In 2009, the future of the American automotive industry looked bleak. Two of the Big Three auto manufacturers had filed for bankruptcy protection while the other was limping severely into the Great Recession. The epitaph of Detroit was being chiseled into stone. All that remained was the eulogy. Instead, Americans heard a defiant declaration:
What does a town that’s been to hell and back know about the finer things in life? Well, I’ll tell you, more than most. You see, it’s the hottest fires that make the hardest steel. Add hard work, conviction and the knowhow that runs generations deep in every last one of us. That’s who we are. That’s our story.
Part of a 2011 Super Bowl commercial featuring the rapper Eminem, the ad unveiled the company’s gritty and brash new slogan, “Imported from Detroit.” It also served notice that Chrysler—along with an industry and the city that gave it life—wasn’t going down without a fight.
“At the time, that was really a brave decision to go out on a limb like that,” says Richard Palmer, chief financial officer at Chrysler Group LLC. “After everything the company and the community had gone through, it was a bold statement that we had been bloodied but not broken.”
What began as a savvy marketing strategy has since become both a battle cry and a blueprint. No city represents the rise—and fall—of the US auto industry quite like Detroit. So it’s only natural, unlikely as it may have seemed just a short time ago, that the industry’s resurgence is starting where it began.
The fact that a would-be microbiologist from Bath, England, has become one of the key architects of Chrysler’s resurrection is both perfectly improbable and entirely fitting. Palmer graduated from the University of Warwick with a degree in microbiology in 1988 but soon decided to leave the beakers and microscopes behind for a career outside the laboratory.
“Basically, I didn’t see myself wearing a white coat for the rest of my life,” Palmer says. “I wanted to get into the business world, and I had a number of friends who had taken jobs in the city of London. I came to the idea that getting into a firm for financial training was a good idea. And, to be frank, the one that I most identified with from a style and a personal level was Price Waterhouse.”
Palmer credits the mentoring he received from senior colleagues at the PwC offices in London as being instrumental to his transition from the pastoral settings of his formative years into the fast-paced world of global finance.
“For me, it opened my eyes to a world that I wasn’t really aware existed,” Palmer recalls. “The culture of the firm was very strong. In those first few years, I learned a lot about building relationships, how to work as a team and how to interact with clients.”
For Palmer, those clients represented industries ranging from financial services and publishing to defense contracting and casinos. After three years in London, Palmer was promoted to manager at the PwC office in Turin, Italy. A three-week Italian language course and one plane ride later, Palmer abruptly found himself talking with one of his newest clients at an industrial factory nestled in the foothills of the Alps. Palmer quickly flourished in a sink-or-swim environment.
“Working in Italy for PwC was a fundamental moment in my career,” Palmer says. “Having that global experience and the ability to work across different cultures was a hugely important thing for me in terms of my professional development.”
As it turns out, that experience has had an impact far beyond Palmer’s own career portfolio. After leaving PwC in 1994, the lessons Palmer learned at the firm have ultimately had a significant influence on his role in the resurrection of a fallen auto giant while helping an entire industry ease slowly back from the brink.
In many ways, Palmer is an unlikely figure in the rebirth of the American auto industry. For starters, Bath is a long way—literally and figuratively—from Detroit. Moreover, Palmer readily admits he has never been what you might call a serious car enthusiast. He enjoys cars, likes them, drives them—sure. But his motivation for working in the auto industry was as much about the professional challenges it represented as it was about the physical product.
“The auto industry has always been tough, and it remains so to this day,” Palmer says. “It can be quite challenging. But if it were too easy, everyone would do it, right?”
After leaving PwC, Palmer spent nearly a decade working for United Technologies Corporation (infrastructure and aerospace) as audit manager and at General Electric Oil & Gas as finance manager. In 2003, Palmer became CFO at Comau, a subsidiary of Fiat S.p.A. specializing in the production of industrial robots used in manufacturing. That led to a position as CFO at Iveco, another Fiat-affiliated subsidiary, focused on manufacturing trucks, buses and diesel engines.
Then, in 2006, Palmer became CFO of Fiat Group Automobiles S.p.A. Palmer’s experience working for PwC in Turin—home of Fiat S.p.A.—was integral to his ability to grasp one of the most significant trends in the last decade. Namely, the globalization of the auto industry.
“I’ve looked at the industry from a lot of different angles,” Palmer says. “One of the biggest developments is the increase in globalization. You don’t have mono-region players anymore. Everybody has grown globally.”
The emergence of rapidly growing and largely untapped regions such as Latin America and Asia- Pacific, which include booming markets such as China, India and Brazil, has fueled the rise of global competition—resulting in an accelerated swirl of regulations—while also ratcheting up the overall quality of cars being produced.
