DCC turnaround plan: ‘It's not rocket science’

In a good cop, bad cop sharing of duties, DaimlerChrysler Corp. President Dieter Zetsche and Chief Operating Officer Wolfgang Bernhard will reveal the company's restructuring plan Feb. 23. There are six teams involved. Four are focused on cost-cutting in materials, manufacturing, fixed costs and operational changes. They report to Mr. Bernhard, whose career included a stint as head of a material cost-cutting task force for Mercedes-Benz. Recognizing a company has no future on cuts alone, Mr. Zetsche has the more enviable task of leading the revenue generation and product strategy teams. The economy caught the Chrysler Group one-footed after a capital spending spree, resulting in a “breathtakingly fast decline of our bottom line, which shocked our people, made them sad, made them angry, rightfully so,” says Mr. Zetsche. “It's not rocket science,” says Mr. Bernhard of the work needed to turn the company around. Despite warnings of $1.2 billion in fourth quarter losses, Mr. Bernhard is almost smug in his certainty of success.

Profits are looking shrimpy for 2001

For years, economists have followed trends in women's hemlines for economic clues, so it shouldn't come as a big surprise that some automotive journalists also consider the size of the shrimp at automaker holiday media parties an indicator for next year's profits. It's a long-time inside joke in the industry, and the OEMs frequently play along by laying out lobster-sized shrimp when they anticipate good times. Nobody starved next to the shrimp bucket this year, but WAW's investigative reporters found this year's catch disappointingly small. The exceptions were press feedbags hosted by Honda North America Inc. and the Chrysler Group. Honda offered up its typically lavish sushi and sashimi spread; Chrysler fed ink-stained wretches not only the biggest shrimp but offered caviar as well. “No doubt this was ordered by the previous management,” explains one wag.

GM a menace, says Dennis

It's refreshing to see a high-ranking auto industry executive cut loose from the shackles of political correctness. In a cathartic purge that stuns even the most grizzled auto observers, Dennis Pawley abruptly resigns as chairman and chief executive of lighting supplier Guide Corp. and rips General Motors Corp. in a press release for its “lack of commitment” to Guide's success. Delphi Automotive Systems, before its spinoff from GM, sold the struggling Guide to Palladium Equity Partners in 1998. Since then, the company has made solid quality and performance strides, despite what Mr. Pawley calls GM's unwillingness “to fulfill its contractual obligations to Guide or pay a reasonable price for lighting components.” He says he has tried, to no avail, to resolve a dispute with GM “involving a few million dollars.” GM denies violating any agreement with Guide. Mr. Pawley, the former manufacturing chief at DaimlerChrysler Corp., also takes a jab at his former employer, which is demanding 5% price cuts from its suppliers. “This ill-fated approach by the automotive OEMs to improve their financials by wringing profits out of an already stretched supply base seems to be in fashion this winter,” he says. When was it ever out of fashion?

Fed up and fighting back

Even before Dennis Pawley flew off the handle, there were signs that the supply side of the auto industry was fed up with OEM strong-arming. DaimlerChrysler Corp.'s 5% price cut demand didn't sit well with the Original Equipment Supplier Assn. of Troy, MI, whose Christmas card to DC purchasing chief Tom Sidlik included an angry letter from Managing Director Neil DeKoker. “This action is sufficient to cause financial failure of some marginally profitable suppliers,” Mr. DeKoker writes. He reminds Mr. Sidlik that suppliers “may also be your best sources of product and process innovation that will provide DaimlerChrysler's competitive edge in future years.” Mr. DeKoker wanted to send Mr. Sidlik a lump of coal, but he couldn't buy it anywhere at a 5% discount.

Ford has an eye on former Olds exec

Karen C. Francis, who may have seen the writing on the wall for Oldsmobile when she bailed last year as the division's marketing general manager, was being mentioned in December for several positions at Ford Motor Co., including the top spot at Ford Motor Co. of Canada Ltd., sources tell WAW. Ms. Francis left General Motors Corp. to become chief marketer for Internet Capital Group in San Francisco, an e-commerce company. Ford hasn't named a replacement for current Ford of Canada President Bobbie Gaunt, who retired Dec. 31. Her replacement had not been named as of presstime. Ford executives met with Ms. Frances in mid-December, sources say, but those meetings apparently were not fruitful. Her time at GM largely was viewed as a success, though Olds sales continued their downward spiral during her administration. She was rumored, prior to her departure, for several top jobs at GM, including general manager of Service Parts Operations.

