I'm sure there are a few out there who remember years ago when Chrysler was bailed out by the Federal Government. Well it sounds like Chrysler may finally go down for the count this time unless some divine power intervenes. I for one hope that power comes in the form of their upcoming hemi-powered RWD sedans.
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Chrysler crisis deepens
Shake-up, more job cuts loom as pressure grows on Zetsche to make turnaround reality
By Bill Vlasic and Mark Truby / The Detroit News
Another new product is the Chrysler Crossfire. Chrysler plans to increase global sales by 1 million units before the end of the decade.
Product blitz
Chrysler, trying to raise global sales of Chrysler, Dodge and Jeep cars and trucks by 1 million units before the end of the decade, plans nine new vehicle launches during 2004, including:
- Dodge Magnum rear-wheel drive wagon
- Chrysler 300C rear-wheel drive sedan
- Redesigned Jeep Grand Cherokee SUV
- Redesigned Dodge Dakota pickup
- Chrysler PT Cruiser convertible
- Redesigned minivans w/fold-flat third-row seats
AUBURN HILLS -- The future of the troubled Chrysler Group will be on the line Monday when CEO Dieter Zetsche presents his latest turnaround strategy at a critical meeting of the DaimlerChrysler AG management board.
Sources close to the company say a major shake-up appears imminent in Chrysler's sales and marketing operations and that white-collar layoffs are a distinct possibility at the No. 3 U.S. automaker.
On Monday, Zetsche will lay out options to reverse Chrysler's slumping sales, which are down 5 percent compared with last year, while industrywide demand is off 2 percent.
Hailed as a hero after he took the reins of Chrysler three years ago, Zetsche now faces the harsh reality of Chrysler's deteriorating performance in a brutally competitive U.S. auto market.
"The whole market is saying it is a critical time for Chrysler," said Rod Lache, auto analyst with Deutsche Bank AG, owner of 12 percent of DaimlerChrysler's stock. "They have to prove they have a plan."
Chrysler spokesman Michael Aberlich confirmed that Zetsche will make a presentation Monday in Frankfurt, Germany, to the management board of DaimlerChrysler, formed in 1998 when German automaker Daimler-Benz AG bought Chrysler Corp.
Aberlich declined to comment on Zetsche's agenda. However, he said that Chrysler may have to revise its stated plan to limit future white-collar job reductions to normal attrition.
"That is still our plan, but we really have to keep an eye on the economy," he said.
In a related effort to cut costs, Chrysler is pushing hard to shed high-wage unionized parts plants in its contract talks with the United Auto Workers.
Speculation about sweeping cutbacks at Chrysler has been stirring since the automaker posted a surprising $1.1 billion loss in the second quarter.
In June, a report by Deutsche Bank analysts said "deep restructuring scenarios look increasingly likely" and suggested that a spinoff of Chrysler was possible.
Chrysler's sales have since bottomed out in an incentive-saturated market.
In August, Chrysler's U.S. market share slid to 11.7 percent -- its lowest point in more than 15 years. And for the first time ever, Chrysler slipped to fourth in monthly sales behind General Motors Corp., Ford Motor Co. and Toyota Motor Co.p.
With sales falling and few new products coming soon to reverse the trend, the pressure is on Zetsche to shore up Chrysler's bottom line any way he can.
"The tom-toms are beating pretty loudly that a reorganization is coming down," said Jim Sanfilippo, a marketing consultant with AMCI Inc. in Detroit.
The concern over Chrysler has shaken investors in Germany, where DaimlerChrysler has its headquarters.
"Most investors wish Daimler didn't own Chrysler," said Henning Gebhardt, head of German equities at DWS, a Frankfurt-based stock-fund manager. "No one can see how or when it (Chrysler) will improve."
Zetsche on the spot
It falls to Zetsche to address that issue before the 13-member management board that governs DaimlerChrysler's global operations. Zetsche and his top Chrysler deputy, Wolfgang Bernhard, are members of the board.
The meeting, held in conjunction with the Frankfurt Auto Show, is an annual strategic planning session conducted by the board each September.
It was at the same meeting three years ago that Zetsche's predecessor at Chrysler, James Holden, made his last presentation to the board. Holden was fired a month later by DaimlerChrysler Chairman Juergen Schrempp amid mounting losses at Chrysler.
Zetsche, the former sales chief of Daimler's Mercedes-Benz luxury car unit, was tapped to turn around Chrysler. He presided over a major restructuring that closed six factories and cut 19,000 hourly jobs,
6,200 white-collar workers and 1,000 contract employees.A tall, affable engineer with a drooping mustache, Zetsche earned plaudits inside and outside of Chrysler for his low-key leadership style and thoughtful manner.
Chrysler returned to profitability in 2002 and had projected a $2 billion profit this year. But that possibility evaporated with the huge second-quarter loss.
Small profit predicted
The automaker has predicted it will earn a small operating profit for the full year, but analysts are increasingly skeptical.
"I would be very surprised if they achieved a small profit as they've forecast," said Juergen Pieper, an analyst with Metzler Bank in Frankfurt.
Despite a plan to increase Chrysler's global sales by 1 million units before the end of the decade with a host of new and redesigned models
-- nine vehicle launches are planned for 2004 -- an immediate dearth of new products and a series of marketing missteps have dragged down Chrysler's sales.
While the new Chrysler Pacifica sports wagon and Dodge Ram pickup have been bright spots, Chrysler's aging minivan and SUV lineups have lost share to Asian and European rivals.
Economic constraints caused the cancellation of a new Canadian factory slated to build a new compact pickup called the Dodge M80.
Dealers on defensive
Chrysler's dealers have been on the defensive as Toyota and other Japanese automakers have rolled out new models, and GM and Ford have driven incentives and rebates sky-high.
"Chrysler dealer sentiment is at the lowest level since we began tracking it in the early 1980s," said Art Spinella, president of CNW Marketing Research Inc. in Bandon, Ore.
In June, sales and marketing chief James Schroer resigned and was replaced by Joe Eberhardt, a veteran German sales executive with Mercedes-Benz.
Sources close to the company say a wholesale shake-up in the sales and marketing staff could be announced as soon as Monday.
Beyond that, the question is how Zetsche will navigate Chrysler through the latest storm. Company insiders concede that he is under enormous pressure to end the year on a strong note.
While there are some promising cars and light trucks in the future product pipeline -- a revamped Durango, new rear-wheel drive sedans and wagons and a new Jeep Grand Cherokee SUV -- Chrysler is hardly in a position to pin its hopes on vehicles down the road.
"It's three years since Dieter has taken charge, so we need to see these products in our showrooms," said Dick Withnell, a Chrysler dealer in Salem, Ore.
"Any CEO is under pressure if your market share is going down. This business isn't for the faint-hearted."
Detroit News Staff Writer Christine Tierney contributed to this report. You can reach Bill Vlasic at (313) 222-2152 or snipped-for-privacy@detnews.com.
Patrick '93 Cobra '83 LTD