CEO Zetsche hits the road to pitch Chrysler's new wave of products

This story explains the event at Cobo on Monday as in this quote:

"After this week's dealer tour, Zetsche will carry his product message
to the media at a press event scheduled in Detroit's Cobo Center on
Monday, Nov. 17. Zetsche is publicly showing off the company's nine
upcoming vehicles, unusual in an industry that guards future product
information."

Link to story:
http://www.autoweek.com/cat_content...=carnews&loc_code=index&content_code=00317354

Lots of info in this story...

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(08:30 Nov. 12, 2003)
CEO Zetsche hits the road to pitch Chrysler's new wave of products
By MARY CONNELLY | Automotive News


Like a presidential candidate, Dieter Zetsche started barnstorming the
United States on Monday, Nov. 10. Over the next six days, Chrysler
group's CEO will visit eight sales regions to rally dealers behind an
upcoming wave of new products. Zetsche must fire up dealers because
the Chrysler group's three-year turnaround plan ends next month and
the company is still faltering. The factors that Zetsche could control
- costs - fell into place. But he could not control vehicle prices in
a U.S. price war, and revenues fell short. Zetsche is betting that he
can still make the plan work, with help from some new iron. By the end
of next year, nine new or updated products will be on sale in
Chrysler, Dodge and Jeep showrooms.

But the fresh products are far from guaranteed hits, because Zetsche
is moving all three Chrysler group brands into new territory. He is
betting that U.S. consumers will embrace premium vehicles from the
Chrysler brand and large rear-wheel-drive models from Dodge and
Chrysler. At stake is the Chrysler group's future - and his own. If
he stumbles, Zetsche has little chance of replacing Juergen Schrempp
when DaimlerChrysler's chief executive retires.

"In the last three years, we had a relatively thin stream of new
products," Zetsche said last week. "This is now changing dramatically.
In the next year, we will be able to attack our competitors. A year
from now, we definitely will be seeing a move upward."

If the turnaround plan were only about cutting costs, Zetsche would be
in great shape. The company has exceeded the cost-cutting targets
established in February 2001, three months after Zetsche landed in
Detroit. (Caption: Sales of the Chrysler Crossfire, part of
DaimlerChrysler's plan to take the brand upscale, have been tepid so
far.)

Over the last three years, he has delivered $7 billion in cost savings
- $1 billion more than the cost-cutting plan called for. Most of the
savings were achieved by extracting price cuts from suppliers. Zetsche
also cut 30,000 jobs in the United States, Canada and Mexico.

The cost-cutting strategy is evident in redesigned products such as
the 2004 Dodge Durango. Tom LaSorda, Chrysler group executive vice
president of manufacturing, says the 2004 Durango requires 10 percent
fewer worker hours to build than the 28.5 hours needed to build its
predecessor. Such manufacturing efficiency is mandated for all future
vehicle programs, LaSorda says.

But while the company has cut costs, it has not increased revenues.
The U.S. price war, sparked by General Motors after the Sept. 11,
2001, terrorist attacks, has forced the Chrysler group to offer hefty
rebates. Chrysler's sales and market share have fallen. In 2001, the
Chrysler group planned to boost revenues by $2.1 billion by the end of
2003. The company will fall short, but it will not say by how much.

THE NEW IRON

The Chrysler group says fresh products will jump-start its turnaround
plan. These nine products will arrive in showrooms by the end of 2004:

2005 Chrysler PT Cruiser convertible: Chrysler expects to sell as many
as 20,000 annually. The convertible will be offered with a standard
2.4-liter four-cylinder turbocharged engine generating 180 hp. A
220-hp version will be optional.

2005 Dodge Magnum wagon: This performance-oriented wagon rides on the
new rear-wheel-drive LX chassis. About 80 percent of the Magnums sold
will have either a 2.7-liter or a 3.-5-liter V-6 engine. The Magnum's
optional engine is a 340-hp, 5.7-liter Hemi V-8 producing 365
pounds-feet of torque. The Magnum is a high-volume unit replacing the
Dodge Intrepid, a model that sold 111,356 units in 2002.

