The Worst Start amongst auto-makers in 2010 was not Toyota’s; it was Chrysler’s! Ailing Bottomline, Steep sales targets, one new Product for The Next Two Years, and of course, The $14 billion in Taxpayers’ funds That Obama wants Repaid fast – can CEO Marchionne rescue Chrysler?
Chrysler’s short term problems are perhaps even its long term. Unlike the most troubled GM or the currently controversial Toyota, Chrysler does not have a great future product line; and even in contemporary terms, is very weak in small cars. Owing to the reduction in capital spending in new product development over the past half-a-decade at Chrysler, the only new vehicle set to be rolled out over the next two years – as Michelle Krebs, Senior Analyst at California- based Edmunds Inc. tells B&E – is an SUV – the Jeep Grand Cherokee (“The vehicle resides in a category, SUV, that is out of fashion with consumers. SUV’s have given way to crossovers, which have more nimble, car-like handling, a generally less aggressive appearance and fuel economy that is more like that of cars than trucks.”). No wonder, Cerberus (which bought Chrysler from Daimler AG in 2007) even forgave $2 billion in loans during Chrysler’s sell-off to Fiat, United Auto Workers and the US government. John Casesa, Analyst at Merrill Lynch, tells B&E, “Only 33% of Chrysler’s current product line will be replaced by 2013. At [this] time of turmoil, companies like GM, Ford, Honda, Toyota and other Korean auto manufacturers plan to replace their existing car models by 99%. Chrysler’s target falls short of even less than half of the industry’s 72% figure.”
Even American buyers, who were once patrons of Chrysler, have turned their backs on the Dodge and Jeep labels since 2007. As per estimates by Edmunds Inc., the sales of the two best-selling brands of Chrysler have fallen by 44% in 2009, thereby dragging the once proud Detroit native to number seven in US (its homeground) and number 13 in the world! Chrysler quotes to B&E the statements of Doug Betts, Chief Quality Officer, Chrysler, “We plan to match the best mass market competitors by end of 2012 through quality improvements. The old Chrysler was not organised to work effectively and the new models were launched with below average quality...”
There is another problem that Marchionne has to fix. 52% of Chrysler’s sales over 2007-2009 have been to fleet cars and rental services, a strategy which includes huge discounts, exposing Chrysler’s weakness is in compacts and hybrids (of which it has none) and mid-size sedans. At present, Chrysler’s product line does not seem fit for fuel-efficiency demanding masses in high-growth economies. And for Chrysler, the $4 billion in R&D investment (which it plans to make over 2010-12) has to count this time.
In the past eleven months, Marchionne has been sincere. He has cut down on the management layer and has taken central control at Chrysler – those who have argued with this Italian have been fired. Marchionne knows that to save Chrysler’s assets from liquidating (as the Obama admin. has warned in the past fortnight), he will have to sell 1.65 million vehicles this year alone. Three months up and he’s managed just 234,215 units. That brings the needed rate to 471,929 units per quarter over the next nine months, more than double the current rate. “Chrysler’s future is iffy. It may simply be folded into a small part of Fiat at some point. Its biggest challenge is surviving 2010,” says Krebs of Edmunds Inc. It is said Marchionne hates wearing ties and suits. In this war for survival where he will get his hands dirty, those are the two that he least needs.
Even American buyers, who were once patrons of Chrysler, have turned their backs on the Dodge and Jeep labels since 2007. As per estimates by Edmunds Inc., the sales of the two best-selling brands of Chrysler have fallen by 44% in 2009, thereby dragging the once proud Detroit native to number seven in US (its homeground) and number 13 in the world! Chrysler quotes to B&E the statements of Doug Betts, Chief Quality Officer, Chrysler, “We plan to match the best mass market competitors by end of 2012 through quality improvements. The old Chrysler was not organised to work effectively and the new models were launched with below average quality...”
There is another problem that Marchionne has to fix. 52% of Chrysler’s sales over 2007-2009 have been to fleet cars and rental services, a strategy which includes huge discounts, exposing Chrysler’s weakness is in compacts and hybrids (of which it has none) and mid-size sedans. At present, Chrysler’s product line does not seem fit for fuel-efficiency demanding masses in high-growth economies. And for Chrysler, the $4 billion in R&D investment (which it plans to make over 2010-12) has to count this time.
In the past eleven months, Marchionne has been sincere. He has cut down on the management layer and has taken central control at Chrysler – those who have argued with this Italian have been fired. Marchionne knows that to save Chrysler’s assets from liquidating (as the Obama admin. has warned in the past fortnight), he will have to sell 1.65 million vehicles this year alone. Three months up and he’s managed just 234,215 units. That brings the needed rate to 471,929 units per quarter over the next nine months, more than double the current rate. “Chrysler’s future is iffy. It may simply be folded into a small part of Fiat at some point. Its biggest challenge is surviving 2010,” says Krebs of Edmunds Inc. It is said Marchionne hates wearing ties and suits. In this war for survival where he will get his hands dirty, those are the two that he least needs.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
