Markets

3 Reasons Sergio Marchionne's Bet on Jeep Has Paid Off

By Matthew DeBord

Updated on: June 3, 2011 / 5:47 PM EDT / MoneyWatch

Fiat just assumed a majority stake in Chrysler, spending $500 million to buy up the U.S. government's remaining stake in the once-nearly-dead carmaker. The stage is now set for Chrysler's IPO, either later this year or early next.

Financially, this has been a master class from Fiat-Chrysler CEO Sergio Marchionne. But Marchionne has also moved the needle on Chrysler's products. Specifically, he zeroed in on Jeep, Chrysler's iconic international brand. Only a European-style CEO could have done this. Here's why.

The rest of Chrysler was a hot mess. When Fiat was handed the keys to Chrysler in 2009, Jeep was the only brand that anyone had seriously talked about as being worth selling to somebody else. This is because it had international recognition -- the rugged American vehicle that had helped win World War II. Neo-muscle-cars like the Dodge Challenger didn't translate. Nor did Chrysler minivans or the full-size Ram pickup. Marchionne was running an Italian car company, so naturally he locked eyes on Jeep. A good move, as Jeep sales have surged during the post-bankruptcy period.
America still loves Jeep, too! It wasn't like Marchionne could look forward to Europeans arriving in droves to buy up Jeeps. The brand needed to appeal to its base. And it did. This is USA Today's DriveOn blog:

Fiat CEO Sergio Marchionne, who became Chrysler CEO as part of the bankruptcy deal, pushed Chrysler to quicken planned upgrades to its models, beginning with the redesigned Jeep Grand Cherokee. That vehicle has been a big success among critics and buyers. Grand Cherokee sales this year through May were up 192.2% from the year-ago period, according to sales-tracker Autodata. The entire Jeep lineup has been tweaked under Fiat's control and Jeep sales are up 55% through May, in a market up 14%, Autodata says.
Jeeps are not SUVs. Well, they are, of course. But the brand so thoroughly pre-dates the stigmatized SUV era that even if all other SUVs were summarily banned in the coming years, Jeep might be granted special dispensation. It has off-road credibility to fall back on, and although plenty of other SUVs are equally effective under rough conditions, Jeep never fell quite to suburban soccer hauler status. And it continues to build the purest expression of off-roading on the market, the Wrangler. Here's what Edmunds.com thought of the latest version:
In the realm of modern wheeled conveyances, the 2011 Jeep Wrangler seemingly ranks only a few rungs higher than a Jamaican jitney bus. This is a vehicle that proudly boasts of solid axles, removable doors, exposed hinges and a fold-down windshield. Yet these symbols of antiquated automotive engineering remain strangely appealing because the Wrangler is still the world's most iconic off-road adventure vehicle.
Only Marchionne could truly see the beauty in something like that. The Old Chrysler took it for granted.

What this proves is that great brand isn't just something to focus on when times are bad. It's actually the business equivalent of a lifeboat. Unfortunately, managers can sometimes become so preoccupied with their overall operation that the lose sight of the lifeboats. Worse, they can neglect them. Not something you want, when the ship springs a leak.

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Photo: Fiat-Chrysler Media