Emerging markets are very much on the agenda for newly independent Chrysler Group. International sales VP Thomas Hausch tells Mark Bursa how the company is planning ahead and acting on a leaner, faster basis under Cerberus ownership.
Chrysler Group is getting down to the business of re-establishing itself as an independent manufacturer, following its acquisition by private equity firm Cerberus. And it’s a leaner, more agile business now, says Thomas Hausch, Chrysler’s recently-appointed vice-president of international sales.
Go deeper with GlobalData
Hausch is an ex-Mercedes man who was part of the Chrysler Turnaround Team of 2000 – he’s been looking after non-US sales since 2001. And in Chrysler’s brave new world, international sales are seen as a very important element of the business. Not just in major developed markets such as western Europe, but in emerging markets, where Chrysler appears to have picked up the best of the deal in the split from Daimler.
An MoU for a manufacturing venture with China’s Chery Automobile was signed in July. And a deal to sell the old-generation Sebring sedan production line to GAZ of Russia will see a first step into another major market, with potential for closer collaboration in future.
Chrysler had a strong, confident presence at the Frankfurt Show, and Hausch is clearly relishing his the freedom of the new regime. “There are the two core advantages of Chrysler’s new independent status,” Hausch said. “Faster decisions, and greater freedom compared to a public company.
“We don’t have to seek the approval of a German board of directors, of whom 50% are representatives of the German workforce,” he said. “This makes it very complex to explain why an American corporation wants to do a collaboration on a B-segment car with a Chinese company like Chery, for example. So the decisions are much quicker.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataAnd the demands of stock market analysts no longer need to be taken into account. “Being the largest private automotive OEM gives us the freedom of not having to double-think what is the average European stock analyst’s view.” Instead of fretting about the share price, decisions can be made for the good of the business. “We might be better off having a bad quarter but investing a lot of money in a new product that helps us in two years’ time,” he said.
Chrysler’s international business has been performing strongly. Sales were up 9% from 2004 to ‘05; 15% from 05-06 and are up 19% in the first eight months of 2007 against the same period in 2006. “Last year was the most profitable year in the history of the Chrysler Group’s international business, and we want to boost that even further,” he said.
Hausch believes this is largely down to smart use of platforms and components, and sensible tactical collaborations, which have proved a better route than giant strategic mergers like DaimlerChrysler.
He cites an example: “I use a Volkswagen diesel engine outside North America – a 2-litre engine in the Patriot, Journey, Caliber and Compass. VW can sell us more of these engines – it fits our cars, and I don’t have to modify it, like I would have to with a Mercedes engine. In return, we’re building a minivan for VW in the US. As a cooperation, it’s a win-win.”
These deals were possible under the old DaimlerChrysler structure – indeed, the Chery deal was worked out before the split, Hausch said. “We made that decision as DaimlerChrysler, but it took a lot of time and a lot of discussions. We’ll now see more decisions like this – and faster decisions. It’s not a case of being liberated from Daimler – we’re liberated in terms of timing for decisions, yes. But liberated in terms of new strategic potential? Not necessarily – we could have done these things in the past.”
Hausch believes it is good for Chrysler that Daimler is retaining a minority stake in the business. “Co-operation with Daimler continues on technology and international distribution. The strategy we put in place is staying put. Chrysler chairman Bob Nardelli says the strategy is right – just have to get the execution right in the US. In international operations, we don’t have to do any ‘recovery’ elements of the recovery and transformation plan.”
Chrysler will benefit from the Chery deal, but the Chinese business is still a Daimler subsidiary at the moment. “We’re jointly producing and we’ll jointly find a way how we want to address it.” The Chinese business is traditionally a Chrysler activity. “Collaboration with Daimler produces Mercedes E-class, Chrysler 300C and soon Sebring at BBDC – formerly Beijing Jeep.”
The Chery deal is a different kind of venture altogether. “Chery is an export story – similar to the VW deal on engines. We’re looking for a B-segment vehicle for Chrysler group. There are producers in China that have no knowledge about European standards, customers, networks and so on – so it’s an opportunity to work there.”
Chery is interesting – it’s seen as a “new school” Chinese manufacturer, not aligned to JVs with foreign automakers. However, Hausch sees the situation as more complex. There’s a clear separation – Chery and Geely are 100% national brands, while the others are JVs. But the influence of the state is there regardless.”
The structure of the Chery deal has yet to be worked out. “Chery is very, very successful in China. We aren’t saying it’ll be a JV – but we don’t rule it out. It could be an export-only plant, or we could adapt a platform they have developed to our standards.”
This is a likely option – the B-segment Chrysler won’t be on a Chrysler-designed platform, because Chrysler has nothing suitable. The Dodge Hornet concept car, which is close in concept to the car Chrysler wants to build – is just a styling exercise, not a platform. “The benefit of sourcing a platform from a partner is that you don’t have to go into the very heavy investments. The platforms Chery has today can be modified successfully – there’s no doubt about that.”
The Hornet is designed for sophisticated markets such as western Europe. “Dodge is the preferred brand at this point in time. Dodge has potential in the B-segment as you can be price-aggressive with the brand, and you could do much with the design, like the Hornet.” But the project could spawn a small Jeep, for example. “We also see competitors that are not price-aggressive, like Mini. If you hit it right with Chrysler or Jeep you could do something similar.”
Beyond China, there are plenty of opportunities, despite the fact that George W Bush has limited the options for US companies – “We can’t go to Iran, North Korea or Cuba!” said Hausch. However, Chrysler has recently added Libya as an export market – it has sold more than 3,000 PT Cruisers there. This is a market that would have seemed unlikely 20 years ago, Hausch said.
But Russia and India have great potential, he believes, The deal to supply the old Sebring to GAZ in Russia is a simple sale of tooling. “We sold the old Sebring tools to a partner and are helping to industrialise the project – it could become a bigger venture,” says Hausch. “And we have to look at the one big market I’m legally allowed to go to as an American producer – that’s India.”
India has enormous potential. “It has huge trade barriers in terms of duties on imported products. So you have to have a mid-term plan for localised production.” This is being worked on. “China we’re already there, Russia we’re talking to partners, India we’re making a business case,” said Hausch.
One option could be to extend the Chery partnership into India – a move that would suit both partners. “Going into India with Chery as a partner is theoretically possible,” says Hausch, but he won’t say if discussions have taken place. “Investigating India is part of our job nowadays, though we haven’t made any decision we could announce.”
Hausch maintains that Cerberus is in for the long haul. “Our investors are looking for asset growth and value growth, and that is a long-term exercise,” he said. “Selling the company back to another OEM car company is not the plan.” A more likely outcome would be a stock market IPO, he said. “There’s no Cerberus plan – there’s a Chrysler plan that Cerberus endorses.”
Mark ‘Coolbear’ Bursa
