Global Insight Perspective | |
Significance | Chrysler's new CEO promised investment in better vehicles and improved fuel economy, but said that some truck and other models might be culled. |
Implications | Phil Murtaugh became the latest high-profile appointment, as he leaves SAIC to head Chrysler's Asia operations and Nardelli said the company's owner, private-equity firm Cerberus Capital Management LP, will not be involved in current union negotiations over a new contract. |
Outlook | Key to the union negotiations is veteran executive and Chrysler's president Tom LaSorda, and key to Chrysler's future, if not the future of the domestic industry, are the successful negotiations of new contracts that will enable the companies to become competitive again. Chrysler has a great management team assembled and is promising investment in product, but concerns over some assumptions given the economic headwinds prevail. |
Chrysler LLC chief executive Robert Nardelli has laid out some of the new strategies aimed at turning the company around, saying that a new three-year plan would be presented to the Chrysler board next month. Essentially, it remains the same strategy set out in February which centres on the elimination of 13,000 jobs and dropping five vehicle platforms by 2012 to leave seven—inevitably culling several models and shrinking the dealer network.
Following the high-profile move of former Toyota executive Jim Press to Chrysler's ranks, the company announced its latest high profile coup—Phil Murtaugh, who will join Chrysler to head its Asian operations from Shanghai Auto Industry Corp (SAiC), and a man who is seen as largely responsible for General Motors (GM)'s successful expansion in China. Chrysler has also recruited a senior executive from Lexus as chief marketing officer.
Nardelli said that the company's product plans will involve changes to some models, possibly dropping certain vehicles, although Nardelli said he plans to keep Chrysler's three main brands, Chrysler, Dodge and Jeep. "We've got some vehicles out there we know we have to make some tweaks to," Nardelli said on Friday: "We're willing to make the investment to take them up a notch." He added that he wants to make sure customers have a reason to chose Chrysler vehicles in a competitive market. Nardelli also reiterated Chrysler's need to expand its global sales footprint, and said that the company would be developing more fuel-efficient vehicles as well as looking to improve environmental impact at its plants.
Separately, Nardelli said that majority owner Cerberus Capital will stay out of negotiations with the United Auto Workers union (UAW), headed by veteran executive and now president, Tom LaSorda, adding that Stephen Feinberg, the founder of Cerberus, has "tremendous passion" for Chrysler and is looking "beyond just a deal." He said that he was optimistic that the two sides would come to a "very viable solution."
Outlook and Implications
Nardelli will unveil his new three-year plan in October, just a couple of months after joining the company and culling models was inevitable following the move to reduce its platform plans. It is widely expected to remain along the same lines as the Recovery and Transformation Plan (RTP) already in place, but has indicated that the worsening outlook for the U.S. economy could change that.
The vital component for the newly formed Chrysler is a deal with the UAW, although the details of what form it may take are still unclear. Chrysler is keen for the successful transfer of liabilities to the UAW, but is in need to preserve cash, which this action would have a huge impact. Tom LaSorda is also key to the negotiations, being an in individual who the union trusts. These negotiations are expected to drag past the 15 September deadline, although this may not be the case for Chrysler should it go down the route of keeping a version of the existing contract.
In Phil Murtaugh Chrysler has yet again added to the strength of its rapidly changing executive line-up, Murtaugh being a seasoned veteran of China, who has been credited with much of GM's success in China. With the additions of Jim Press and Murtaugh, Nardelli has successfully assembled a capable management team, and this something he is likely to draw on heavily being the "non-car guy" among them. Whether they will have access to the vast sums of cash needed to invest in new product and turn the company around remains to be seen as the economic situation in the United States appears set to worsen.