US: Chrysler sticking with output cuts plan
Chrysler Group chief executive Tom LaSorda has said that the company is staying with its plan to cut its production in the third and fourth quarters in order to deal with rising inventory of pickup trucks and sport utility vehicles.
Chrysler, like domestic competitors General Motors and Ford, is trying to cope with falling demand for its highest-profit models, Dow Jones noted.
LaSorda, speaking to reporters at a charity event at the company's US headquarters, said the auto maker hasn't been surprised by the significant shift by consumers away from large SUVs and pickups. He reportedly said Chysler is planning to offset the shortfall by introducing a spate of more-fuel-efficient models in coming months.
Dow Jones said Chrysler plans to cut approximately 10% of its production in the third quarter compared to the same period in 2005 though LaSorda declined to give specifics of the fourth-quarter cuts, saying only that the cut will be smaller than the current quarter and "slightly down" year on year.
The news agency noted that, in recent years, the majority of Chrysler's sales mix has been made up of trucks and SUVs, but the balance is changing. "We've had a swing of about 4% from trucks and big SUVs to midsize SUVs and smaller cars, so we're adjusting from that," LaSorda reportedly said. He added the Dodge Durango large SUV has seen the highest production cuts.
Chrysler expects to lose as much as $600 million in the third quarter on an operating basis but return to profitability in the final three months of the year as new-model launches take root, Dow Jones added. "Eight of our launches are starting now until the end of the year," LaSorda reportedly said.
The auto maker's effort to supplement falling volume of certain products after some good years with hits like the 300C is gaining steam already, LaSorda told Dow Jones. The new Jeep Compass and Dodge Caliber small hatchback cars based on the same platform have received 90,000 dealer orders since launch recently.
Chrysler plans to eventually launch a sub-compact car that is smaller than the Caliber, but has not yet firmed up plans for the model. The company is in talks with a joint-venture partner on the project and is looking at building the car in Europe or Asia, LaSorda said.
Dow Jones said products like the Compass and Caliber are getting a good reception in the US because of high petrol prices that continue to sit around $US3 a gallon. Prices have reduced in recent weeks, but still influence consumer buying patterns.
Consistently high petrol prices have been a major factor in the sales slowdown, but LaSorda told the news agency his company is prepared to see higher prices in future.
"Internally, we're saying `what if it sits between $3 and $4 (a gallon)?,'" LaSorda said. He said that assuming petrol prices will continue to fall could lead to "disaster."