer - some board of directors you guys got going for you over there at Fiat.  Good luck in the American automotive market.

Comments

[Luciano]

Hi Bill,

it is not true. The FIAT was deeply changed by Marchionne.
I think that you should read more on the subject.
BTW 5 years or 100.000 KM is the standard warranty for european cars (yes also for Toyota).

Luciano

P:S.: I read your blog every day and is very informative. When will you post on lean accounting, TDABC and TOC?

[Dragan Bosnjak]

Hi there,
I'm writing from Italy, I run my own blog talking about lean thinking in italian. And I can't be more agree with you. Let me explain why: FIAT is telling that thay are doing lean all the time, but I can see that the only lean thing they do is the use of lean tools and not at all the development of lean philosophy. There is lot of plants in Italy of Fiat that is on strike all the time because the human part of lean thinking is inexistent. I saw an article today about what the Chrysler workers have found after getting back from their vacancies: a completely changed workplace and the superiors are telling that now the "lean" is going to be really applied. I think the only thing that will start is the employee dissatisfaction, because they will try to implement changes without really talking to them... Fiat has really turned things around, but the best Fiat plant is in the Poland... (!?) and the method used is that of the carrot and the stick (if you work then you have a job, otherwise...).
The question about the warranty is not as important I think, because in Europe is usual to have warranties of 5 years and 160.000km (=100.000 miles). Of course it is not the American market and I don't know exaclty which are the conditions on it, and from what I can see from your post, neither Sergio Marchionne does... (he's only a very good money manipulator after all...).
Maybe the better thing would have been to put Jim Press in command who would have made some real lean and not lame thinking...

[Dragan Bosnjak]

And PS. the italian word for insane is INSANO (quite the same really...) ;)

[Bruce Baker]

Luciano,
I think Bill's critique of the warranty reduction was not based on benchmarking what the competition offers. His critique was based on the ludicrous claim that consumers actually prefer shorter warrantys and that when you reduce a warranty it sends an implied (or infered anyway) message of a lower commitment to quality. Maybe his analogy comparing the action to drunk unergrads playing beer pong could have been moderated a little but his point is valid. I don't typically moderate my comments on things that I find to be absurd either so I can throw stones. It is the arrogance of somebody telling me that I prefer a shorter warranty that shows Fiat's insualtion from the real world and their arrogance in believing that if they say it in a press conference then we will believe it. They should have just said that they were matching the competition. That would not have sent a good message but it wouldn't insult the intelligence of normal thinking people. Who wants less for their money?

[Mark Welch]

Selfishly, my big takeaway from Bill's post is that I won't be replacing my '99 Sebring JXI Convertible with another Chrysler.

And, Bill, I love the way you write - with insight and a lot of humor. Keep it up.

[Eric Wade]

Great and thought - provoking post. I'm wondering if well executed lean programs through the whole organization can offset idiot moves by management. Say what you want about Daimler (I'm a fan) but if even Jim Press (beyond reproach) couldn't do it, maybe it's not possible to repair?

Another question for another post, maybe, but I wonder if you have any examples of situations where lean was successfully implemented by the "bottom" of the org chart while the top of the org chart stayed "insane" as you put it?

[Aleksey Osintsev]

Hi Bill,
It's always my pleasure to read your blog posts - very informative and full of new ideas. Thanks!
Since I came to Canada from Europe few years ago and I'm experienced with both European and American markets, I believe I'm able to compare them. And again, from my personal experience I found that power-train 100K miles warranty for European cars makes more sense for me than unlimited for American ones. And the reason is quite simple - it's kind of standard that European cars have galvanized bodies and they do not rust for at least 10-12 years unlike most of American and Japanese car brands.
I would rather prefer seeing my vehicle with rarely used time-limited power-train warranty without a single rust stain then having unlimited engine warranty for a car that is completely rusty after 3-4 years of using. For me as a vehicle owner a rust protection warranty is #1 criterion in new car selection process.
May be from this point of view the Fiat's decision doesn't seem to be that insane...