GM's successful IPO will make it easier to take Chrysler public in 2011, contends CEO Marchionne.
Barring a shocking, last-minute setback, General Motors is expected to generate perhaps as much as $23 billion in a potentially record-setting IPO today.
The initial public offering will not only generate cash for GM and the U.S. Treasury, its single-largest shareholder, but also provide some much-needed momentum for cross-town rival Chrysler, which plans to launch its own IPO in late 2011, according to that maker’s chief executive.
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The GM IPO is “great news,” proclaimed Chrysler CEO Sergio Marchionne, talking with TheDetroitBureau.com at the L.A. Auto Show. “GM has done a lot to open up the market for us. We’ll do a lot better (with Chrysler’s own IPO) now.”
As with General Motors, the Treasury holds a sizable stake in Chrysler, a stake it took in return for a multi-billion-dollar bailout when the smaller company emerged from bankruptcy in May 2009. With Chrysler not expected to stage the sort of quick turnaround that has occurred at GM, Marchionne has chosen to let his rival go back to public trading first.
Chrysler’s own IPO, he said, will take place, “in 2011, the second half of 2011, in all likelihood.”
That would likely occur about the time a significant wave of new products developed in cooperation with Italian affiliate Fiat begin to roll into Chrysler showrooms. That will be a critical step for the U.S. automaker, still considered the weakest and most troubled of the Detroit Big Three brands.
But Chrysler has begun showing some unexpected strength. While still in the red, its third-quarter earnings were considered reasonably positive and its 2011 line-up is generating more kudos than the company has seen in a number of years. And sales outside the U.S., something Marchionne has long considered critical to improve, are expected to account for a quarter of Chrysler volume in 2011.
Nonetheless, Chrysler has to overcome plenty of problems, not the least of which is its reputation for poor quality. The influential Consumer Reports magazine has issued a Recommended Buy rating for only one of the maker’s models, the Ram 1500 pickup, noting that Chrysler has some of the biggest quality problems in the industry.
“I fully understand the naysayers,” he said following the Fiat news conference at the 2010 Los Angeles Auto Show. “This industry has a big history of over-promising and under-delivering.”
But Marchionne insisted, “We all learned from this painful process” what is necessary to turn things around, and are “coming to grips with the fundamental drivers of this industry.” What has already happened at Chrysler is “a miracle…by any stretch of industrial dexterity.”
Marchionne has promised to make quality a high-priority – along with taking Chrysler public again. Nonetheless, the maker hasn’t been faulted nearly as much for taking the 2009 bailout as rival GM, which critics have dubbed, “Government Motors.”
Marchionne told TheDetroitBureau that, if anything, the maker has had, “an incredibly good relationship” with the government, in contrast with its dealings with other lenders, which he described as “a lot more painful.”