It's all in the Game

In this latest game of Chutes and Ladders, Chrysler Group appears to be regaining control of at least part of the board.

Two years into a 3-year turnaround plan, the auto maker is past the crisis stage. The skeptics outnumbered the believers when Chrysler announced the details of the 3-year turnaround plan early in 2001. The milestones were met at the end of year one, and still the skeptics held court.

As the end of year two approaches, third-quarter results showed Chrysler Group to be the shining star of DaimlerChrysler AG, posting operating profits of $301 million during the quarter compared with a $264 million loss in like-2001. Overall sales volumes were up 8% with the continued success of the Jeep Liberty, Dodge Ram pickup and PT Cruiser.

The expectation is Chrysler will achieve positive operating earnings for the fourth quarter, with full-year earnings significantly higher than the breakeven originally projected.

“Certainly our key intention is to accomplish our targets next year as well,” says Dieter Zetsche, Chrysler Group president and CEO, of the 2003 target to earn $2 billion.

The auto maker continues to roll the dice and avoid the snakes on the board as it moves towards each stage of the turnaround plan. Confidence is growing with each quarterly report. Once the house of Chrysler is in order, the plan is to increase sales by a million units over the next decade.

Zetsche is planning a product onslaught and increased capacity to build it all. The plan calls for manufacturing efficiency and flexibility comparable with the benchmarked Japanese. But Zetsche expects to go one better: offering killer designs the competition can't match and consumers won't be able to resist. And ones that dealers will confidently sell.

When things weren't so hot, “when we had a major decline in our relationship with dealers, we saw a strong shift from new-car to used-car sales at dealerships,” says Zetsche. That's changed. As Chrysler rebounds, relations with dealers are improving. “And this goes along with more focus on new-car sales with a willingness to go for some risk in ordering wholesale.”

He adds, “We have a lot to offer our dealers, and we see more and more of them believing in that bright future and coming to the party and doing their part.”

The Chrysler brand is being re-energized with incremental sales coming from two new vehicles in the first half of 2003, part of a plan to increase Chrysler product sales 40% in the next two years.

The Crossfire will be the new halo vehicle for Chrysler. This rear-drive sports coupe, being assembled in Germany, also marks a change in attitude as to how many Mercedes components can end up in a Chrysler. The Crossfire boasts almost 40% Mercedes parts, including a 3.2L V-6 engine.

Production begins Jan. 27 on the new all-wheel-drive Chrysler Pacifica. Chrysler is calling the premium tall wagon the next segment buster — along the lines of the PT Cruiser and the minivan it invented in 1983. Ford will give Pacifica a competitor with the Freestyle, but not until 2004. General Motors Corp. also gets in the tall wagon crossover game in 2004 with the Malibu Maxx.

The next-generation large car family leaps to rear-wheel drive. The new vehicles will be designated as '04-1/2 models. Ward's is told the new rear-drive family will include the LX (replacing Intrepid); the LXi (replacing Concorde) and the 300N (replacing the 300M). A newcomer is the All Sport, a station wagon with Dodge styling and SUV attributes.

The game is far from over. But having successfully maneuvered thus far, Chrysler appears to be on a ladder rung high enough for competitors to take notice.