The restructuring
of DaimlerChrysler’s Chrysler Group likely will result in a smaller automaker
employing fewer people and building fewer new cars and trucks, the Detroit News
reported, citing senior executives.
"Short-term, Chrysler needs to be smaller," President Dieter Zetsche
told the newspaper in an interview at the North American International Auto
Show.
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"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."
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By GlobalDataThe 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."
