The Chrysler Group today announced a three-year Recovery and Transformation Plan that seeks a return to profitability by 2008 while also taking steps to change its business model for the long run. The plan will result in an employee reduction of 13,000 people from 2007 to 2009. The Newark Assembly Plant will be idled, shifts eliminated, and total capacity reduced by 400,000 units
The key measures include:
Revenue Management
- Continue the product offensive with eight new and five refreshed products in 2007. Key products include the new Chrysler Town & Country and Dodge Grand Caravan minivans, mid-size Dodge Avenger sedan, Chrysler Sebring convertible and a Jeep Liberty that completes the revamping and expansion of the Jeep family.
- Improve the retail-to-fleet mix, build momentum with new offerings in global markets and improve the effectiveness of marketing and incentive spending.
- Reduce and optimize the dealer network to improve dealer profitability.
Material and Fixed Costs
- Reduce material costs by up to €1.15 billion ($1.5 billion) by 2009.
- Explore the sale of support operations, including transportation services.
Capacity & Efficiency
- Reduce total production capacity by 400,000 units per year.
- In 2007, eliminate a shift at Newark (Delaware) Assembly Plant and the Warren (Michigan) Truck Plant. In 2008, eliminate a shift at St. Louis (Missouri) South Assembly Plant.
- Idle Newark Assembly Plant in 2009.
- Idle the Cleveland (Ohio) Parts Distribution Center in December 2007.
- Adjust powertrain, stamping and component operations to reflect reduced capacity.
Employee Reduction
- Overall, Chrysler Group will reduce the number of employees by 13,000, or approximately 16 percent.
- Hourly employment will be reduced by 11,000 over three years, with 9,000 in the U.S. and 2,000 in Canada (4,700 in the U.S. and 1,100 in Canada in 2007 alone).
- Of the U.S. hourly total, 4,000 employees will be impacted by assembly plant actions; 1,000 by reduced capacity in powertrain, stamping and other component operations; 1,000 by other actions including the potential sale of support functions; and 3,000 through technology, efficiency and productivity.
- Salaried employment will be reduced by 2,000 over the next two years, with 1,000 each in 2007 and 2008.
- Special retirement programs and other termination and attrition programs will be announced separately.
Other “transformation” initiatives include:
Customer and Brand Focus
- Continue the product offensive through 2009, with more than 20 all-new vehicles and 13 refreshed vehicles.
- Build on its existing product strengths through new entries in the minivan, pick-up truck and select rear-drive full-size vehicles. At the same time, the company will learn to do more with less with a plan to reduce product platforms from the current 12 to seven by the year 2012.
- Expand into new commercial vehicle segments, including entering the Class 4 & 5 truck segments for the first time.
- Continue the shift to a car/truck mix that is less reliant on trucks.
- Invest in powertrain with €2.3 billion ($3 billion) dedicated to new engines, transmissions and axles, in order to move toward a portfolio that is more fuel efficient. That will include a common axle program for all vehicles, plus work on a new transmission technology. Last week, the company signed a non-binding memorandum of understanding with Getrag (a German-based supplier) to develop this more fuel efficient “dual clutch†transmission technology.
- As part of that powertrain offensive, the company has under development a new V-6 engine platform (dubbed “Phoenixâ€), which is targeted to reduce the number of six-cylinder engine families from four to one.
- In addition, Chrysler Group will introduce its first two-mode full hybrid with the 2008 Dodge Durango , and is also evaluating a mild hybrid for future applications.
- Finally, it will expand its line-up of diesel engines, including several BLUETEC-labeled vehicles, a designation emblematic of the cleanest diesel in its class.
Increase Global Presence
- Avoid nameplate redundancies in North America and develop and introduce vehicle programs aimed at global markets.
- Use third parties where possible to access regional products and markets where it makes economic sense.
- Balance supplier purchasing globally by targeting €3.8 billion ($5 billion) of additional purchasing to low-cost sources to complement the company’s global growth.
Partnerships
- In manufacturing, an agreement with Volkswagen to build minivans in North America for VW’s dealers.
- In retail, such as in Mexico where it sells a Hyundai -produced vehicle as the Dodge Atos, and soon will sell a small cargo van produced in Taiwan
- In import opportunities, such as the recently-announced agreement in principle with Chery Automobile Company of China (contingent upon approvals from the DaimlerChrysler Supervisory Board and the Chinese government) produce a small car for sale in North America and Europe.
- And in focused partnerships, such as the GEMA World Engine project with Hyundai and Mitsubishi i n Dundee, Michigan, or the DaimlerChrysler consortium with General Motors and BMW to develop hybrids.
