Chrysler ‘Scouring World’ for Competitive Advantage

DETROIT – Chrysler LLC is expanding its product-development process, internally and externally, in an aggressive bid to satisfy consumer demands in an increasingly competitive environment, the auto maker’s top executive says.

Internally, Chrysler has replaced its architecture-oriented product-development structure with five product teams that feature a segment or brand focus. Externally, the auto maker plans to establish regional centers of excellence.

“They’re going to be all-encompassing centers where we’ll have design, we’ll have engineering, we’ll have sourcing capabilities,” says Robert Nardelli, Chrysler Chairman and CEO. “They may eventually lead to actual manufacturing centers.”

Atop Chrysler’s list of potential sites are Mexico and China, Nardelli tells the Automotive News World Congress.

“Those would be the logical places for us to look first to try to bring some innovation, some technology and some talent into the organization,” he says.

Echoing a sentiment expressed by Chrysler procurement chief John Campi at last week’s North American International Auto Show in Detroit, Nardelli says the auto maker must “make sure we’re scouring the world” to ensure development of the highest-quality products at the lowest-possible cost.

“This is not an outsourcing strategy,” he adds. “This is about a customer-satisfaction strategy.”

Chrysler Chairman and CEO Robert Nardelli

Russia, India and Brazil also rank highly as potential investment sites, Nardelli says.

The five new product teams are Jeep, Dodge truck, cars and minivans, future midsize products and high-performance vehicles under Chrysler’s SRT (Street and Racing Technology) brand.

Nardelli is vague about what Chrysler means by “midsize products.” Former body-on-frame vice president Michael Donoughe, whose fingerprints are on the redesigned-for-’09 Dodge Ram pickup, leads this group.

“The creation of Mike’s organization is really multifaceted,” Nardelli says, adding it will have a multi-disciplinary flavor with input from design and marketing professionals. “It’s a new, innovative approach to put the best and brightest that we have in a room and have them bring us something for the market.”

But elements of the previous structure will remain. “We’re going to continue to have some of the traditional product-launch, product-platform executives that we’ve had across the organization,” Nardelli says.

Dan Knott, former SRT chief and vice president in charge of core components, processes and international engineering, will lead the Jeep team as a vice president.

Donoughe’s successor as vice president-body-on-frame vehicles, Scott Kunselman, will head the Dodge truck team. He also retains the vice president title.

Larry Lyons, who previously shepherded development of front-wheel-drive products ranging from the Dodge Caliber C-car to the Dodge Journey cross/utility vehicle due out this quarter, is named vice president-car and minivan product team.

Kipp Owen will continue to lead the SRT division as a director.

The move seemed to resonate with industry insiders.

“The most important changes Chrysler will make are the ones that deal with new product development,” says consultant J Ferron, president of Ferron & Associates. “This is the basket where they’re putting their eggs for the next several years.

“Focusing on strong brands like Jeep and (Dodge) truck, makes sense. Where it’s less certain, broaden that a bit. There may be some joint development opportunities. They could bring suppliers deeper into the process.”

Nardelli also gives a vote of confidence for Chrysler’s Mopar division. Asked if the unit is on its last legs, he replies: “Absolutely not.”

Nardelli says he learned, during his tenure at General Electric Corp., that parts and service is a key component of manufacturing enterprises. And aftermarket does not mean “afterthought,” he adds.

Meanwhile, Nardelli says he is encouraged by the Federal Reserve’s 0.75% rate cut.

“It demonstrates a tremendous awareness, a recognition that we really need to improve some liquidity,” he says.

“For us, what it does is give the auto-financing companies the ability to really bring some more credit, more funds into the marketplace. It’s going to help consumers. It’s going to help consumer confidence. It sends a very strong message of encouragement, stability. It will re-ignite some energy back in the consumer sector.”

Nardelli also sticks to the auto maker’s expectation that 2008 will see a market with 15.5 million to 16 million unit sales and does not anticipate cuts beyond the measures Chrysler took in November, when it slashed production by 10.1% and killed four under-performing product lines.

“We think we’ve sized ourselves right, but we’ll see,” he says. “The reduction in the Fed rate bodes well for the auto industry, bodes well for our consumers. We’re going to really stay heads-down focused on executing on our strategy.”

The auto maker is confident that products set for launch this year will resonate in the marketplace. These include the Journey, Ram and Dodge Challenger muscle coupe.

“We have no other cuts planned today,” Nardelli says. “But I can tell you, in 37 years (in business), any CEO who would say they’re done or they don’t have to do any more, probably hasn’t grown the scar tissue that they need to grow to be a CEO.”

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