Chrysler's Press Talks Turnaround Strategy

Annual Production Slashed, Among Other Dramatic Moves Aimed at Moving Away From Detroit's 'Old Metric'

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DETROIT (AdAge.com) -- Jim Press, who arrived at Chrysler a year ago this week as vice chairman after 37 years at Toyota Motor Sales USA, pulled back the curtain a bit today on the now private carmaker's performance and strategies.
Jim Press
Jim Press

Case in point: The automaker is studying whether to keep making the similar Dodge Caravan and Chrysler Town & Country minivans. "We had to spend $100 million on each of them so they could compete with each other," he said, referring to annual marketing costs. While neither model would be killed, the automaker is considering making one of the minivans smaller to appeal to younger customers, with the other aimed at a more mature car buyer.

Cutting losses
Those are the types of decisions the "new" Chrysler will be making to execute its turnaround plan, Mr. Press revealed at a talk before the Automotive Press Association here. The "old" Chrysler, owned by Germany's Daimler, which still holds a minority stake, was aiming at selling 4 million new vehicles annually. "We were building cars people didn't order. There was no market for them, but we shipped them anyway" to dealers, he said. "We were losing money on product," basically "writing a big five-digit check" for every Crossfire, Pacifica and Magnum sold, he said.

Under majority owner Cerberus Capital Management since May 2007, Chrysler this year slashed annual production to 2.5 million units, Mr. Press said. The capacity cuts automatically translate to lower market share. But chasing share over profit is what Mr. Press called the industry's "old metric." The company's goal is to create a sustainable business model, so executives are making "tough choices," such as cutting staff, eliminating models and talking to potential buyers inside and outside North America for the Dodge Viper business, which makes 100, hand-built performance cars annually in a Detroit plant.

Chrysler was big in car fleets, which accounted for 40% of its total sales volume, with most going to rental companies. But fleet sales "don't cover your overhead" and negatively affect resale values, Mr. Press said. So Chrysler substantially cut fleet sales by an undisclosed amount this year.

The automaker, which had a truck-heavy lineup, has recently managed to shift to a more balanced portfolio of cars and trucks. Chrysler will soon launch the redone Dodge Ram full-size pickup, which Mr. Press said will be its biggest ad launch of the year. Arriving this month are the two-mode hybrid Dodge Durango and Chrysler Aspen SUV.

Chrysler improved its financial performance in the first half of the year, consistent with its turnaround plan, he said.

Freed from quarterly reports
Although the carmaker had a cash loss in the first half of 2008, the company tallied a positive EBITA, Wall Street shorthand for earnings before the deduction of interest, tax and amortization expenses, a financial indicator of efficiency and profitability. He declined to reveal when Chrysler expects a cash profit, but said the automaker has more than $11 billion in cash and marketable securities, and has set aside $3 billion to develop advanced, more efficient engines.

Mr. Press said the automaker is in the driver's seat because it no longer has to issue quarterly financial reports, giving it more flexibility to make faster decisions. He said it will take time to get Chrysler back on track. "It takes years to get into these situations. You don't fix things in days or months."
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