Innovations are the key to a turnaround
June 22, 2007
The Chrysler Group unveiled more details Thursday about its new engine, transmission and axle programs that aim to improve fuel efficiency, a key component to the company's plan to regain profitability.
More than four months into Chrysler's turnaround plan, several key pieces have been falling into place -- even as the sale of Chrysler to Cerberus Capital Management has deflected attention from what's occurring at the Auburn Hills headquarters."As we implement our recovery and transformation plan, product remains the top priority. We know we must build vehicles that customers want to buy," said Frank Klegon, Chrysler executive vice president of product development.
Two major pieces of the way Chrysler wants to remake itself over the next three years involve more fuel-efficient vehicles and higher sales outside North America.
The turnaround plan aims to end the red ink. The company lost $680 million last year and $2 billion in the first quarter of this year, the latter largely because of costs associated with the turnaround.
Part of Chrysler's problem has been its truck-heavy lineup at a time when gasoline reached record prices and consumers are worried about fuel efficiency.
In recent weeks the company has been busy breaking ground on new powertrain facilities around North America, including an engine plant in Trenton and an axle plant in Marysville, as part of its $3-billion push to develop engines, transmissions and axles that will get better gas mileage.
On Thursday, Klegon said the Phoenix family of V6 engines being developed for use in 2010 will improve fuel efficiency as much 8% and that the company is looking to expand its use of hybrid technology.
In addition, Klegon said, the development of a new dual-clutch transmission, which is designed to be as efficient as a manual transmission but with the ease of an automatic, should improve gas mileage up to 6%.
Chrysler also is looking to improve fuel economy 5% by reducing vehicle weight, improving aerodynamics and making other drivetrain improvements.
How all of these improvements taken together will affect the overall gas mileage of a given Chrysler, Dodge or Jeep vehicle can't be determined yet, officials said, because of the differences in the vehicles and how the elements interact.
Auto industry analyst George Magliano of Global Insight said Chrysler's turnaround plan is "moving in the right direction" and pointed to some positive notes, such as the apparent quick pace to finalize the sale of Chrysler, hourly workers' high interest in buyouts and the recent indication by UAW President Ron Gettelfinger that the union needs to help Chrysler with health care issues.
But Magliano said, "They still have a long way to go."
He cautioned that the efforts to improve fuel efficiency will take time to prove out. "That's a great goal, but that's more press than substance right now," he said. "Chrysler's product line is heavily weighted to trucks. ... They are one of the premier guys with big engines."
Another element of the turnaround plan that's garnered a lot of attention is the target of reducing the workforce by 13,000 people over three years. Already 7,600 hourly workers raised their hands for buyout and early-retirement packages offered to lower the headcount this year -- 1,700 more than the company planned for in 2007.
A little less headline-grabbing is what is happening to reduce material costs. One change is being made in how Chrysler delivers materials.
Chrysler used to employ 30 carriers to ship material along nearly 300 routes within a 200-mile radius of core manufacturing facilities. The company opened it all up to competitive bidding and narrowed it to two carriers.
The change is expected to save $9 million this year.
The company has said it wants to reduce material costs up to $1.5 billion by 2009. "We are ahead of our objectives on the cost side," Klegon said.
In addition, on Thursday Klegon announced that Chrysler will explore the possibility of using four-cylinder diesel engines in the U.S. market and more of the 3.0-liter V6 diesel engines already used in the Jeep Grand Cherokee.
Chrysler has diesel engines in the Dodge Sprinter and Ram Heavy Duty and announced plans last winter for a new Cummins turbodiesel to be available in light-duty pickups after 2009.
Klegon said the four-cylinder diesel engine would have the ability to power a minivan.
The 2008 Dodge Challenger is displayed at the Chrysler Proving Grounds in Chelsea on Thursday.
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