Topic: Mercedes-Benz / Smart / Maybach Tidbits

[MKII]

Disgruntled investors seek Chrysler spin-off
Wed Nov 29, 2006 11:28 AM GMT

By Hendrik Sackmann and Michael Shields

STUTTGART/FRANKFURT (Reuters) - Growing ranks of shareholders in DaimlerChrysler are calling for a spin-off of loss-making U.S. arm Chrysler, which they say is dragging down the group and damaging management's credibility.

But that pits them directly against Chief Executive Dieter Zetsche and his executive team, who remain determined to hang on to Chrysler and restore it to profit.

"I would welcome a separation of Daimler from Chrysler," said Ingo Speich, portfolio manager for car stocks at German fund manager Union Investment, which with nearly 14 million shares is among the biggest German investors in the group.


"Cooperation between Mercedes-Benz and Chrysler is still very limited," he said, undermining a key argument for the 1998 merger with Daimler-Benz that formed the world's fifth-biggest carmaker.

Chrysler remains for investors "the great unknown", he said, a "problem child" that could shred the group's future results even if management makes no mistakes.

Stung by U.S. consumers' shunning of high-margin light trucks and sport utility vehicles given high fuel prices, Chrysler will lose around 1 billion euros in 2006 as it scrambles to roll out more fuel-efficient vehicles.

That has prompted a drive to cut costs by $1,000 (500 pounds) per vehicle, but investors says more radical surgery may be needed.

"I think a demerger is very realistic," said Juergen Meyer, fund manager at Sweden's SEB Asset Management, which owns around 1.2 million DaimlerChrysler shares, down from 1.7 million early this year.

"I don't see the synergies that DaimlerChrysler has been pursuing for years. Customers' desires simply do not fit together," he said.

JP Morgan also saw momentum rising for a major change.

"We remain convinced that management patience towards under-performing assets like Chrysler has worn thin and increases the likelihood that DaimlerChrysler will reduce exposure to Chrysler," the bank said in a recent note.

RATINGS IN FOCUS


A spokesman for DaimlerChrysler said: "We are in the process of working out a comprehensive programme to make Chrysler Group profitable for the long term. Everything else is speculation to which everything has already been said."

Getting rid of Chrysler could also help the group cut its borrowing costs, depending on how such a deal was structured.

"We would certainly have to consider a different rating for DaimlerChrysler if Chrysler were no longer in the group," said Falk Frey, senior credit officer in Germany for Moody's Investors Service, which cut the group's debt rating to Baa1 from A3 in September after Chrysler triggered a profit warning.

Chrysler is the reason Moody's downgraded the long-term rating and said it may do so again, Frey told reporters.

After a muddled message on its commitment to Chrysler during the third-quarter results conference call, DaimlerChrysler was forced last month to reiterate that Chrysler was not for sale.

"No one would buy it," said one investment banker who follows the auto sector closely, "but perhaps the Chinese would take it if they didn't have to pay anything for it."

Many analysts put Chrysler's worth at zero or less when valuing the group on a sum-of-the parts basis.

"Chrysler may be worth something going forward, but it may as well be a longer-term cash absorber," said Christian Breitsprecher at BHF Bank in a note to clients.

One German banker said linking Chrysler up with Renault or Volkswagen would offer Chrysler small-car expertise that it now lacks and is pursuing with two potential partners, one of which is China's Chery.


Stephen Cheetham, automotive analyst at Sanford Bernstein, said ditching Chrysler -- even for a nominal sum and with its liabilities fully funded -- could boost the group's stock value at least 10 percent by changing investor sentiment.

"However, we believe there are three issues inhibiting a near-term disposal deal: management will, finding a buyer, and uncertainty surrounding Chrysler's benefit liabilities," he told clients in a note.

The real stumbling block is approximately 2 billion euros (1.3 billion pounds) in unfunded pensions and 16 billion euros in unfunded retiree healthcare liabilities, he added, liabilities that any buyer would no doubt insist that DaimlerChrysler finance in full.

The unionised work force is taking a hard line on cost savings at Chrysler and will be loath to see it severed from rebounding earnings power at premium division Mercedes and the group's market-leading trucks division.

