"Where we can, we would like to export from the United States because the United States is the lowest cost place to produce cars in the world "
Chrysler Chairman
Robert J. Eaton
Now that he has dodged the bullets fired by billionaire shareholder Kirk Kerkorian, Chrysler Corp. Chairman Robert J. Eaton turns his attention to upcoming negotiations with the United Auto Workers union led by Stephen Yokich -- and keeping Chrysler's ambitious international strategy on course.
The two are not unrelated.
In an interview during March with Ward's Auto World, Mr. Eaton summarized the most recent developments in Chrysler's global strategy. In short, joint ventures are either under development, or in the early stages of production, in Venezuela (Neon), Argentina (Grand Cherokee), Brazil, Thailand (Cherokee) and Indonesia.
But the most intriguing are two joint ventures under discussion in India, including one with Bajaj Auto, a producer of motor scooters, motorcycles and three-wheel taxis.
Chrysler is looking at building a world car, codenamed " Blossom," that would be priced between $4,000 and $6,000, to be built jointly with Bajaj and aimed at Maruti Udyog Ltd., which controls 76% of the Indian market
"Up until recently and even to some extent right now, you pretty much have to have a local partner," Mr. Eaton says. "Theoretically it is possible to have your own plant in India, but nobody has done one and it may not be politically acceptable. It's just a political requirement."
There are other reasons to build where you sell, Because the annual per-capita income averages $300 in India, many people would be pleased with a vehicle one step above a bicycle. Americans can't build such a basic car profitably on their own turf yet.
But labor is now a smaller piece of the total cost picture in the U.S. than ever. Low-wage workers aren't that an advantage any more.
There's a curious paradox here. Chrysler's export business is growing. Its international shipments jumped 29% last year from 161,000 vehicles in 1994 to 208,000 in 1995. But barely more than half of those were assembled in the U.S. and Canada. In fact, Chrysler's North American exports grew by a modest 6% last year.
Now, unable to meet Jeep Grand Cherokee demand from its Jefferson North plant in Detroit, Chrysler will import a few thousand $40,000 super-luxury Grand Cherokees from its Austrian joint venture with Steyr-Daimler-Puch AG. The irony is that Steyr is assembling them with engines, transmissions and stampings shipped from the U.S.
Where's the payoff for higher productivity?
If the UAW chooses Chrysler as its target, and the conventional wisdom is betting that way, Mr. Eaton will assure UAW leaders that the industry's inevitable globalization can bevery good for them.
Chrysler has hired 16,000 new hourly Workers over the last three years. Even after subtracting retirements, deaths and those who quit, there has been a net increase of 13,000 over that period.
When the UAW struck two Delphi Chassis brake parts plants last month, idling General Motors Corp.'s entire North American assembly operations, union leaders authorized 300 workers to cross picket lines to meet orders from Chrysler and Isuzu.
"Our relationship with the UAW has never been better," says Mr. Eaton. "There's an awful lot of misinformation out there."
For example, he points out that Chrysler is investing about $550 million to acid engine capacity at Trenton, MI, and Kenosha, WI, that eventually will replace about 500,000 Mitsubishi Motors Corp. engines currently imported from Japan and Korea. By the turn of the century Chrysler will stop buying engines from Mitsubishi altogether.
If that's not enough, Mr. Eaton likely will remind UAW leaders that North American-built right-hand-drive versions of Neon, Jeep Grand Cherokee, Jeep Wrangler and Plymouth Voyager are all debuting in Japan where Chrysler wants to boost sales of North American vehicles from about 17,000 last year to 100,000 in 2000.
The only real job security lies in building the export market That's what made the Japanese auto industry the envy of the world. If U.S. workers can't capitalize on their low-cost status now, the opportunity may be lost forever.
In other comments, Mr. Eaton says:
* Chrysler has no plans for a large SUV to compete with Gm's Suburban or Ford's upcoming Expedition. The reason: it would cut Chrysler's corporate average fuel economy.
* It has no plans to develop a smaller-than-Cherokee SUV to compete with Toyota's new RAV4 and Honda's upcoming CR-V. But internal planning documents show that a Dakota based sport-ute, code-named AN, is coming for the '98 model year, priced between the current Cherokee and Grand Cherokee.
* Chrysler's relationship with Mitsubishi Motors Corp. is not dead. 'It's pure economics:' says Mr. Eaton. "We will continue technical exchanges forever, and do whatever business arrangement makes sense at the time."
