Who’s the Renegade PR Person at Chrysler?

By Chris Haak

03.31.2009

Perhaps lost among yesterday’s flurry of GM- and Chrysler-related announcements and news releases from each company, the President’s Task Force on Automobiles, and President Obama himself, Chrysler has had to do some serious backtracking from statements that its PR department released.

As we reported earlier, the government announced on Monday that it considers neither Chrysler nor GM to be viable entities and that it was giving Chrysler 30 days to work out a deal with Italy’s Fiat, which might make the firm a viable going concern.  Mere hours later, Chrysler announced that it had agreed to the terms of a formal alliance with Fiat S.p.A. and its majority owner, Cerberus Capital Management.  Chrysler went on to say that the US Treasury Department supported the agreement.

Just thirty minutes later, Chrysler issued another news release that said that the deal with Fiat was actually just the “framework of an agreement.”  There’s a big difference between a framework agreement – which Chrysler, Cerberus, and Fiat have already had in place for several weeks – and a final agreement, which the parties have 30 days (now 29 days) to come to.  When I first saw the news that an agreement had been reached, I was surprised, because most observers expected it to take possibly more than the allotted 30 days for the parties to come to terms.  Further, the government had changed the terms under which an agreement would be acceptable; specifically, Fiat’s proposed 35% initial stake, and eventually up to 55%, would have to be much lower.  The government would also not allow Fiat to have a majority ownership of the company until the loans had been repaid.

Chrysler spokeswoman Lori McTavish explained the second statement by saying it was to make it clear that there was still work to be done on the alliance. “Today marks an important milestone for Chrysler,” she said. “We originally had a preliminary nonbinding agreement; now we have an agreement on a framework. It’s like you’re dating and then you’re going steady.”  Sorry, I don’t really buy that explanation.  It sounds an awful lot like PR spin to me.

This is not the first time that Chrysler has put out a news release or made a major statement that it had to retract.  In fact, it’s the second time just in the Fiat courtship that it has happened.  Back on March 19, Chrysler announced that although Fiat would not receive any of the cash from the US government, Fiat would assume 35% of Chrysler’s debt (which was the same proportion of Chrysler that the companies were proposing Fiat own).  The next day, March 20, Fiat issued a news release that said, “Fiat Group intends to make it absolutely clear that the proposed alliance will not entail the assumption of any current or future indebtedness of Chrysler.”  Oops.  Chrysler was subsequently forced to retract its earlier statement and edit the video, which is posted on its media website (no registration required).  The revisedvideo is avaialable at this link.  The link also includes Chrysler’s retraction statement:

This video has been revised since originally posted. Please see Chrysler LLC statement below:As a potential result of the ongoing discussions taking place related to the Fiat alliance, Fiat would become an equity holder with the same rights and responsibilities as all other equity holders in a newly restructured company. To clarify, this does not mean Fiat would assume responsibility for any of Chrysler LLC’s debt.

So there have now been two major foot-in-mouth incidents at Chrysler in the past week and a half.  Is this the work of a renegade PR person, wily-nily issuing unreviewed press releases?  Well, probably not.  In the March 19/20 snafu, the video in question features CEO Bob Nardelli, meaning that there were many people involved in the production of that video, as well as the fact that Mr. Nardelli himself was on the video making the statement.  So did he not understand the terms of the proposed deal that his company and Fiat had entered into?

On yesterday’s goof-up, it could be the work of a single person, but if so, it would show organizational failure, because in a time of enormous scrutiny of this industry, the company has to be positive that everything it’s sending out on the wire is accurate.  There have been whispers over the past few weeks that so many people have left Chrysler’s white collar ranks in the past few months so rapidly that it’s nearly impossible for the company to conduct its daily operations, much less complete all of the extra homework assigned by the Treasury Department.  Just in the PR function alone, top PR guy Jason Vines resigned shortly after Cerberus bought Chrysler, and the company moved the PR function report to the head of human resources.

Fiat managed to fleece General Motors of out $2 billion a few years ago; the company’s management seems to be made of shrewd negotiators.  Let’s hope that Chrysler and Cerberus show up with their A-game next time they’re across the table from their Fiat counterparts.  And let’s hope that as Chrysler continues to shrink, its white-collar employees are more comfortable with the company’s new size and new reality.

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