The other option is for a complete break-up of the group, but management has shown little appetite for such a move and its 45 billion euro market value makes it a difficult acquisition target, despite its large free float
 

 

[sirAQUAMAN64]

VW brand boss Bernhard could return to Chrysler
Discussions center on canceling his contract

Henning Krogh  |   |  Automobilwoche / December 5, 2006 - 1:00 am
 
Wolfsburg. The uncertainty over Wolfgang Bernhard's future at Volkswagen is blocking incoming VW group Chairman Martin Winterkorn's personnel reshuffle.

"Bernhard is seething," said a confidant of Winterkorn.

"It's clear that Bernhard will leave us," said the insider who works at VW Wolfsburg headquarters.

Bernhard was taken by surprise by VW supervisory board Chairman Ferdinand Piech's success in forcing current VW group Chairman Bernd Pischetsrieder to resign his post at the end of the year.

Internal discussions now center on canceling Bernhard's contract, said the insider.

Bernhard wants a clause in his contract that prevents him from working for a rival for up to two years to be eased, as well as a substantial pay off and pension payments.

Bernhard has VW product plans

"Bernhard would be a highly dangerous man for VW until at least 2012," said a company insider. "He has internalized details of all the product and manufacturing strategies."

VW wants a quick decision over Bernhard's future. Otherwise, a planned reshuffle of top management posts could be considerably delayed.

Winterkorn plans to appoint Audi production boss Jochem Heizmann to the new position of VW group production chief.

Juergen Lunemann would take Heizmann's post at Audi. Lunemann is manager of Audi's Neckarsulm plant in Germany.

Winterkorn wants Audi technology chief Ulrich Hackenberg to become head of development for the VW group. Michael Dick, who heads Audi's new model development, would take Hackenberg's post.

DaimlerChrysler rumors grow stronger

Rumors that Bernhard will return to DaimlerChrysler are getting stronger.

Bernhard recently met with DaimlerChrysler CEO Dieter Zetsche to sound out the possibility of returning to his former employer, a source said.

DaimlerChrysler's German works council would not accept Bernhard as head of the Mercedes Car Group, a post he was due to get in 2004. Zetsche is considering with U.S. managers whether Chrysler group CEO Tom LaSorda should continue in his post following recent heavy losses at the group. Bernhard could succeed LaSorda.

"Bernhard would be welcomed back in the U.S.A.," said one of his confidants.

[sirAQUAMAN64]

Customers want coddling, not palatial showrooms

Guido Reinking  |   |  Automobilwoche / December 4, 2006 - 2:10 pm

Readers of the latest ADAC brand-satisfaction rankings may be surprised to find that the German automobile club puts Smart, DaimlerChrysler's cult city car brand, in last place.

It's not that customers are dissatisfied with the car itself, according to survey results. No, they are bothered by the way they get treated at the dealership.

That's no wonder. Smart customers bear the brunt of the brand's constantly changing sales strategy. They are nomads in a service desert, always looking for the next dealership.

When the brand was launched, there were Smart Centers to visit. But the people working in them quite often had a relationship with automobiles that can only be described as aloof.

The centers mostly are history, and Mercedes has taken over the brand's sales and service. But Smart customers now must stand around among SL-, E- and S-class owners and feel as out of place as rock fans at the annual festival of Wagner operas in Bayreuth, Germany.

Smart is not alone

Smart is an extreme case but not an isolated one.

Mercedes has the same problem: Service satisfaction is lower than vehicle satisfaction.

Jaguar provides an opposite example. Although the venerable British brand has not exactly coddled its customers with product quality in the past, it has scored high in recent years in the J.D. Power and Associates Customer Satisfaction Index in the United States.

Competitors find it hard to believe. How is that possible, they wonder.

The answer is simple. American customers feel that Jaguar dealerships take their needs seriously. And service department contacts are used to expand the customer relationship.

Service brings success

The success of Lexus in the United States also is directly related to the level of service it provides to existing customers and prospective buyers alike. The brand has invested in building customer relationships instead of focusing on glass-and-marble showroom palaces, a decision that has paid off year after year in survey-topping satisfaction scores.

The rankings underscore that, more than ever, victory or defeat in the auto industry is determined at the dealership, not in the development center or factory.

Lexus and Jaguar recognize this. Mercedes and Smart are just learning it.

