Under Drive

Sergio Marchionne, Fiat SpA's chief executive and the man now charged with jump-starting Chrysler, said today that the one of the most severe crises the global auto industry has ever seen will likely slow the American manufacturer's turnaround. Despite failing to reach the sales volume Marchionne has long preached necessary for any auto company to survive the downturn, the Italian executive vowed to forge ahead without finding another manufacturing partner.

Still, the comments cast a pall over Chrysler's restructuring plans. Fiat and Chrysler together make about 4 million units, short of the 6 million Marchionne has said was required. "We can reach that number on our own," he told reporters at the Frankfurt Motor Show, confirming that in November he will present a five-year plan for Chrysler, which will likely including bringing Fiat cars back to the U.S. market, sharing technology, and revamping the American brand's current lineup of vehicles. But questions remain.

Chrysler, like Detroit rivals Ford and General Motors, is being slammed this month in the wake of the government's recently ended Cash for Clunkers program. So far, nationwide industry sales are off 19 percent. "We are going to see harsh reality in September," Marchionne said. He added that the U.S. industry was facing "disaster." GM boss Fritz Henderson echoed the somber tone, telling Bloomberg that the market is "very weak" this month.

The plan to save Chrysler pivots on putting Fiat technology into the American maker's lineup. But, that is easier to plaster on a PowerPoint slide than it is to do. Chrysler had difficulty getting inventory to market last month to meet Cash for Clunkers demand, an indicator that the company's plants are far from optimized. What's more, even with Fiat platforms and technology to work with, drumming up new models will cost millions and take time. Who will pick up the tab—the government? Fiat?—is not yet clear.

The auto industry has a long history of much maligned "badge engineered" vehicles that bombed in the market, such as the disastrous Subaru-based Saab 9-2X. Even well-received efforts have ended in disaster. GM's plan to import European Opel models and rebrand them as Saturn cars and SUVs was widely applauded for its deft execution. But that strategy could not forestall GM's bankruptcy and the likely shuttering of Saturn.

Still, Fiat has some advantages. Despite a larger-than-expected net loss of 179 million euros in the second quarter, executives say they're still on track to post a net profit of at least 1 billion euros for the year. Thanks to slick designs and generous government incentives, Fiats flew off Italian car lots this summer. Confirming that Fiat's technology and platforms could be extremely valuable to Chrysler's truck and SUV-heavy portfolio, the European Federation for Transport & Environment this week dubbed the Italian maker Europe's greenest.

Now, the clock is ticking to make the most of those advantages for Chrysler.