"Puts profit first". Is this a Peoples' Weekly World headline or Detroit News ?
CB
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Zetsche puts profits first
New Chrysler group boss says automaker will sacrifice market share for earnings
Charles V. Tines / The Detroit News ( no longer a scab paper; yea , right !)
Dieter Zetsche would not say whether Chrysler's current five-year, $36-billion product
budget will be slashed, but stressed that the former No. 3 U.S. automaker needed a
dose of financial discipline.
By Bill Vlasic / The Detroit News
AUBURN HILLS -- Dieter Zetsche, the newly appointed president and chief executive
of DaimlerChrysler AG's troubled Chrysler unit, said Tuesday the U.S. automaker faces
a difficult restructuring needed to bring production in line with a shrinking market
share.
In his first press briefing since becoming head of Chrysler Group, Zetsche said his
top priority is to make Chrysler profitable even at the cost of cutting back its
volume of new cars and light trucks.
"We have to adjust the company to the size there is in the marketplace right now,"
Zetsche said.
Charles V. Tines / The Detroit News
"Our first task is to be as profitable as possible," says Dieter Zetsche, president
and CEO of the Chrysler Group.
He was careful not to mention possible plant closings or layoffs. But such stringent
steps are widely expected by analysts and investors as part of an aggressive
restructuring plan that DaimlerChrysler is now developing.
While deftly sidestepping questions about factory closings, Zetsche conceded that
Chrysler cannot afford to grab market share at the expense of profits. Chrysler's
share of U.S. new car and truck sales has slipped to 14.5 percent this year, down from
its high of 16.1 percent in 1998.
"Our first task is to be as profitable as possible," said Zetsche, a 47-year-old
former Mercedes-Benz executive. "If we are sacrificing the bottom line, you better not
do that."
Zetsche was named Nov. 17 to replace James P. Holden as head of the struggling
Chrysler, the Auburn Hills-based unit of the German automaker DaimlerChrysler. He is
Chrysler's third chief executive in two years.
Acquired in 1998 by Daimler-Benz AG, Chrysler has spiraled downward in the second
half of 2000. Slumping sales and high incentive costs caused a $512-million operating
loss in the third-quarter, with another $1.25 billion in losses expected in the fourth
quarter. Losses next year could reach $2 billion, analysts say.
By any measure, it's a stunning swing from a record 1999, when Chrysler's operating
profits totaled $5.2 billion on revenues of $64.5 billion and worldwide sales of 3.2
million cars and trucks.
Investors dump stock
The rapid decline in the Chrysler Group's fortunes and a weaker outlook for
industry car and truck demand have prompted investors to dump DaimlerChrysler's stock.
Shares in the German automaker dipped $1.22, or 2.88 percent to close at $41.14
Tuesday on the New York Stock Exchange.
Zetsche and his chief deputy, Wolfgang Bernhard, are developing a broad
restructuring plan to be presented to DaimlerChrysler's supervisory board in two
months. Details will be released Feb. 26 following a meeting of DaimlerChrysler's
governing supervisory board.
While he declined to divulge specific plans, Zetsche said he is focusing on future
product plans and Bernhard is tackling the cost side.
Bernhard, most recently president of Mercedes-AMG GmbH, a performance tuning
company, will scrutinize purchasing, manufacturing, fixed costs and overall
operations. Zetsche said he will direct "revenue management" and product plans going
forward.
He would not say whether Chrysler's current five-year, $36-billion product budget
will be slashed, but stressed that the former No. 3 U.S. automaker needed a dose of
financial discipline.
"We need to further increase the efficiency of our spending," said Zetsche, a tall,
soft-spoken engineer with a bushy mustache.
Excess output hurts
Zetsche cited three factors in Chrysler's rapid decline this year: a weakening U.S.
market, excess production of older-model minivans while converting plants to build an
all-new model and letting costs grow without the opportunity to raise vehicle prices.
"The result of all that is a breathtakingly fast deterioration of the bottom line,"
Zetsche said.
After a month on the job, Zetsche said he understands the concerns of Chrysler
employees about their futures.
"People within the company are shocked by this development," he said. "They feel
upset. They feel angry and rightly so."
But Zetsche said he feels personally welcome at Chrysler, and downplayed the notion
that some American employees resent a German takeover.
"Nationality is a nonissue," Zetsche said. "Wolfgang and myself are Germans. So
what?"
Zetsche said there are no plans to bring large teams of German officers to the
United States, but said some German executives could be tapped to fill individual
posts at Chrysler.
Mum on restructuring
With speculation growing about plant closings and white-collar job cuts, Zetsche
pointedly refused to answer specific questions about the restructuring process. He did
say that no charges will be taken against earnings in the fourth quarter to cover
restructuring activities in 2001.
In the short term, Zetsche said Chrysler will not pare back on incentives as it did
last spring to disastrous results.
"I'm not that stupid," he said.
Zetsche further said that many suppliers have "signed on" to Chrysler's recent
edict that they cut the price of their parts by 5 percent on Jan. 1. He said he was
"relatively optimistic" that most suppliers would comply with the demand.
Some suppliers balk
Yet, in just the past week, ArvinMeritor Inc., Cummins Inc. and other suppliers
have indicated they won't honor the price demands. And the Original Equipment
Suppliers Association protested DaimlerChrysler's demand for price cuts.
In meetings with employees, Zetsche has tried to rally support by appealing to
Chrysler's "team spirit" and history of coming back from disaster. So far, he likes
what he sees.
"They are really committed to go with us through fire in order to restructure this
company and get it back to where it belongs," he said. His goal, Zetsche said, is to
restore the agility and speed that Chrysler was once known for.
"I would like to see ourselves as a dolphin amongst a sea of whales and sharks," he
said.
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