Bold Exec

Fiat Chrysler thoughts

Executives who don't take the time to find out what the 2nd and 3rd and 4th and... organizational layers think mis-use an asset of the company. As the cartoon suggests, asking those who really know what's going on is a powerful tool.

I have been highly skeptical of the Fiat Chrysler combination/takeover/arrangement but a news item of last week gave me pause, and consideration for a more optimistic viewpoint; consideration only but...

Sergio Marchionne, Fiat/Chrysler's CEO, made decisions on his managerial team by asking employees further down the ranks; they know best the real behavior patterns of the executives and have seen them in action. They can separate the theatrical staging vs. the reality of their leadership capabilities. Good for Sergio. He is renowned as a "very smart fella" by Forbes' Jerry Flint whom has covered the auto industry for 40 years.

What a surprise!!! Not.

Maybe some accounting imagination. All those wondrous years in which General Electric made their numbers quarter after quarter, and all the accolades heaped on Jack Welch during that period, seemed to be too good to be true. He did do a good job of selecting and discarding businesses, no doubt, but it turns out some financial Enron-type shenanigans, albeit on a smaller scale, were also at work.

All managements have tuck-aways, reserves created when results are good--saved for a rainy day. It is now being exposed that GE was quite aggressive on this account, but that's okay as long as these reserves were created prospectively and not the other way around. Rolling previously created extra reserves into current earnings is okay; rolling not-yet-created future reserves into current earnings, i.e. borrowing from the future like our governments do, is not okay.