A Reversal of Fortune at Chrysler, Too September 20, 2006
Chrysler said it would cut its production schedule for the rest of the year by 16 percent because of slumping sales as a result of high gas prices.
DETROIT, Sept. 19 ? Maybe Chrysler is not so different after all.
After Daimler-Benz merged with Chrysler in 1998, Chrysler vowed to break away from its troubled Detroit brethren and join ranks with the Japanese automakers. It designed innovative vehicles like the gutsy 300C sedan and the spunky PT Cruiser, gambling that an emphasis on bold design, better quality and German engineering would set it apart from the Big Two.
“There were a lot of people that thought Chrysler was really home free,” said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.
But in recent days, a series of stunning announcements have signaled that Chrysler, despite all those efforts, has not been able to escape many of the same problems bedeviling General Motors and the Ford Motor Company.
On Tuesday, Chrysler said it would cut its production schedule for the rest of the year by 16 percent because of slumping sales as a result of high gas prices. That comes on the heels of similar cuts at G.M. and Ford, which are both trying to restructure after billions of dollars in losses in the last year.
Chrysler, which lately has ranked fourth behind G.M., Ford and Toyota Motor in American sales, reiterated that it expected a $1.26 billion loss this year, when it had planned to break even.
As a result, Chrysler said it would embark on what was likely to be its second major revamping since 2000, and acknowledged that its market share could shrink further, potentially dropping it to fifth place behind Honda in the United States.
Chrysler workers, whose profit-sharing checks the last few years were proof that they worked for Detroit?s most successful company, now find themselves vulnerable like their counterparts at G.M. and Ford.
Analysts have said all year that Chrysler, the only Detroit automaker to gain market share last year, was faltering. But Chrysler executives maintained that a strong second half, when it is introducing a volley of new vehicles, would lift its fortunes.
That has not proved to be the case. During a briefing Tuesday with industry analysts, Chrysler said it would cut third-quarter production by 90,000 vehicles, double its original plan.
Chrysler, which depends more heavily on sport utility vehicles, pickup trucks and minivans than any other Detroit carmaker, said it would also cut another 45,000 vehicles from its production plans in the fourth quarter.
Over all, Chrysler said it planned to build 705,000 cars and trucks during the second half of the year, or 16 percent fewer than its original second-half projection.
“We have to clearly dig deeper into the top of Chrysler to make sure we further can accelerate the process of increased competitiveness,” said Dieter Zetsche, chief executive of DaimlerChrysler, who ran Chrysler from 2000 until last year.
His replacement at Chrysler, Thomas W. LaSorda, signaled that the automaker would embark on its second reorganization in six years, vowing to “turn over all the rocks” at Chrysler to determine the right cost structure for the auto company.
Mr. LaSorda, speaking in a conference call with analysts and journalists, said that it was premature to discuss plant closings and that Chrysler needed to keep open “the majority” of its plants.
But he said the company was facing sharply higher costs for raw materials and parts, up as much as 60 percent this year in some cases. He said Chrysler needed to act as soon as possible.
In the presentation to analysts, Chrysler forecast that its share of the American car market would be 10.6 percent in the third quarter, down from its original plan to hold 11.2 percent. That puts it in fourth place, behind G.M., Ford and Toyota and just slightly ahead of Honda.
But in July, Honda outsold Chrysler, bumping it down to fifth place in the American market. Honda recently announced plans to build a new factory in Indiana, raising the likelihood that it could overtake Chrysler permanently.
Unlike its major Japanese rivals and G.M., Chrysler had no subcompact cars in its lineup when gas prices hit $3 a gallon, even though DaimlerChrysler sells them overseas.
Despite its vow that it would build only vehicles that customers wanted, it allowed unsold sport utility vehicles to pile up on vacant lots all over metropolitan Detroit.
Even though its cordial relationship with the United Automobile Workers union allowed Chrysler to set the industry pattern for contract talks, it has not been able to reach a deal to cut health care costs like the ones G.M. and Ford worked out with the U.A.W.
The reversal of fortunes at Chrysler was a disappointment to many in the auto industry who thought Chrysler might have hit on a magic formula that other Detroit companies could follow.
- Posted in : Uncategorized, DaimlerChrysler
- Author : arnold
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