Daimler: Fix Chrysler Or Else...

Anthony Fontanelle
February 16, 2007

Chrysler Group needs swift and clever moves to avoid further losses. The company knows exactly that one wrong move could trigger the worst to its detriment. It could lose its goodwill. It could lose its German suitors. It could even lose everything it has.

So many things have been compromised. The automakers announced Wednesday that it will cut 13,000 jobs and drastically downsize production in an eleventh-hour effort to secure its future with the German automaker DaimlerChrysler AG.

The turnaround plan came with a warning that DaimlerChrysler is exploring all strategic options for the struggling American division. Said warning includes a potential sale. Chrysler lost $1.5 billion in 2006. Amid declining market share and sales, the automaker is under pressure to cope and yield profits by 2008. With more losses predicted to come this year, Chrysler is said to have contracted a turbulent "marriage made in heaven" with the former Daimler-Benz AG.

"Sooner or later (Daimler) has to decide whether to fully integrate Chrysler or separate altogether," said John Casesa of the investment firm Casesa Shapiro Group. But DaimlerChrysler CEO Dieter Zetsche was reluctant to make a long-term commitment to Chrysler despite its plan to reduce its workforce, close one assembly plant in the United States and cut shifts at two others.

In a news conference at Chrysler headquarters in Auburn Hills, Zetsche extolled the "recovery and transformation" plan but said all options for the U.S. division remain on the table. "We do not exclude any option in order to find the best possible solution for both the Chrysler Group and DaimlerChrysler," Zetsche said.

Individuals close to DaimlerChrysler said Zetsche and other members of the board of management agreed in recent days to reiterate publicly that all options remain open. Said revelation left Chrysler's future in qualm. It has also triggered assumption about potential partners or buyers. The situation also pushed DaimlerChrysler's stock up $5.33 or 8 percent to $69.78 in New York, the highest in seven years.

"Management is still unclear on purpose? about Chrysler's future," said Pierre-Yves Quemener, an auto analyst with Paris brokerage firm Kepler Equities. "It seems to us that Zetsche's commitment to (Chrysler) could grow weaker quarter after quarter."

United Auto Workers blasted DaimlerChrysler's management for its plan to cut jobs. UAW President Ron Gettelfinger called the cutbacks "devastating news for thousands of workers" and said DaimlerChrysler "cannot cut its way to profitability." Gettelfinger, a member of DaimlerChrysler's supervisory board added, "We will do everything in our power to hold the company to its commitment to grow the business by developing new products with Mercedes-Benz that are appealing to consumers."

Zetsche said Mercedes and Chrysler will continue to cooperate on joint projects for vehicles under development. He said cooperation increased in the past months and would continue. Sources said the two divisions are working together on future small cars and SUVs. In addition, a new V-6 engine, dubbed "Phoenix," will power Mercedes, Chrysler, Dodge and Jeep vehicles. Active Brakes Direct and other auto parts are upgraded to accommodate its power and performance.

During the press briefing with analysts, Zetsche was asked repeatedly about Chrysler's fate, only to repeatedly refuse to discuss what "options" were being considered. "We cannot provide you with any more details at this time," he said.

But even as Zetsche and LaSorda penned the recovery plan, the automotive world still expects the possibility of a divorce between Chrysler and Daimler. “[They] can't seem to succeed simultaneously. This is really a blind date that isn't going to turn into a marriage," said Sean McAlinden of the Center for Automotive Research in Ann Arbor.

Source: Amazines.com