Facing a Big Quarterly Loss, Chrysler Moves to Cut Costs October 20, 2006
Chrysler is pushing to cut at least $1,000 a vehicle from its costs in an effort to return to profitability as soon as possible.
DETROIT, Oct. 19 - The Chrysler Group, facing a steep third-quarter loss, is pushing to cut at least $1,000 a vehicle from its costs in an effort to return to profitability as soon as possible, officials at the company said Thursday night.
The program, called “Project Refocus,” comes as Chrysler is expected to post a $1.5 billion loss for the third quarter when it reports results next week, snapping a string of 12 profitable quarters. Chrysler, a unit of DaimlerChrysler, is also expected to lose money for the full year.
As part of its effort to save $1,000 a vehicle, Chrysler’s teams are examining how they can eliminate fixed costs, trim capital spending and find more savings within manufacturing, purchasing and other operations.
If Chrysler could reach its $1,000-a-vehicle goal, the company could save as much as $2 billion, given that it will sell about 2 million vehicles this year. But officials cautioned that the automaker had not yet calculated a figure for total savings.
For one thing, it will be more difficult to save that much on small cars, like the Dodge Caliber, as well as on vehicles it has just introduced, like the Jeep Compass and Patriot.
Generally, it is easier for auto companies to find savings as they are developing new cars and trucks, not once they have gone on sale. Nonetheless, Chrysler is looking at all of its models in hopes of reducing costs, a Chrysler spokesman, Jason Vines, said Thursday night.
The cost-savings program began in July, soon after DaimlerChrysler officials warned that the company would lose money during the third quarter and for 2006. The effort marks Chrysler’s second major revamping this decade, and comes six years after an extensive cost-cutting drive in 2000.
Chrysler managers have recently received help from other executives within DaimlerChrysler, including Rainer Schmuckle, the chief operating officer of the Mercedes Group, which has conducted its own cost-cutting effort during the last year.
Mr. Schmuckle recently held two days of meetings with Chrysler officials and plans to return to Chrysler’s headquarters in Auburn Hills, Mich., later this fall.
“We set these teams up and we supplemented them in September with some of the experts within DaimlerChrysler ? people who have been through it and know how to do it,” Mr. Vines said. “It’s a global company.”
Chrysler and Mercedes officials have shared ideas since shortly after Daimler-Benz merged with Chrysler in 1998. But Mr. Vines and other officials stressed that the teams were being directed by Chrysler managers, and reported to Chrysler’s chief executive, Thomas W. LaSorda.
Chrysler, which was the only Detroit-based company to see its market share increase in 2005, has lost both sales and market share this year, when gasoline prices spiked and customers turned away from the big sport utilities and pickups that dominate Chrysler’s lineup.
- Posted in : Uncategorized, DaimlerChrysler
- Author : arnold
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