Chrysler Remake: New CEO Shakes Up Exec Team Again

With sales down sharply and pressure to start generating cash before government loans run out, Chrysler CEO Sergio Marchionne shook up his executive team Monday, replacing two of his brand managers after just four months and splitting Dodge into car and truck units.

The changes show Marchionne's penchant for moving quickly and demanding performance, industry analysts say. But it's also a sign that all is not well inside the company's sprawling headquarters complex in the Detroit suburb of Auburn Hills.

"Something went wrong here," said Gary Dilts, a former Chrysler sales executive who is now senior vice president of global automotive operations for J.D. Power and Associates. "He's going to mix and match this team until he gets the chemical balance where he wants it."

Speed is crucial for Marchionne, who also runs Italy's Fiat Group SpA. It will be at least 18 months before Chrysler can launch a new car lineup based on smart, fuel-efficient Fiat designs. Until then, the third-largest U.S. car maker must survive with its current shaky lineup.

Marchionne, who led a stunning resurgence at Fiat, replaced Peter Fong, 45, as president and CEO of the Chrysler brand and Michael Accavitti, 50, as president and CEO of Dodge.

Fong also was the company's top sales executive, and both men appeared with Marchionne as the company's public faces just two weeks ago at the Frankfurt Auto Show in Germany.

But the moves come just four days after Chrysler reported a 42-percent drop in September sales, compared with the same month a year earlier. Through the first nine months of the year, Chrysler sales are off 39 percent, the largest drop of any major automaker.

Among Chrysler's problems is a weak lineup of midsize cars. Its current entries, the Sebring and Avenger, have sold poorly and have received low quality ratings from J.D. Power and Associates and Consumer Reports magazine, which found them inferior to the top-selling Toyota Camry and other competitors.

The Sebring-Avenger replacement will be based on a Fiat compact that will be stretched and widened to fit a midsize car.

Marchionne promises to introduce a new lineup chock with Fiat small and midsize cars in November, and separating out Dodge's car business will help rebuild its image.

The new offerings will also include trucks and larger cars from Chrysler that he hopes will be more appealing to Americans. The company's namesake brand will try to steal customers from Cadillac and other luxury brands.

Chrysler has been mostly mum about its new product plan. Even dealers have been kept in the dark.

Splitting the Dodge brand into truck and car operations mimics what Marchionne did with Fiat, where he successfully separated commercial vehicles from passenger cars, said Chrysler spokesman Gualberto Ranieri.

And a separate truck unit could also be sold off if Chrysler needs more cash. Although sales of the Ram pickup are down 27 percent for the year, it's still Chrysler's top selling vehicle at 143,205 through September.

The U.S. Treasury Department allocated roughly $8 billion for Marchionne and Fiat to keep Chrysler going until it can become profitable again, but its sales can't seem to rebound with a slumping economy and the current poor-selling model lineup. Last year, under different leadership, the company lost billions and went into bankruptcy protection.

Treasury Department officials have said there will be no more government cash for Chrysler, but also have said they "stress-tested" the $8 billion and it was enough to keep Chrysler going after its Chapter 11 restructuring until it can make money again. Chrysler so far has received a total of $15.5 billion from the U.S. government.

Chrysler said in a statement Monday that Fong left the company for personal reasons and Accavitti resigned to pursue other interests.

Chrysler's Ranieri wouldn't comment when asked if the sale had anything to do with the men's departure, but Dilts said it's clear that neither would have quit on their own just months after being promoted. The moves show that Marchionne is looking for the right combination to bring the company back, he said.

Marchionne got rid of former CEO Robert Nardelli and Vice Chairman Tom LaSorda almost immediately upon taking over Chrysler's management in June.

More recently, a person briefed on his plans says Deputy CEO Jim Press, a former Toyota Motor Corp. executive, will step down by the end of the year. Currently no one reports to Press.

Two men will replace Accavitti running the Dodge brand.

The truck group will be led by Fred Diaz Jr., 43, who previously ran the company's Denver operations. Vice President of Design Ralph Gilles, 39, will take over leadership of the Dodge car brand which includes minivans.

The Ram brand consists of the company's new Ram pickup trucks, as well as its commercial vehicles. Diaz also will take over as lead sales executive in the U.S. for the Chrysler Group organization.

Hayden Elder, owner of a Chrysler-Dodge-Jeep dealership in Athens, Texas, said Diaz spent many of his early years with the company in Texas learning the truck business.

"I don't know if there is ever going to be a more perfect fit to run the Dodge division than him. He understands it."

Elder said he was pleased with the Dodge split because marketing cars and trucks is vastly different.

"You don't market to a gentleman buying a one-ton diesel the same way you market to someone buying a high-end minivan," he said.

Chrysler brand CEO Fong was replaced by Fiat executive Olivier Francois, 48.

At the Frankfurt show, Chrysler executives said they want to make Chrysler a high-end luxury brand, while Dodge would feature performance and every day cars and trucks. Jeep would remain focused on off-road vehicles. Michael Manley remains as president and CEO of that unit.

The split also makes it easier to sell the Ram brand, said Aaron Bragman, an analyst for the consulting firm IHS Global Insight.

The Ram and Jeep brands are the only parts of Chrysler that currently have value, he said. The Ram pickup is a company top seller, while the Jeep has a big chunk of the off-road market. Although sales of both have fallen this year, the drop isn't nearly as large as Chrysler's overall swoon.

"It's a better way for them to eventually divest the (Ram) brand," he said. "If they need to liquidate, it will be easier to do, but that doesn't instill confidence in many people."