Hanover Chrysler Dodge Jeep

Never play poker with Sergio Marchionne.

In less than 24 hours, the CEO of Chrysler Group LLC watches the United Auto Workers leadership certify a split contract ratification vote, sees European leaders craft a credible response to their sovereign debt crisis, gets a stronger-than-expected report on third quarter U.S. gross domestic product and unexpectedly releases Chrysler's quarterly numbers.

Unrelated events? Not if you're running a transnational automaker rooted deeply in western Europe and the United States. The prospects for Chrysler and its controlling shareholder, Fiat SpA of Italy, are slightly brighter today because of the union deal ? the least generous among the three ? and mildly improving macro-economic conditions.

Capping the news cycle, the guy who publicly scolded UAW President Bob King unexpectedly dropped his profitable third-quarter numbers Thursday ? to embarrass King again? No, to deflect rising criticism from rank-and-file members angry with the contract, or from skilled-trades members angry with the vote-counting, or from members angry about being denied Facebook updates on the ratification voting. Or all of the above.

Stupido Marchionne isn't.

Remember, this is the guy who depantsed former General Motors Corp. Rick Wagoner and his stud CFO, John Devine, by extracting $2 billion in cash to unwind the aborted Fiat-GM tie-up. This is the guy who gained control of a collapsing Chrysler from the president of the United States, essentially for free.

This is the guy who negotiated the least costly of three UAW deals with resurgent Detroit automakers, mindful that a detour into arbitration (allowed under terms of Chrysler's federal bailout) would hobble union hopes for organizing foreign-owned rivals down South. There are smaller signing bonuses paid over a longer period of time and a tighter alignment between manufacturing quality and performance bonuses.

This is the guy whose Jeep brand ? maligned, crappy, out-of-date and poor-quality Jeep ? emerged as the highest quality domestic brand in the latest rankings by Consumer Reports. That's, you know, the kind of cred Chrysler's German masters said they would deliver, but never even came close.

This is the guy whose sales and marketing teams shock the industry with consistently better-than-expected results before most of their new and/or improved metal debuts in North American showrooms. They're still at it, posting nearly two-point market share gains in both the United States and Canada year over year.

This is the guy leading the No. 3 Detroit automaker that booked third-quarter net income of $212 million on 19 percent higher revenue of $13.1billion, that upped its free cash flow target for the year to $1.2billion, that delivered a 24 percent increase in worldwide car and truck sales over last year.

"This house continues to be fully focused on financial performance and making outstanding cars and trucks by fully leveraging its alliance with Fiat," Marchionne said in a statement Thursday. What a concept.

With each passing quarter, Chrysler looks like a house it doesn't pay to bet against. Marchionne's unorthodox, Land's End-sweater-wearing, underpromise-and-overdeliver, I-don't-care-about-the-Detroit-rules style is the real deal. The numbers show it; the hard-headed management shows it; and the products are starting to show it.

Chrysler's cranky UAW members can certainly express their displeasure with the new contract. They're free to gripe about the way their leaders managed the communication of the ratification vote and their perceived slights in a) going last and b) getting a stingier deal.

It's a free country. But they could do a lot worse than the plainspoken Italian-born CEO poor-mouthing the union's leadership. In fact, they already did, from an arrogant German campaigning for the big job back home (Dieter Zetsche) to a preening General Electric Co. cast-off who still seems to think he was on his way to rescuing Chrysler.

It ain't so, Mr. Nardelli.

Marchionne, however, is another story. Among the wild cards in this fall's contract talks, none carried more interest than the Fiat guy running Chrysler. Would he back the UAW and its savvy president, Bob King, into a corner? Would his disdain for this town's unwritten rules of labor talks, hardened by the fact that Old Detroit died with twin bankruptcies, back the CEO into a corner? Would he turn out to be too smart for his own good?

Those answers and so many more are starting to accumulate, and what they say is that Chrysler appears to have a boss who is leading the whole team ? union and management ? into a more competitive and more sustainable future.

After a decade of drift and misguided leadership, that's about as good as it can get ? until it gets better.

dchowes@detnews.com

(313) 222-2106

Daniel Howes' column runs Tuesdays, Thursdays and Fridays.

Bryce G. Hoffman/ The Detroit News

Three months after he merged the executive teams of Fiat SpA and Chrysler Group LLC, CEO Sergio Marchionne says he wants even closer integration of the two companies.

