Chrysler has set aside "millions of dollars," according to CEO Tom LaSorda, for an in-house venture capital program designed to create "new, innovative ways to grow the company." The project has been in operation since early spring, said the automaker's chief executive, and a number of proposals have been received from Chrysler employees.

By the end of August, or early September, LaSorda continued, he and other senior executives will hold a review of the most innovative proposals. Employees will have 15 minutes to pitch their ideas, much as if they were going before a venture capital company. Chrysler is ready to sponsor several of the best, if they merit funding from a budget that LaSorda suggested is "more than a single-digit million."

The project is not designed to come up with new ways to build cars, stressed the executive, whose twin brother is a successful entrepreneur. But there appear to be relatively few other caveats. "I want somebody to give us a business that would get us $50 million, $100 million," said LaSorda. The project is also meant to serve as a learning lesson for the entire Chrysler enterprise, said LaSorda. It is tough to get people to think like entrepreneurs because of the "paralysis by analysis" in a large bureaucracy. In the long run, the CEO hopes the project will lead to more flexibility and speed in the Chrysler organization.-Paul A. Eisenstein

The Chrysler Group will cut deliveries by 90,000 vehicles — roughly a quarter — in the third quarter, the automaker said today. Overall, shipments for the second half of the year will be down 135,000 units from the original plan. Third quarter deliveries had previously been lowered to 380,000 vehicles. That figure will bow be 290,000. Last week, Chrysler said it expects to post report a loss of $1.5 billion for the third quarter of fiscal 2006 — a significant increase over the previously anticipated $600 million loss. "The Chrysler Group is facing a difficult market environment in the United States with excess inventory, non-competitive legacy costs for employees and retirees, continuing high fuel prices and a stronger shift in demand toward smaller vehicles," the company said during that announcement. The Chrysler Group consists of Chrysler, Jeep, and Dodge.

Chrysler group for sale? 'We don't exclude anything,' CFO says

Bradford Wernle

Is the Chrysler group for sale? During a presentation to analysts and journalists today, DaimlerChrysler CFO Bodo Uebber refused to rule out the sale or spinoff of its unprofitable Chrysler group.

"We don't exclude anything here," including structural changes, Uebber said during his third-quarter earnings teleconference today. "We will do our analysis. Second, we will talk about measures. And third, we will draw our conclusions."

Asked again whether DaimlerChrysler has put the Chrysler group up for sale, Uebber repeated the same answer without giving a yes or no. "I don't do any speculation," he said.

Chrysler group losses dragged down DaimlerChrysler's third-quarter financial results. The Chrysler group lost $1.47 billion, down from a $393 million profit for the same period a year ago.

The company predicts Chrysler will lose $1.2 billion in 2006. DaimlerChrysler posted quarterly net income of $680 million and projects a companywide operating-profit target of $6.29 billion for the full year.

The Chrysler group's loss overshadowed a rebound at the Mercedes Car Group, whose quarterly operating profit rose to $1.24 billion.

DaimlerChrysler has assigned a team of senior executives to study seven major facets of the Chrysler group's business. The teams have been asked to improve margins by $1,000 per vehicle. Officials declined to give a timetable for the internal study.

Reuters contributed to this report.

TURIN, Italy -- At the headquarters of Fiat SpA here, an auto industry outsider is engineering a turnaround of a company considered the biggest mess in the industry two years ago.

He's doing it with an in-your-face taunt: The leaders of many of the world's largest auto firms have lost their way, says Chief Executive Sergio Marchionne. If you're going to fix a broken car company, call in an amateur.

When Fiat hired him in June 2004, the company acknowledged it was just months away from running out of cash. It had lost about $2.4 billion the year before. A four-year-old alliance with General Motors Corp. was on the rocks.

Mr. Marchionne had never worked in the auto industry. He was running a century-old Swiss company that inspected and certified goods moving in trade. He was Fiat's fifth CEO in three years. Labor leaders and analysts figured there would soon be a sixth.

Today, Fiat is on a tear. Sales were up 19 percent in the first nine months of this year. Its auto business is profitable. The stock has doubled since a year ago.

"All of this sounds like a miracle," Mr. Marchionne said at an industry conference in June. "But it is not. And it is explainable."

The newcomer mocked the auto-industry dogma that factory closings were the answer to the industry's problems. Instead, he took a knife to the bureaucracy.

He bucked the standard industry practice of hoarding one's best technology. Mr. Marchionne pushed to sell as many of Fiat's engines and other parts as he could, even to competitors.

He boasted that Fiat at first would be selling fewer cars, not more, as he stamped out steep discounts. They are a common practice in the industry, particularly in the U.S., where GM and Ford Motor Co. have often pushed cheap financing to keep sales up. Mr. Marchionne figured that though such promotions buoyed Fiat's market share, they widened its losses and cheapened the brand.

