August 29, 2007
Chrysler made a number of significant moves this week:
* proposed plans to shed a couple of non-core operations – Chrysler Transport and all or parts of Mopar;
* reshuffled the manufacturing management ranks, with some veterans taking retirement;
*appointed an up-and-comer to specifically be responsible for executing (and possibly accelerating and deepening?) the automaker’s recovery plan;
*held management meetings at which Nardelli shared his vision of Chrysler's future.
And the week's not half over.
These moves are but a precursor tremor to what is likely to take place in the future as Chrysler’s new owners attempt a quick turnaround of the automaker – and likely sell it within the next few years.
Shedding “Non-Core” Assets
Shedding “non-core” assets is predictable. The first move private equity firms make in a purchase is shed assets to not only slash costs but also to generate cash from a sale in order to recoup some of its investment. With auto companies, few standalone assets exist to sell off as they are deeply intertwined in the companies’ core business or the assets have little value.
In the case of Cerberus, which owns roughly 80 percent of Chrysler, the reported plan is to shed all or parts of Mopar, which makes high-performance and specialty auto parts sold by Chrysler as options in its vehicles or by its dealers as aftermarket features. The floated plan also includes the spin-off is Chrysler Transport, which managers delivery of supplies to Chrysler plants. The two operations combined employ about 1,300 workers.
Obviously, the UAW opposes such divestitures. Chrysler, as is the case with General Motors and Ford, is in the thick of negotiations with the union for a new national contract to replace the one that expires Sept. 14.
The UAW opposes Chrysler shedding operations, in part, because it eliminates jobs but also undermines the union’s power by further decreasing the union’s dues-paying membership. Diminishing the union’s power may be seen as a secondary benefit for Cerberus.
Director of Recovery Appointed
Another intriguing development Tuesday at Chrysler was the appointment of former Daimler exec Andreas Schell to the newly created post of Director of Recovery and Transformation Plan and Business Strategy. Daimler still owns nearly 20 percent of Chrysler.
Chrysler’s press release on his appointment said the position pulls together “the restructuring of several strategic functions under a single point of responsibility.” The consolidated positions include: Recovery and Transformation Plan – the plan announced on Feb. 14; business strategy; material cost management; and executive planner, Office of the Chairman.
Schell, at the tender age of 38, is obviously an up-and-comer. In his new job, hel reports to Nardelli and Tom LaSorda, vice chairman and president.
Schell joined Chrysler in 2002. He most recently was senior manager in the Office of the Chairman. Prior to joining Chrysler, Schell had been with Daimler since 1996. He holds a masters degree in mechanical engineering from Germany’s University Clausthal-Zellerfeld and an MBA from Michigan State University
What wasn’t revealed was whether or not Schell will stick to the current plan. Or, will he adjust it, accelerate it and significantly deepen it as Chrysler seeks profitability by 2009, according to the current plan.
A hint might be what Chrysler sources are saying. Insiders claim the new owners are scrutinizing every corner of Chrysler, including areas thought to be way down the list of priorities, and already reshuffling and accepting retirements of some veterans.
The appointment of Schell to the new post one again raises questions about the future of LaSorda, who role was described as implementing the recovery plan developed during his tenure as Chrysler chairman and that he announced on Feb. 14, the day Chrysler was put up for sale by DaimlerChrysler.
Conventional wisdom says LaSorda, popular with the unions having grown up in a family of Chrysler union activists in Windsor, Ont., is largely focused on labor talks. Betting is he’ll be sent merrily on his way with a trunk load of cash after a contract is reached.
More Management Shuffle
Chrysler announced Tuesday a number of other management changes in the manufacturing ranks. They are:
· Cynthia C. (Cindy) Sidoti -- plant manager, Sterling Heights, Mich., Assembly Plant, which makes the Chrysler Sebring sedan and convertible and the Dodge Avenger. She replaces a Chrysler veteran who is retiring. She most recently was plant manager of the Toledo, Ohio, Supplier Park;
· Robert M. Seabolt -- plant manager, Toledo, Ohio, Supplier Park Complex, which produces the Jeep Wrangler and Jeep Wrangler Unlimited 4-door. He was director – Recovery & Transformation Plan and Material Cost Management;
· Melissa M. Holobach - - plant manager – Pilot Operations, Sterling Heights, Mich., Vehicle Test Center and Conner Avenue (Detroit) Assembly Plant. She’s in charge of production of the Dodge Viper and future pilot vehicles. She was director of business strategy;
· Frank A. Faga – director, Rear Wheel Drive Product Team, Advance Manufacturing Engineering. He replaces a Chrysler veteran who is retiring. He previous was director of Compact Car Manufacturing.
A couple weeks ago, Chrysler reached outside its walls to hire Lexus marketing vice president Deborah Wahl Meyer as the new vice president and chief marketing officer of Chrysler, effective Tuesday.
Stay Tuned for More Change
This week, Chrysler’s top 300 managers are meeting off-site, meetings scheduled before Cerberus and Nardelli took over. At the meetings, Nardelli reportedly is sharing his vision for Chrysler’s future.
If this is the kind of action Nardelli takes in his first few weeks on the job, what will the next year or so hold? Likely Chrysler will see a lot more seismic changes.
As Gerald Meyers, a University of Michigan business professor and former chairman of American Motors Corp. (bought by Chrysler in the 1980s) told the Detroit Free Press: "This is just the beginning. He's not going to resist making changes."