Thursday, October 11, 2007

Chrysler's shift in strategy accelerates

By Bernard Simon in Las Vegas
Updated: 3:11 a.m. PT Oct 11, 2007

Several non-US carmakers have approached Chrysler to possibly co-operate in the development of new vehicles, a senior Chrysler executive said on Wednesday night.

Steven Landry, head of the Detroit carmaker's North American sales, said these approaches, which remain at an early stage, have come since Cerberus Capital Management, the New York private-equity group, bought control of Chrysler in August from Germany's Daimler.

The proposals seek to marry the unnamed foreign carmakers' expertise in vehicle platforms with Chrysler's success in "top hats", or the more visible parts of a vehicle.Chrysler's senior management, including Bob Nardelli, the former chief executive of Home Depot who moved to Detroit in August, are in Las Vegas this week to rally 3,000 Chrysler, Dodge and Jeep dealers as part of Cerberus's drive to reinvigorate the struggling carmaker.

Jim Press, vice-chairman and president, said Chrysler needed to become more focused on its customers by, among other things, adjusting its product lineup and improving relations with dealers.

Mr Press, who was hired from Toyota last month, said "we've got to look at the products through the eyes of the customers. It used to be that you had trade-offs. For the future, you've got to have customers satisfied."

For instance, he indicated that Chrysler is likely to pull back from its recent strategy of attempting to give the Jeep brand a softer, more urban image.

Several Jeep models that have taken this approach have sold poorly.

Recent moves to cull dealers and combine Chrysler, Jeep and Dodge brands under a single roof are likely to accelerate.

Several Chrysler executives, past and present, said Cerberus's arrival had markedly sped up decision-making at the carmaker. Mr Press cited a decision to reduce fourth-quarter production by 82,000 units which was taken on the basis of a seven-minute conference call.

He said Chrysler's distribution system was over-loaded with products that customers didn't want, while it couldn't turn out enough of the models that are in demand.

He predicted that macro-economic trends increasingly favoured US carmakers over their foreign rivals. He cited the weakening US dollar, escalating costs outside the US and ground-breaking labour contracts between the Detroit-based carmakers and the United Auto Workers union.

Chrysler and the UAW on Wednesday night reached a tentative deal on a new four-year labour contract, that includes transferring its retiree healthcare liabilities to an independent trust. Full details of the agreement have yet to be disclosed.

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