He also insisted that designers and engineers radically speed the process of bringing out a new model, skipping the step of building a working prototype. The result was to shave six months off the standard design-to-market time of 24 months or more.

Finally, instead of seeking a rescue through a broad alliance -- as Renault SA and Nissan Motor Co. have, and as GM considered doing -- Fiat has pursued smaller, targeted joint ventures.

Fiat's turnaround isn't finished, and analysts caution against overstating it. Much of its sales surge reflects the success of just one model, a small, sporty sedan called the Grande Punto. Many analysts doubt Fiat can ever fully overcome the hurdle of being a builder of small cars, on which margins are thin, in a high-cost place like Europe. "We believe that Fiat is an overvalued turnaround story in which the market is likely to lose faith," wrote one analyst, Stephen Cheetham of Sanford C. Bernstein & Co., this month.

Yet it's clear Mr. Marchionne's unconventional approach is producing results so far. He maintains that his overhaul has revolutionized the culture in a way that will keep the company competitive in the long term, even against lean Asian rivals. Besides its main unit, Fiat Auto, the company makes Iveco trucks, Case New Holland farm equipment and two expensive car brands that aren't part of Fiat Auto, Ferrari and Maserati. Although Fiat's flagship brand left the American market years ago, Ferraris and Maseratis continue to be sold in the US.

The auto industry normally cultivates its executive talent from within. But the bleak conditions in some corners of the industry have lent appeal to the idea of an outsider who can shake things up with new ideas. Ford has also gone outside for a CEO, hiring Boeing Co. executive Alan Mulally.

When Mr. Marchionne arrived at Fiat, many expected him to use its financial crisis as a lever to force unions to accept a factory shutdown. Fiat's European factories were running at just 60 percent of capacity, analysts estimate, far below the 80 percent to 90 percent thought needed for profitable operation. Other companies, such as GM and Ford, are attacking their woes through extensive plant closings and worker buyouts.

But Mr. Marchionne pledged not to shut any of Fiat's Italian factories, even a chronically inefficient one in Sicily that was slated for closure under prior management. One special situation made this easier. An Italian law permits an industrial company that's financially on the ropes to send workers home temporarily and pay only a portion of their salary. Still, Mr. Marchionne's decision not to close any factories astonished industry analysts and even fellow Fiat executives.

Labor is only 6 percent to 7 percent of the cost of making a car, Mr. Marchionne told a group of industry insiders in June. "Therefore," he said, "the real reason for large operating losses at Fiat Auto must be found elsewhere." He figured that the industry's constant focus cutting factory payrolls was an excuse to avoid tackling tougher problems.

He looked to the management ranks. Fiat's controlling shareholders are the Agnelli family, known for style and formality. This sensibility was mirrored, to some degree, in the Fiat hierarchy. Executives who worked in the same hall would schedule appointments to speak to each other through their secretaries.

That wasn't Mr. Marchionne's style. An intense man who rarely wears a tie, he spends much of the day when in his Turin office in nonstop meetings, smoking a steady stream of Kents, often with Bach playing in the background. At his first major outing as CEO, in July 2004, Mr. Marchionne was blunt about Fiat's management. It was "inward looking," he told analysts and journalists, and its approach to business "needs to change and change drastically."

He said Fiat, which was selling 30 percent fewer cars than a few years earlier, no longer needed the same number of managers. Of more than 700 at the car unit, 30 percent were sent packing, for an annual saving of about $160 million. At the corporate level, he dismantled a 300-person management layer that monitored the company's truck, tractor and car units.

"It showed we've taken responsibility from the top for the problems," says the head of human resources, Francesco Garello. "We haven't put the blame on the factory workers but on the decision makers. That had an enormous cultural impact."

While laying managers off, Mr. Marchionne promoted others. Soon after arriving, he knocked on the door of Luca De Meo, director of Fiat's Lancia car brand. "He walked into my office and said, 'Who are you?'" says Mr. De Meo. The two talked for 90 minutes about the company's problems.

Weeks later, Mr. De Meo was put in charge of the core Fiat brand, even though the 39-year-old had been at Fiat less than three years. "He hadn't been with the organization long enough to pick up any bad habits," Mr. Marchionne says.

Mr. De Meo espoused the unorthodox approach. He hired consultants from Swedish retailer Ikea to give stodgy dealerships an airy, consumer-friendly feel.

But Fiat faced a roadblock. An alliance it had made with GM in 2000, as a way to catapult itself into the orbit of the world's largest car maker, had turned acrimonious, with both sides threatening lawsuits.

