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How Chrysler's gains turned to pain

Old 02-07-2007, 05:28 PM
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Default How Chrysler's gains turned to pain

I hope Chrysler does okay in the long run. Can you imagine only 30K Challengers in the first year and maybe a little more the 2nd year
and then cancelling the car........talking about bursting your bubble.


How Chrysler's gains turned to pain


Just a year ago Chrysler seemed immune to the problems at GM and Ford. Now the automaker is set to slash thousands of jobs.

By Chris Isidore, CNNMoney.com senior writer
February 7 2007: 3:39 PM EST
NEW YORK (CNNMoney.com) -- Chrysler Group is set to join its Detroit-based rivals in the breakdown lane of the nation's auto industry, just a year after it was racing past those competitors in most measures of success.

As General Motors and Ford Motor were announcing huge losses, tumbling sales and cutting thousands of jobs in 2005 and early 2006, Chrysler was reporting profits and improved sales.

But the problems plaguing its rivals - waning popularity of pickup trucks and SUVs, labor cost disadvantages and plants not as flexible as those of its Japanese competitors - have caught up with the North American unit of DaimlerChrysler.

Last year, Chrysler and its corporate parent lost their longstanding spot as No. 3 automaker in the United States, falling behind Toyota. And when Chrysler details its turnaround plans on Valentine's Day, it will be a day of thorns, not roses, for what is now the No. 4 U.S. automaker.

"They've got a few poison arrows in that quiver," said Erich Merkle, director of forecasting for IRN Inc., an automotive consulting firm, about what he's expecting to see as part of Chrysler's turnaround plans.

Merkle and other industry experts are looking for Chrysler to announce plans to cut up to 10,000 jobs through buyouts and retirement packages and close at least two assembly lines, with Newark, Del., and North St. Louis the most likely candidates.

A reduction of 10,000 jobs, or 20 percent of its U.S. factory workers, is smaller than the cuts at GM and Ford.

The United Auto Workers union has won job guarantees from the Big Three automakers that keep union members at nearly full salary if they are laid off, making plant closings difficult and costly. GM and Ford had to offer workers up to $140,000 apiece to give up some benefits and leave the company.

Look for a similar offer from Chrysler, said Merkle. "I don't think they're going to have to pay more, but I don't think they'll be able to pay less," he said.

Chrysler officials wouldn't comment, other than to say that a turnaround plan will be unveiled at the company's Auburn Hills, Mich., headquarters on Wednesday morning. DaimlerChrysler will also hold its conference detailing its full-year financial results there, the first time since the 1998 merger that it will do so in Auburn Hills rather than Germany.

The company may cushion the bad news by announcing plans for investment in its Jefferson North Assembly Plant in Detroit, the last auto assembly line operating within city limits. The announced investment is anticipated to top $1 billion and could give the plant the ability to make cars that share more components and design with DaimlerChrysler's luxury Mercedes-Benz unit.

Some German shareholders have been pushing DaimlerChrysler to sell Chrysler, which Daimler-Benz bought in 1998. A decision to more fully integrate Chrysler Group and Mercedes could essentially close off that option. That in itself could delay an announcement on new investment and coordination across brands.

"DaimlerChrysler faces a decision. It either needs to much more aggressively integrate Chrysler and Mercedes or separate the business. The management has a fundamental decision at hand," said John Casesa, managing partner of consulting firm Casesa Strategic Advisors. "I think it's still an open question."

But some other experts say that current DaimlerChrysler management is committed to keeping the merger together. Daim
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Old 02-07-2007, 05:32 PM
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Default RE: How Chrysler's gains turned to pain

The thing that has hurt them is they started to get further into a dying segment (SUVs) and it is hurting them. They need to cut down on their product offerings for that segment and invest on their cars more. Bring the two further together will only make matters worse. MB has proven they don't know how to compete in anything besides performance luxury. They need to let American's run Chrysler not "Dr. Z" or any other of his people.
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