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Do You Buy Marchionne's Turnaround Plan?

Sergio Marchionne
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Sergio Marchionne

As I sit through a lengthy explanation of how Sergio Marchionne plans to turn around a struggling Chrysler, one question keeps running through my mind: Do we think this plan will work?

That question is not to imply Marchionne's 5-year plan for Chrysler will fail.

Far from it.

There are many aspects of the strategy that make complete sense on paper.

* Chrysler will share platforms with Fiat and by 2014 reduce 11 platforms to 7. A huge cost savings.

* Using a Fiat platform, Dodge will introduce a small car by 2013. That's in addition to Dodge adding a compact sedan in 2012 and a model to replace the Avenger in 2013. Dodge desperately needs new, smaller, fuel-efficient models.

* Jeep will be adding a small SUV in 2013 as well as two other new models that year. Jeep, which currently builds just fewer than 500,000 vehicles, is targeting a major increase in production to 800,000 vehicles by 2014.

Those and other steps by Marchionne make total sense.

Still, with this being Chrysler's third "road map" to the future in the last 11 years, there's a feeling among many people that we've heard this song and dance before. Remember how Daimler executives talked about growing Chrysler by working together? Remember how Cerberus vowed to "invest" in Chrysler? Look at how those two panned out.

Marchionne has heard the skepticism and has read reports of how Chrysler is slowly dying. He refuted the second point today by pointing out Chrysler posted positive EBITDA in the third quarter and its cash balance is up $1.7 Billion since coming out of bankruptcy. No wonder he must chuckle at the skeptics.

Truth is, we won't know for at least two years if this turn-around plan is gaining traction. Yes, on paper it makes complete sense. Yes, there is a new spirit and energy at Chrysler, Jeep and Dodge. But at this point, the only thing that will truly change perceptions of Chrysler, are better products and results from Chrysler.

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