In the wake of a turbulent merger, DaimlerChryler’s 2001 corporate recovery plan predicted a US market share of 14% in 2002. Although the target now appears slightly optimistic, that should not overshadow its subsequent progress. Cost cutting measures have propelled the company back to profitability, leaving it primed to refocus on its market share as it readies new models to be launched in 2004.
DaimlerChrysler, the third largest vehicle maker in the US, has admitted it does not expect to meet its own sales targets for this year. The company set out to capture 14% of the US market at the beginning of the year, but now says the 130,000 extra sales it requires are no longer a realistic proposition.
The 14% target was presented a year earlier, at the start of 2001, as part of a corporate recovery plan. However, DaimlerChrysler has seen its market share slip slightly to 13.2%. For the moment the company says it is concentrating on delivering profits, rather than chasing market expansion.
By focusing on the bottom line, DaimlerChrylser has been able to return to profitability earlier than expected, following losses of $2.2 billion in 2001 and the company’s subsequent restructuring effort. Much of the restructuring has focused on cutting production costs through factory refits and the utilisation of more efficient assembly line tooling processes.
Despite improved efficiency, however, the company is facing the prospect of rising raw material costs and increasing price competition from its giant US rivals, GM and Ford. Both companies are employing discounts as they lock horns in an intense price war that threatens to drag in DaimlerChrysler.
After slashing profit forecasts for the year by over half a billion dollars in February, the company has acquitted itself well over the course of 2002 given increasingly difficult market conditions. Improved profits and higher earnings from its Mercedes-Benz division have helped to bolster its position.
In the longer term, as DaimlerChrysler turns its attention once again from cutting costs to growing market share, it aims to add an extra one million sales during the next five to 10 years. Those sales, representing a 36% rise, will hinge on the success of new models to be launched in 2004.
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