[sirAQUAMAN64]

http://www.globeauto.com/servlet/story/RTGAM.20061206.wxrminivans06/GAStory/Business/

Struggling minivan a bad omen for Chrysler
GREG KEENAN

From Wednesday's Globe and Mail

Minivan market leader Chrysler Group may have to scale back production of minivans to a single assembly plant, industry sources say, amid sharply declining demand for a vehicle that has defined suburbia for more than two decades.

Chrysler is projecting output of between 430,000 and 480,000 minivans annually when redesigned Dodge Caravans and Chrysler Town and Countrys go into production next year, industry sources said.

"That's being highly optimistic," said one high-ranking industry source, who said production of 400,000 is a more realistic figure.

Chrysler makes minivans in Windsor, Ont., and St. Louis, but 400,000 vehicles a year is not enough to keep two plants running full time. "The question is: Do you need two plants? And the answer is no," said another industry source familiar with the minivan segment.

The St. Louis plant is in the most danger, while the three-shift Windsor operation is probably safe, the sources said.

DaimlerChrysler AG's Chrysler Group is examining all aspects of its operations after a $1.5-billion (U.S.) third-quarter operating loss, and industry analysts and sources anticipate a cost-cutting plan early next year that will include assembly plant closings. A plant in Newark, Del., that assembles Dodge Durango sport utility vehicles appears to be most in danger of closing, but the St. Louis minivan plant could also be on the bubble if Chrysler does not find new models to build there, industry sources said.

DaimlerChrysler Canada Inc. spokesman Ed Saenz said the company does not comment on future product strategy or the outlook for production.

Minivan sales are sliding in both the Canadian and U.S. markets amid the soaring popularity and availability of so-called crossover utility vehicles (CUVs) and an aging population that is seeking less space, but more comfort.

"There's no growth left in that segment," said John Casesa, an industry analyst and managing partner of Casesa Shapiro Group LLC, who noted that minivan sales have been declining since the beginning of the decade.

There's probably room for Chrysler, Honda Motor Co. Ltd., Toyota Motor Corp. and "one or two other pretenders," Mr. Casesa said, noting that Ford Motor Co. and General Motors Corp. intend to exit the minivan market altogether.

Ford will stop selling its Freestar minivan next April and said last week it has halted production of the vehicles in Oakville, Ont., for November and December to concentrate on the new CUVs it is making there. GM has earmarked its minivan plant in Doraville, Ga., for permanent closing.

Canadians and Americans drove off dealers' lots in more than 1.6 million new minivans when the market peaked in 2000. The segment slid to 1.277 million last year and sales slumped a further 12 per cent in Canada as of the end of October and about 9 per cent in the U.S. market as of the end of November. The slump in sales in Canada means sales of CUVs will surpass those of minivans this year for the first time.

Chrysler's recent peak performance of 615,500 sales in 1998 gave it 42.5 per cent of the minivan market.

These are crucial vehicles for the Chrysler Group, which was the first auto maker to introduce a minivan in the 1980s. Its domination of the segment in the 1980s helped the then-Chrysler Corp. recover from a brush with bankruptcy. In the 1990s, minivans helped generate billions of dollars in profits for the company.

Although that domination has been gradually whittled away, Chrysler still sells more minivans than any other auto maker and held 37 per cent of the segment last year.

Minivans represented 20 per cent of Chrysler's total sales of 2.4 million vehicles in Canada and the United States last year.

"The market shifts so rapidly now that there are no longer any cash cows," Mr. Casesa said.

Chrysler has been able to maintain its lead by being the first to develop new features for its vehicles. It was the first to offer a second sliding door in the 1990s and its second- and third-row seats that fold into the floor were a major innovation this decade. The next generation of the vehicles will include a rotating passenger seat, sources said, that will enable the seat to be turned around.

Minivan sales decline

 Canada United States
2000 TOTAL: 1,615,462 244,375 1,371,087
2005 TOTAL: 1,277,314 171,534 1,105,780

[PJungnitsch]

Chryslers big problem is they never could get the quality under control, and that's sold a lot of Toyotas and Hondas. Dodge minivan owners tend to be a pretty negative bunch, especially after they change a few transmissions.

[Allen]

absolutely correct...