First Olds, now Firebird? Muscle car hiatus likely

General Motors Corp. will introduce new pony cars to replace the Chevrolet Camaro/Pontiac Firebird, but not for another five years or so. Company insiders say substantial changes are under consideration, including front- and all-wheel-drive versions instead of the current rear-wheel-drive configuration. And there's thought to eliminating V-8 availability in the Firebird, offering a new V-8 engine only with Camaro, sources say. Camaro goes retro, while Pontiac's offering draws inspiration from the wild Piranha concept car. It would be such a departure from the current Firebird that there is heated debate over discontinuing the Firebird nameplate. The cars will stay on the same platform and will return as planned to GM's lineup following a year or two hiatus beginning in 2003, sources say. By then, maybe there'll be a market for muscle cars.

Killing Olds just the start of cuts at GM

With suppliers and dealers still reeling from its announcement that it is killing its Oldsmobile Div. and slashing 15,000 jobs in the U.S. and Europe, GM quietly reveals plans for even more cutbacks. Among the moves: By 2004 it wants to chop its current lineup of 80 models by as much as 20%; some vehicle platforms (now called architectures in GM's current lexicon) also are being eliminated from future product plans. So far, GM isn't saying exactly which models will be cut — other than Oldsmobiles. The automaker also reportedly is looking to shift more engineering work to Mexico to lower costs. Meanwhile GM wants its non-auto business to grow 30% to $12 billion during the next three years, with some board members reportedly pushing for $15 billion. GM also issues a letter to its suppliers outlining its “joint supplier cost reduction initiative” to reduce material costs and share the savings with suppliers — similar to DaimlerChrysler's SCORE program. GM Engineering and Worldwide Purchasing are jointly launching the 12-month program and will ask suppliers for ideas to cut costs in current vehicle programs. GM wants to give back 35% of the savings to its suppliers and keep the remaining 65%. GM says it could implement suggestions immediately, if approved.

Delphi considers sales, layoffs

Bracing for the inevitable downturn in the automotive market, Delphi Automotive Systems Corp. says it will revamp or sell as much as $5 billion in businesses and may announce more temporary layoffs as weakening aftermarket and vehicle sales erode earnings through 2001. Delphi Chief Executive J.T. Battenberg III says he doesn't know how much of the $5 billion in businesses under review would be sold, but the units — which account for one-sixth of Delphi's 2000 sales — must be No.1 or No.2 in their areas to be retained. Delphi's $600 million global auto generator unit is among those units being reviewed. Alan Dawes, Delphi chief financial officer, says the company has reduced its Mexican workforce by more than 5,000. More temporary layoffs are anticipated, similar to the 1,700 recently announced in the U.S. Delphi expects fourth-quarter 2000 earnings of $6.8 billion to $6.9 billion, with consolidated earnings of $175 million to $200 million, or 31 to 35 cents per share. Analysts had expected Delphi to report fourth-quarter earnings of 44 cents per share. In 2001, the company projects a net margin of 3.0% to 3.3% — not much of a Christmas present.

CARB eases mandate-not enough for OEMs

A semi-conciliatory California Air Resources Board once again is scaling back its zero-emissions vehicle (ZEV) mandate for 2003, but the regulatory group's latest action still may not be enough as far as automakers are concerned. In an apparent admission that battery technology remains too expensive and suffers from performance limitations, CARB is cutting in half the 2003 ZEV requirement to 2% of light vehicle sales. It is at least the second time that CARB has backed off on the requirement, originally set at 10% of sales and rolled back to 4% in September. The revised rules say automakers selling more than 35,000 light vehicles annually in California — the Big Three U.S. and Big Three Japanese automakers — will have to ensure that another 2% of sales are either gasoline/electric hybrids or fuel cell cars. The Alliance of Automobile Manufacturers trade group says CARB's requirements for sales of hybrids and super ultra low emissions vehicles present an unreasonable timetable for automakers.