Charles Brown CharlesB at
Mon Jan 8 13:39:15 MST 2001

DaimlerChrysler to shrink Chrysler group
Zetsche calls downsizing inevitable

Charles V. Tines / The Detroit News

Chrysler President Dieter Zetsche stands with the new Jeep Liberty at the 2001 North
American International Auto Show. "Short-term, Chrysler needs to be smaller," Zetsche

 By Daniel Howes, and Bill Vlasic / The Detroit News

    DETROIT -- The restructuring of DaimlerChrysler AG's Chrysler Group likely will
result in a smaller automaker employing fewer people and building fewer new cars and
trucks, senior executives said Sunday.
   "Short-term, Chrysler needs to be smaller," President Dieter Zetsche said in an
interview at the North American International Auto Show at Cobo Center. "Chrysler has
to have the right size for the market that is out there. We will try in the future to
grow this business. Still, you cannot afford to have lots of capacity fixed in place
just in case you need it sometime."
   The frank assessment, delivered hours after Chrysler took the wraps off its new
Jeep Liberty sport-utility vehicle, effectively confirms that Zetsche and his deputy,
Wolfgang Bernhard, are mulling plant closures and job cuts as part of a broad
restructuring to boost Chrysler's flagging profits and market share.
   In separate interviews, Zetsche and Bernhard refused to deny persistent speculation
that the restructuring of America's No. 3 automaker -- set to be announced Feb. 26 --
likely would include cutting Chrysler's 33,000-person salaried workforce by 15 percent
and closing as many as five manufacturing operations in North America.
   "We will find ways," said Bernhard, Chrysler's chief operating officer. "We have to
find ways. It does not mean we have to go into (existing union) contracts, but we will
find a way."
   Already, Chrysler has slashed first-quarter production plans by 26 percent from the
year-earlier period. But Bernhard said the latest production cutbacks, reported Sunday
by The Detroit News, likely would be revised in coming weeks depending on market
   Zetsche said the automaker is not considering a spinoff of its component
operations, which include the McGraw Glass plant in Detroit. A move to divest
component operations would mirror steps already taken by rivals General Motors Corp.
and Ford Motor Co.
   Still, Zetsche and Bernhard are moving quickly to stanch Chrysler's losses and
improve the prospects of success for such new products as the Jeep Liberty. Since
arriving in mid-November following the firing of then-President James P. Holden, the
German duo has announced plans to end production of the Jeep Cherokee and demanded 15
percent price cuts from suppliers over the next three years.
   "I've been around the business long enough to know that right now it's pretty
chilly in Detroit, but it can come back," said Rick Schaum, Chrysler's executive
vice-president for product development and quality.
   "It's no secret we pulled sales ahead collectively (in the first half of 2000).
We're making the hard decisions now to get production in line with demand. But the
predictions of our demise are premature. We're going to be back stronger than ever
   That remains to be seen. Chrysler posted a $512 million third-quarter operating
loss and is expected to report a loss of as much as $1.4 billion for the last three
months of 2000. Internal estimates currently peg losses for 2001 at $2 billion, though
company executives privately acknowledge that such estimates could swing dramatically
depending on market conditions.
   Zetsche clearly signaled, however, that he considers Chrysler's troubles to be
structural and not just the legacy of third-quarter mistakes by his predecessor in
launching the all-new minivan.
   Most specifically, Zetsche displayed a distaste for the hard-sell discount
marketing tactics that have defined Chrysler's style since the days of Lee Iacocca.
But Zetsche acknowledged that he alone could not force change on a U.S. market
accustomed to fat incentives and cut-rate financing.
   "Directionally, we will try to more position the value of our products and give
customers value, not just the deal of the day," he said. "We have good products. We
stopped launching our ad campaigns two weeks after launching the cars and instead used
the money for incentives."


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