2005 Chrysler 300 sedan: Chrysler's new model shares its chassis and
three engines with the Magnum. Electronic stability control, antilock
brakes and the 5.7-liter Hemi V-8 will be standard on the 300C, the
top-of-the-line model. The equipment will be optional on the base
model, called the 300. The 300 Touring and 300 Limited round out the
lineup. The sedan replaces the Chrysler Concorde and 300M, models that
sold 63,986 units in 2002.

Redesigned 2005 Dodge Dakota: The pickup remains mid-sized. Electrical
architecture arrives from Mercedes-Benz.

Redesigned 2005 Jeep Grand Cherokee: The automaker's most popular SUV
will share some components with Mercedes-Benz vehicles for the first
time. A third row of seats is expected.

Redesigned 2005 Dodge and Chrysler minivans: The third-row seat in the
minivans will fold flat, matching a feature already offered by
competitors. Interior upgrades and some exterior freshening are
expected.

2004 Dodge Ram SRT-10: A Viper-powered Ram pickup that will arrive in
showrooms in January.

2005 Chrysler Crossfire convertible: The convertible shares components
with the Mercedes-Benz SLK. It will be assembled by Wilhelm Karmann
GmbH in Osnabruck, Germany.

2005 Jeep Wrangler Unlimited: This stretched version of the Wrangler
goes to dealerships next year.

Through nine months of this year, the company posted revenues of $43.1
billion, down 20.7 percent from the same period a year earlier.

The Jeep Grand Cherokee tells the story. Revenue generated by the
Grand Cherokee dropped 37 percent to $3.9 billion in the first nine
months of 2003, compared with the same period in 2000, according to an
Automotive News analysis. In the first nine months of 2000, the
average Grand Cherokee transaction price, including incentives, was
$29,483. That dropped to $27,276 in the same period of 2003. The
figures were provided by the Power Information Network.

The Dodge Ram pickup has been one of the few bright spots. It has
generated $9.1 billion in revenue in the first nine months of 2003, up
26 percent compared with the same period of 2000.

The revenue figures do not reflect the precise amount of revenue
flowing to the Chrysler group. That's because the calculations are
based on transaction prices that include dealer gross profit.

After this week's dealer tour, Zetsche will carry his product message
to the media at a press event scheduled in Detroit's Cobo Center on
Monday, Nov. 17. Zetsche is publicly showing off the company's nine
upcoming vehicles, unusual in an industry that guards future product
information. The road show is meant to allay skepticism on Wall
Street about the Chrysler group's recovery. But critical risks
threaten Zetsche's product gambles. Zetsche wants to:

Expand Jeep beyond its historic roots. But by producing a new
generation of less-capable Jeeps, he risks diluting the brand and
turning off buyers who pay for Jeep's pure SUV image.

Convert Americans to large rear-wheel-drive vehicles. The 2005 Dodge
Magnum and Chrysler 300C will be the first high-volume models fully
developed since Chrysler Corp. was acquired by Daimler-Benz AG in
1998. It's not clear that family shoppers, particularly in the Snow
Belt, will embrace rear-wheel drive.

Push Chrysler's products upscale. That's a daunting task during a
price war. And Chrysler's current owners are mainstream buyers. Sales
of the Chrysler Pacifica, with a base price of $31,230, including
freight, started slowly last spring. The Pacifica now carries a $3,000
rebate. The $34,495 Chrysler Crossfire also is off to a tepid start.

Zetsche is confident he can fight back now with more than just cost
cutting. "In the first three years of the turnaround, we were
successful in moving our cost base to a more healthy area, improving
our quality and playing defense," Zetsche says. "But we missed our
assumptions for volume, share and margins per vehicle."

The introduction of a redesigned Dodge Durango this month and nine
products in 2004 will put the company on the offense, he says. And
when minor freshenings and facelifts are counted, more than half of
Chrysler's volume will be renewed on an annualized basis, Zetsche
notes. Zetsche says he has hit on a winning product formula.