Some European analysts have recently expressed concern that Chrysler might drag down Fiat's bottom line. But when the two companies released their financial results on Thursday, it was apparent that the opposite was true. Approximately two-thirds of the Fiat-Chrysler group's trading profit came from the automaker.

Marchionne said that, with Chrysler's support, Fiat is well on its way to posting a record trading profit for the full year. And he said this makes it all the more important for the group to be welded together.

"We do see these two entities as ultimately coming together," Marchionne told analysts and reporters Friday morning. "We do need to bring the governance systems together ? not just operationally as we've done, but also from a corporate standpoint."

Marchionne has already merged the management teams of the two companies. But the ownership position of the United Auto Workers' retiree health care trust ? also known as a voluntary employees' beneficiary association or VEBA ? requires him to maintain strong firewalls on the financial front. Marchionne would prefer to see those walls removed.

VEBA owns more than 46 percent of Chrysler. Fiat SpA owns the rest, but Marchionne has made it clear that he wants the UAW's shares, too.

"The way in which this happens is totally open," he said.

He has tried purchasing the VEBA shares directly from the UAW, but the two sides have not been able to agree on a price.

Marchionne had said the solution could be an initial public offering that would allow the union to cash in shares for a higher price. But he said Friday market conditions make that an unattractive option for now.

"I wouldn't venture to do anything in this market today," he said. "It's an ungrateful market. It's distracted by other things."

The UAW declined to comment.

Chrysler CEO says it creates class system that can't go on

Bryce G. Hoffman/ The Detroit News

Four years after the United Auto Workers and the Detroit Three agreed to a two-tier wage system, at least one automaker's CEO says the system must go.

Chrysler Group LLC CEO Sergio Marchionne says he tried to abolish the two-tier system in the company's U.S. factories during his recent negotiations with the UAW, but was unable to reach an agreement with the union. Now, he is vowing to do it in 2015.

"It creates two classes of workers in the plant," Marchionne told analysts and reporters in a conference call Friday. "This kind of economic disparity between people on the line is not something that can go on for a long period of time."

The UAW declined to comment on Marchionne's remarks.

But labor experts said Marchionne's call for a return to a common wage structure for all production workers is not as altruistic as it might seem.

"The UAW would also like to see the end of Tier Two, but I think they have very different ends in mind," said Kristin Dziczek of the Center for Automotive Research. "His desire is to get everybody to the lower level, not the higher."

The two-tier wage system was adopted by all three Detroit automakers as part of their game-changing 2007 contracts with the UAW. Under it, new hires were paid about $14 an hour, compared to about $28 an hour for existing production workers. They also received a less generous benefit package that replaced defined-benefit pensions with a defined-contribution retirement plan.

At the time, union leaders acknowledged the fundamental inequality of the system, but said it was the only way to convince the companies to hire more workers. The UAW, which has seen its ranks dwindle from 1.5 million in 1979 to just 377,000 last year, needs new members to cover its own expenses.

Workers have complained about the system, and it was a major factor in recent voting at Chrysler. Plants with many entry-level workers appeared more inclined to vote for ratification than those with more veteran employees.

Marchionne is determined to raise the issue again when the new contract expires in four years. But he said the current agreement does provide a solid foundation for future growth.

"It makes us a lot more confident going forward," he said.

Chrysler Chief Financial Officer Richard Palmer said the new agreement would have no net effect on the company's labor costs. It will raise the wages of entry-level workers to $19.28 over the life of the contract, but he said that would be offset by adding more lower-wage workers as the company expands production in the United States. The new contract also provides bonuses for quality and productivity to all workers, but he said these would be offset by the actual gains they are tied to.

"(There is) no overall increase in net costs," he said.

Chrysler's contract offered fewer gains for workers than the ones the UAW negotiated with General Motors Co. and Ford Motor Co. Both of those automakers said their new agreements would increase labor costs by about 1 percent over the next four years.

"They would have to have a heck of a lot of second-tier people hired at the end of contract in order to have this net out," Dziczek said. "That doesn't seem to include any profit-sharing either."

The contract is supposed to pay workers a bonus of 85 cents for every $1 million the company makes.

Marchionne said the new contract is only a beginning. He would still like to see a more flexible compensation scheme that makes workers more invested in Chrysler's success.

"We do need to provide real upside to all workers as long as the organization continues to perform and deliver value," Marchionne said. "On the other side of the equation, there's got to be an undertaking and a commitment by our people to share in the downside risks of this venture."

bhoffman@detnews.com

(313) 222-2443