The auto maker’s chief operating officer, who served previously as the company’s head of manufacturing, is leading a drive for greater efficiency in the assembly plants and is busy patching up’s relations with its dealers and parts makers.
Those efforts already are paying dividends, as are a spate of new products, especially the Chrysler 300 Series and Dodge Magnum. When hip-hop artist Snoop Dogg came calling for a 300 earlier this year, Chrysler knew it had a hit on its hands.
“We see the answer of our success in this marketplace is not only having the products, but you better make sure they’re attracting buyers,” LaSorda tells Ward’s in a year-end interview. “We’re happy with that.”
Chrysler Group COO Tom LaSorda.
Just one year ago, the bottom appeared to have dropped out of Chrysler Group’s reorganization plan. The U.S. arm of DaimlerChrysler AG reported a $591 million loss for the year, falling far short of meeting its $2 billion profit goal, while sales volumes slumped 7% to 2.6 million units.
Meanwhile, Chrysler’s sibling, Mercedes-Benz, was in better shape, ending the year with $3.9 billion in profits, a 4% increase, and relatively flat sales volumes of 1.2 million units.
Fast-forward to 2004 and the reversal of fortunes is staggering. Through the year’s third quarter, Mercedes’ profits have plummeted 30% to $2.1 billion, while overall sales are down 4% to 873,000 units.
Chrysler, by comparison, reported a $1.3 billion gain for the first nine months, with sales up 3% to 2 million units.
Chrysler is riding high with the 300 Series and Dodge Magnum. More than a combined 115,600 of the rear-wheel-drive cars have been sold through October, and demand continues to climb, with supply of the 300 running at less than 30 days through September, according to Ward’s data.
Chrysler promised nine new products by the end of 2004 – and it delivered.
It finished up with the launches of the Jeep Grand Cherokee and Dodge Dakota in October, and Chrysler already has more than 67,000 orders for the Grand Cherokee.
That adds up to a good year for a division that once was ridiculed as the “black sheep” of the DC family, one shareholders criticized as the financial drain of the group. The return to profitability and rebounding sales are among the biggest achievements for Chrysler this year.
LaSorda describes 2004 as a roller coaster and says the end of the rancor that permeated the presidential election should help ease consumer worries and rebuild near-term confidence.
He expects 2005 to be in “the same ballpark” with 2004’s projected annual sales volume of about 17 million units industry-wide, depending on the global economic climate.
“The other thing that keeps us up at night is what the competition is doing with their product introductions, because if they hit those sweet spots, we know there’s only so many people buying and there’s only so many segments,” LaSorda says. “If someone gets a hot one (product), it’s tough on us and vice versa.”
Still, Chrysler is building on its recent successes, with plans to introduce 25 new models between 2004 and 2007, including the nine already introduced this year.
LaSorda refuses to confirm how many new products will roll out of Chrysler plants in 2005, although a new C-segment replacement for the Neon is a given, as well as another variant from the 300 Series LX RWD platform, the Dodge Charger.
Chrysler also is finalizing designs for products that will replace its D-segment (midsize) vehicles, the Dodge Stratus, Chrysler Sebring and PT Cruiser.
The product onslaught springs from Chrysler’s $30 billion capital-investment campaign targeted for the next five years. “I think the product-program cadence in 2006, 2007 and beyond is going to be very heavy and quite plentiful,” he says.
Chrysler is losing one of its major partners,Motors Corp., after DC’s board of management decided earlier this year not to invest additional capital into the ailing Japanese auto maker.
This departure has not changed the course of development for Chrysler and’s jointly conceived C- and D-segment platforms, LaSorda says. A final decision on the product range for those platforms is coming soon.
“The C-segment (Neon replacement) is on its way,” he says. “We’re building prototypes and we’re testing them. The suppliers have been selected, and the product is being built.”
Chrysler led development of the D-segment vehicles and will decide where the vehicles will be built by the end of this year.
With its product programs in place, Chrysler now focuses on becoming among the most efficient auto makers by 2007, based on the Harbour Report survey.
The auto maker saw its efficiency jump 7.8% overall in the 2004 survey, with total hours per vehicle dropping to 37.4, which was better than competitor (See related story: Chrysler Proud of Harbour Results)Motor Co. but still lagging behind Japanese auto makers.
LaSorda says Chrysler remains on track to meets its efficiency targets, although he adds it may be difficult to show significant gains next year because of the aggressive new-product launch schedule. “We’ll pick up the pace,” he says. “We’re still on track in our trend line (to meet efficiency targets by 2007).”
LaSorda points to Chrysler’s Newark, DE, plant as an example of how efficiency and smooth launches go hand in hand.