Jeep 4x4 models will remain rugged SUV standard bearers, he says.
"Around this core - which we will defend - we can do something more,"
Zetsche says. "The Jeep brand has more potential than is being
leveraged today." Jeep models developed to compete with softer-riding
sport wagons will be required to be "superior over their direct
competitors," he says.

The decision to move to rear-wheel drive is sound, Zetsche says. "For
large cars, we know on a factual basis that rear-wheel drive is
clearly superior over front-wheel drive," he says. "The American
industry tried to convince the customer of something else because the
components for large front-wheel-drive vehicles were readily available
from smaller cars." Electronic stability control and traction control
have tamed the bad habits of rear-wheel drive, Zetsche says. "Where
the customer is still concerned, we will offer at Dodge and Chrysler
all-wheel-drive to address those concerns."

Reworking the Chrysler brand image is a longer-term strategy, Zetsche
says, adding that Chrysler will remain a volume brand. But over time,
Chrysler will field more vehicles that have a "premium advantage,"
further distancing the brand from Dodge, he says. It's a no-win game
to sell 'commodity' products distinguished only by their big
discounts, Zetsche says. "You have to differentiate yourself in the
product. We want more and more customers coming to us because they are
excited about our product, not just because we announced an
incentive."

While burdened with what Zetsche calls a "slow launch," the Chrysler
Pacifica has built sales volume and "today is very successful for us."

Aided by the $3,000 rebate and lower-content models, Chrysler sold
7,703 Pacificas in October, compared to 6,642 in June. Pacifica sales
have increased for seven consecutive months, Zetsche said. The
pressure on Zetsche, COO Wolfgang Bernhard and new marketing boss Joe
Eberhardt is intense.

In October, lackluster U.S. performance forced DaimlerChrysler to
report lower-than-expected earnings. Standard & Poor's gave
DaimlerChrysler a negative outlook and downgraded its long-term credit
rating one notch to BBB.

Manfred Gentz, DaimlerChrysler's CFO, cautioned that the U.S.
operation may fall short of its goal to post a slight operating profit
in 2003. Until April, the company had projected a $2 billion annual
operating profit. The sour numbers show why Zetsche wants to rally
the dealers. Chrysler's future - and his - depends on it

 

Yes, desperation....


Matt

 

See, once again we have the same old stupid idea that cost-cutting is
the way to turn around a company. It's the sales, stupid!!

With the cost-cutting completed, it will be harder then ever to raise
sales because everything that goes into those vehicles is going to be
made a little shoddier. Quality is left in the dust and while you can
get away with this somewhat with an established brand, it's really
stupid for new models that your trying to get people to come in and
buy.

Well obviously if the market share has fallen, the hefty rebates were
not doing anything. So why keep offering them? Because the fool has
totally bought into the cost-cutting mantra, believing that he can always
make up the loss by further cost cutting.

It would have been smarter to simply manufacture and sell less cars and
keep the prices up. He would have still lost total sales simply because
the car market shrank. But Chrysler would have ended the year in
the black which would given it a big boost next sales year, because buyers
would then perceive that GM was struggling and Chrysler was a winning
company.

I will be it's more than 2.1 billion.

Se we have a fundamental dichotomy here. On one hand if your buying into
wholesale price and cost cutting, your basically admitting that autos are
nothing more than a commodity market, that the buyers really don't give
a crap about the product, that they are just going to buy what is the
cheapest.

But if you dumping a whole lot of marketing effort and R&D into bringing
out brand new models then your saying that buyers do care about the
differences between your new and old models, and your models and the
competition's models.

So, which is it?

No, he can't. He should have concentrated on boosting sales first,
then worried about cost cutting if that didn't work. And where is
the market research that is showing that Chrysler's sales are down
because they have not introduced a raft of new models? Could it
perhaps be that the number of Chrysler dealeships has fallen as
dealerships have switched to other manufacturers?

Ted

 

The ol' "what we're losing in each unit we'll make up for in volume"
philosophy. 8^)

Bill Putney
(to reply by e-mail, replace the last letter of the alphabet in my
address with "x")