That trend is expected to climb. In PwC’s 2012 Global CEO Survey, 78% of automotive CEOs who responded said they plan to change their research and development capacity (most increasing their R&D budgets), with nearly a third identifying new products and services as a primary driver for growth in 2012. In the current industry climate, innovation is vital, with quality becoming an almost foregone conclusion.
“Everyone makes good vehicles today,” Palmer says. “It’s very hard to differentiate on quality alone. To be an effective carmaker, you obviously need to have a great functional product, but you also need much more than that to succeed.”
The Big Three US auto manufacturers had been struggling for years to stem the dilution of market share caused by increased domestic and international competition, as well as product lines that were failing to meet consumer expectations. Then the situation turned from serious to dire as the global economy began to sputter into recession in late 2007.
By 2009, the end seemed near. Chrysler was headed for bankruptcy, and the American auto industry was on the verge of crumbling, threatening to take Detroit— the once heralded capital of the industry, the Motor City—right down with it. Then something happened.
Fiat S.p.A. formed an alliance with Chrysler Group, acquiring an ownership stake in the new company formed after its predecessor filed for bankruptcy. But this company that had been so emblematic of the industry was still teetering on the edge. Palmer was appointed to the role of CFO of the newly formed Chrysler Group LLC. The task that lay ahead of him wouldn’t be easy.
“Chrysler went bankrupt because something was wrong, and to a large extent what was wrong was the product,” Palmer says. “The company had lost focus on its core mission of designing, building and selling great cars. We needed to refocus and go back to the basics.”
First, the new leadership team had to build confidence among employees whose mettle had been constantly tested throughout the arduous bankruptcy process.
“When I came in, the finance team had clearly been through a very tough time,” Palmer says. “There was a negative atmosphere in the company, and we really had to stem the bleeding, rebuild the finance team and motivate the people who had been through the process.” He also found a large degree of wariness over how much influence Fiat would exert over the company. His experience of building relationships at PwC would prove to be invaluable in the tenuous months after Chrysler and Fiat joined forces.
“At first, people felt incredulous,” Palmer says. “Eventually they began to understand that this wasn’t going to be an invasion by Fiat, but an alliance. Really it was going to be up to the Chrysler workforce to dig the company out, and so there was a lot of empowerment for employees early on.”
Palmer played a pivotal role in building what would become the business plan Chrysler-Fiat unveiled to the world in November 2009. The plan stated the company’s new objectives, including everything from overhauling the product lineup to building better supply relationships to improving customer service.
“We basically presented everything we were going to do to make this place work,” Palmer says. “A lot of people looked at this and said we were being unrealistic. But the employees here have a lot of pride, a lot of competencies and a lot of passion for the company. That can’t be underestimated.”
With a revamped product line and renewed vigor, the company began to turn the tide as market share and sales slowly ticked up. In addition, the company underwent a massive brand facelift, exemplified by the original “Imported from Detroit” commercial.
“It was very well-received, especially in Detroit, and really set the tone for differentiating the brand on a marketing level,” Palmer says. “For several years, we didn’t have credibility in the marketplace and now, with the changes we’ve made, we do.”
During halftime of the 2012 Super Bowl, the company followed with another hard-hitting message— this one delivered with the gravelly gravitas of Clint Eastwood and focused on the toughness and persistence that’s required for success.
That success is already happening. The trials by fire that the American auto industry went through in 2009 have positioned it for a major resurgence as European economies continue to flicker and falter.
“Everyone is grappling with the problems in Europe,” Palmer says. “It just underscores how you have to have a global base and strong brands, and you have to commit to driving quality up and costs down. For all its troubles, the crisis in the US market may have been the best thing for us. We’ve restructured, become more competitive and right-sized. In the meantime, Europe is having its own crisis.”
Lingering concerns over the situation in Europe have had a significant impact on the industry psyche, however. In PwC’s Global CEO Survey, 76% of automotive CEOs saw reason for caution, while 57% said their companies have been directly affected by the crisis. That Chrysler Group LLC would be in one of the strongest positions to weather the storm relatively unscathed is a development that few could have anticipated just a short time ago.
In fact, it’s staggering to think of how far Chrysler has come in such a relatively short amount of time. Still, Palmer—who now also serves as CFO of Fiat S.p.A. — is wary of repeating the errors of the past. A company, a city and an industry depend on it.
“We’re in much better shape than we were three years ago, but we still have a lot of ground to cover,” Palmer says. “As CEO Sergio Marchionne reminds us constantly, you’re only as good as the last vehicle you launched, so we have to continue to execute on all levels. We’re still on a comeback trail, and we’re not finished yet.”