In the deal, GM had taken a 20 percent equity stake in Fiat Auto and agreed that if things went badly, Fiat Auto could sell the rest of itself to GM. At the time, with Fiat healthy, no one expected this clause to matter much. But by 2004, with Fiat on the ropes, GM worried that the Italian company might exercise the clause and force GM to absorb some $8.8 million of Fiat debt. Mr. Marchionne, at a meeting with GM CEO Richard Wagoner in January 2005, insisted that GM pay to get out of what was in effect a put option. Mr. Wagoner agreed to pay $2 billion.

The cash gave Fiat some breathing room, but the end of the alliance left it a pint-size player in the global auto game. Mr. Marchionne gave the manager who had overseen the GM relationship a new mission: Find some new alliances, but narrower ones that would plug Fiat's weaknesses and leverage its strengths. He told the executive, Alfredo Altavilla, to steer clear of equity investments, for a simple reason: "We had no money."

They also didn't have much respect. Mr. Altavilla recalls that as he talked with industry executives, they kept asking, "Will you still be around in six months? Will you be able to supply spare parts in three years?"

But Fiat had some strong technology to offer, including a highly efficient 1.3-liter diesel engine. Mr. Altavilla signed a deal to produce small cars jointly with Ford, at a Fiat plant in Poland. Ford would get a small car powered by Fiat's engine and built on a Fiat platform. Fiat, in effect, would get to sell the use of some of its technology and facilities, collecting more revenue from its plants.

Most car makers hoard their best technology rather than let rivals have access to it. Mr. Marchionne thought that was "crazy," says Mr. Altavilla, figuring that "your competitor will just go to somebody else to buy" something equivalent.

Mr. Altavilla has signed nine deals, helping Fiat both to widen its model lineup and enter new markets. One arrangement is with the car division of Russian steelmaker OAO Severstal, which will sell Fiats through its dealership network in Russia. Another is with Turkish auto maker Tofas and France's PSA Peugeot Citroen SA to make a small cargo vehicle. By next year, the fast-growing Indian car market will include two brands equipped with Fiat's small diesel engine: cars from Fiat and Tata Motors Ltd. in Mumbai.

Mr. Marchionne was baffled by what he says is the industry's tendency to be "capital happy" -- rolling the dice on costly new models without first doing lots of market research. He says this habit was especially bad at Fiat: "We only listened to the customers after the cars were launched."

The result was sales projections that could be badly off the mark. Five years ago, Fiat launched its Stilo model, expecting it to sell as many as 360,000 a year. It peaked at 160,000 in 2002. The result was huge excess production capacity and parking lots full of unsold cars. Moving them required steep discounts that cannibalized sales of other models.

Mr. Marchionne told product-development people to sharply understate sales projections. Instead of designing a model that could make money only if it sold 300,000 a year, they had to design it to be profitable if it sold half that many. It was up to the designers and engineers to figure out a way.

At the same time, he required more market-testing, even of car interiors. On the Grande Punto, he approved a bright orange interior even though he hated it, because consumer focus groups liked it.

When Mr. Marchionne arrived, Fiat Auto's engineering and design department had five independent units and two international divisions, each developing products on its own. There was little communication or synergy, and morale was abysmal, says Harald Wester, a new product-development chief the CEO hired.

Fiat was preparing to replace the Stilo with a model called the Bravo, of a size similar to compacts in the U.S. Mr. Wester says the Bravo was "mediocre," had no "wow factor." He ordered it redesigned, a move that engineers said would mean a six-month delay in its launch. No delays, Mr. Wester retorted. In fact, he demanded, the Bravo must be launched six months earlier than planned.

To do so meant adopting an entirely new engineering process that skipped the step of building prototypes. "A healthy company would never have thought about doing it like this," says Mr. Wester, but "extraordinary situations lead to extraordinary solutions." He says Mr. Marchionne approved the plan, except for one change: "He asked us to deliver it one month earlier." The Bravo is set to go into production next month.

Labor unions at Fiat have a history of strikes and even violent confrontation with management, but Mr. Marchionne's openness appears to have softened attitudes a bit. Recently, he stood before hundreds of union officials to answer their questions. "We had never seen anything like that before at Fiat," says Giorgio Airaudo, secretary of the Turin section of a left-wing union, FIOM-CGIL.

The company and unions operated for years with no contract after the last one expired. For 10 years, unions had been pushing for a new one. They were astounded when Mr. Marchionne proposed a new one, with a clear formula for bonuses, which would be based on quality, productivity and financial results. It was signed in June.

Mr. Marchionne concedes that Fiat isn't out of the woods. But its progress so far has led to a surge of self-confidence and a change in how the company is regarded. "We were considered the biggest losers in Europe," says Mr. Wester. Now, "my people don't get teased at the bar anymore for being from Fiat."

rolling the dice on costly new models without first doing lots of market research. He says this habit was especially bad at Fiat: "We only listened to the customers after the cars were launched."