USA: Zetsche says Chrysler needs needs to shrink - paper
"Short-term, Chrysler needs to be smaller," President Dieter Zetsche told the newspaper in an interview at the North American International Auto Show.
"Chrysler has to have the right size for the market that is out there. We will try in the future to grow this business. Still, you cannot afford to have lots of capacity fixed in place just in case you need it sometime."
The frank assessment, delivered to Detroit News reporters only hours after Chrysler took the wraps off its new Jeep Liberty sport-utility vehicle, seems to confirm that Zetsche and his deputy, Wolfgang Bernhard, are considering plant closures and job cuts as part of a broad restructuring to boost Chrysler's flagging profits and market share.
In separate interviews with the Detroit News, Zetsche and Bernhard refused to deny persistent speculation that the restructuring of America's No. 3 automaker - set to be announced on February 26 - likely would include cutting Chrysler's 33,000-person salaried workforce by 15 percent and closing as many as five manufacturing operations in North America.
"We will find ways," said Bernhard, Chrysler's chief operating officer. "We have to find ways. It does not mean we have to go into [existing union] contracts, but we will find a way."
The newspaper, which closely monitors automotive industry developments in its back yard, said that Chrysler has already slashed first-quarter production plans by 26 percent from the year-earlier period. But Bernhard said the latest production cutbacks, would probably be revised in coming weeks depending on market conditions.
Zetsche also said that the automaker is not considering a spin-off of its component operations, which include the McGraw Glass plant in the Motor City. A move to divest component operations would mirror steps already taken by rivals General Motors and Ford, the paper said.
The Detroit News said that Zetsche and Bernhard are moving quickly to stanch Chrysler's losses and improve the prospects of success for such new products as the Jeep Liberty. Since arriving in mid-November following the firing of then-President James P. Holden, the German duo has announced plans to end production of the 18-year-old Jeep Cherokee and demanded 15 percent price cuts from suppliers over the next three years.
I've been around the business long enough to know that right now it's pretty chilly in Detroit, but it can come back," Rick Schaum, Chrysler's executive vice-president for product development and quality, told the newspaper.
"It's no secret we pulled sales ahead collectively (in the first half of 2000). We're making the hard decisions now to get production in line with demand. But the predictions of our demise are premature. We're going to be back stronger than ever before."
But, the Detroit News says that remains to be seen. Chrysler posted a $US512 million third-quarter operating loss and is expected to report a loss of as much as $US1.4 billion for the last three months of 2000. Internal estimates currently peg losses for 2001 at $US2 billion, though company executives privately acknowledge that such estimates could swing dramatically depending on market conditions.
Zetsche clearly signalled, however, that he considers Chrysler's troubles to be structural and not just the legacy of third-quarter mistakes made by his predecessor in launching the all-new minivan.
Most specifically, the Detroit News said, Zetsche apparently displayed a distaste for the hard-sell discount marketing tactics that have defined Chrysler's style since the days of [one-time chairman] Lee Iacocca. But Zetsche acknowledged that he, alone, could not force change on a U.S. market accustomed to fat incentives and cut-rate financing.
"Directionally, we will try to more position the value of our products and give customers value, not just the deal of the day," he said to Detroit News reporters.
"We have good products. We stopped launching our ad campaigns two weeks after launching the cars and instead used the money for incentives."