Newark actually reported lower efficiency results in 2003, due to the launch of the new Dodge Durango SUV. LaSorda says the leadership within Chrysler and at Newark initially placed a priority on improving vehicle quality over efficiency during Durango’s ramp-up. Now that quality levels are attained, it’s time for the plant to improve on the efficiency side.
“This year their productivity is 22% year-over-year,” he says. “That’s an example of where you might fall back, but you’ve got to pick it up the next year.”
LaSorda says it will be difficult for the perennial efficiency leaders,Motor Corp. and Motor Co. Ltd., to maintain their standing at approximately 32 hours per vehicle over the next several years as they launch new plants and models in the U.S., including light trucks and SUVs.
That should make it easier for Chrysler to close the gap.
As the former head of Chrysler manufacturing, LaSorda intimately knows the challenges ahead with regard to production efficiency. He led Chrysler’s most ambitious manufacturing experiment to date: The new Toledo, OH, Jeep assembly plant.
The $2.1 billion plant – slated to begin production in 2006 – will use supplier capital and employees in areas such as the paint and body shops. The new arrangement could save Chrysler up to $300 million, money that could be used to develop another vehicle and add it into the plant’s mix.
Supplier partners include the Kuka Group, which will construct a new 250,000-sq.-ft. (23,225-sq.-m) body shop on the site and directly employ 200 workers.
Haden International Group of Auburn Hills will build a 400,000-sq.-ft. (37,160-sq.-m) paint shop at the plant with 160 direct employees.Mobis of South Korea will construct a 200,000-sq.-ft. (18,580-sq.-m) chassis building, where a rolling-chassis module will be assembled.
“That’s my pet project to make sure it (the new Toledo arrangement) works,” LaSorda says. “I think it’s a good decision.”
LaSorda doesn’t see the Toledo concept being adopted at other Chrysler facilities in the near future. He says it would take another greenfield plant to accommodate a similar concept.
“Who’s going to give me money to take over an old body shop and trim and car final (assembly) and an old paint shop?” LaSorda says. “There’s nobody coming forward with that kind of business model.”
Although he clearly is a manufacturing expert, LaSorda knows his limits when it comes to areas such as marketing and product development.
“I keep telling people I could tell you if it (a product) was butt ugly or not, but to tell you if the radii should be changed by three degrees, I’m probably not the best guy to ask that, yet,” he says. “Am I a retail expert? Absolutely not, and I have told the dealers that.”
Even so, dealers seem happy with Chrysler’s progress on the marketing front. As part of Chrysler’s “Premiere Night” marketing campaign, LaSorda and the rest of the executive team visited Chrysler, Jeep and Dodge dealers across the U.S. to celebrate the arrival of new products for the various brands. He says the visits were fruitful.
“They want more of everything we can give them. They still want more new stuff,” he says. “The relationships (between senior management and dealers) are much, much better.”
Chrysler is advancing with its Alpha dealership program, which consolidates Chrysler, Jeep and Dodge brands under one roof, a program LaSorda says has launched successfully.
Some dealers have spent more than $10 million on their consolidated dealerships. “They put a lot of money into doing it because I think they have confidence in our product line,” he says.
Chrysler will not force all its metropolitan dealers to adopt the Alpha concept, only those that could benefit from the consolidation.
While improved dealer relations are critical, LaSorda says he is spending more time attempting to boost relationships with parts suppliers.
He meets regularly with supplier executives and representatives to help companies break through roadblocks preventing adoption of new technology. Getting the Chrysler purchasing organization to recognize good ideas is part of his mission.
“I think sometimes they (suppliers) have great innovative technologies and ideas, and maybe they can’t get through what I’ll call ‘the bureaucratic wall,’” he says. “What I’ve offered up is to be a conduit to our internal people who can make those decisions.”
Five months into his tenure as COO, LaSorda has seen firsthand the brutality of corporate politics. Just days before taking his post, LaSorda’s predecessor, Wolfgang Bernhard, was stripped of his promotion as the head of Mercedes-Benz. LaSorda says he wasn’t privy to the meetings surrounding Bernhard’s eventual departure from DC, but he wishes the former executive a bright future.
“He’s a good friend of mine,” LaSorda says of Bernhard, who has been named chairman of theBrand Board of Management. “I think he’s got a lot of great leadership qualities and is a great guy, and I’m sure he’s going to be successful. The rest is between him and his leadership that he worked for.”
LaSorda’s long days provide him little opportunity to enjoy his favorite pastime: golf. Still, he cherishes the rare moments of relaxation with his wife and a “nice glass of wine.”