[sirAQUAMAN64]

The Dodge Nitro: Details or chemistry?
   
Dodge dealers: Blow up Nitro ads
TV explosions are catchy, but they don't show the features

Bradford Wernle  |   |  Automotive News / December 25, 2006 - 1:00 am
 
DETROIT -- Dodge dealers love the new Nitro SUV's looks and price. But many complain about the edgy Nitro ads created by the agency BBDO.

One TV ad shows a Nitro jump-starting another car. The Nitro driver guns his engine, and the other car blows sky-high. Another ad shows a Nitro falling through the center of the earth and through hell to emerge on a street in an Asian country.

Arresting as they are, the ads don't say anything about the Nitro's features. Therein lies the dealers' beef.

"We need to be telling people why they should be buying a Nitro," says Doug Alley, owner of Alley Dodge in Kingsport, Tenn., and a member of the Dodge Southeast regional dealer advertising association. The Nitro ads were a big topic of discussion at a recent association meeting, he says.

Chrysler group CEO Tom LaSorda promised dealers he would review the group's advertising from top to bottom after the resignation this month of global sales and marketing chief Joe Eberhardt. He acknowledged the complaints with the Nitro ads at a meeting with Detroit dealers.

LaSorda's dilemma is that while dealers may not like the ads, many people find them funny and memorable. If Dodge wants to win new customers, it needs to get their attention first.

Carrie McElwee, a Chrysler spokeswoman, says the Nitro ads have done their job.

"Overall, the ads have done what we expected them to do," McElwee says. "The Web traffic is up about 30 percent above our expectations. We're getting positive recall on the likability of ads."

After the initial ads raise brand awareness, Chrysler plans "to go more into content and features," she says.

George Kang, a senior analyst for Edmunds.com, has another take. He thinks the ads and the Nitro itself are geared to win new customers for Dodge.

"You need to bring incremental business - incremental business being defined as a new generation of people who might not have thought of Dodge," Kang says.

"That new generation is not necessarily interested in all the bells and whistles but more interested in how the car is going to define the person who's driving it."

Kang cited an ad in which young people pull into a parking lot in a Nitro and find a space half occupied by a sloppily parked BMW. They crank up the Nitro's MP3 stereo, and the bass vibrations move the BMW aside, creating a space.

The Nitro ads take "more of an entertainment perspective. It's trying to establish itself as more of a cool, hip brand."

[sirAQUAMAN64]

Mercedes expects solid U.S. sales in 2007

Reuters / January 9, 2007 - 8:07 am
 
DETROIT (Reuters) -- DaimlerChrysler's Mercedes-Benz brand is set for another solid year of U.S. sales in 2007 even if the world's biggest economy weakens, Mercedes Car Group sales and marketing chief Klaus Maier said on Monday.

The advent of the revamped C-Class car in August will help complement good demand for other relatively new products in the Mercedes-Benz lineup that helped 2006 U.S. sales rise 11 percent to 248,000 vehicles, he told Reuters.

"If you go with the right products at the right time there is enough purchasing power to get the volume we want to have in the U.S. market," he said at the North American International Auto Show.

"With the new C-Class coming in the middle of the year this will give us enough momentum. I think we have still not fully exploited the potential of the existing products like the S-Class (executive car) and ML and GL (SUVs)."

"These are all brand new cars. We see the demand is still there and that should help us until the C-Class can pick up. That is why we are not pessimistic even if the economic environment gets more modest," Maier said.

He did not give a specific sales forecast but said sales would not grow at a double-digit rate every year.

U.S. sales of the R-Class sports wagon did not get off to a brisk start as the market sought to figure out just where the crossover fit in. Maier said Mercedes may have launched the model slightly ahead of its time.

"I think we will attribute more features in 2007 to the product, which gives it more momentum for the market. That will help us," he said.

Mercedes-Benz has led the German charge to promote diesel cars in the U.S. market, and Maier said it was seeing its first successes. U.S. sales of diesel-powered Mercedes-Benz cars rose 60 percent last year to around 7,000 cars, but still made up only 3 percent of its overall U.S. sales.

Maier said estimates that diesel's share of the U.S. car market could hit 10-15 percent by 2015 were "not unrealistic" depending on how fuel prices develops.

Given high fuel prices, Maier said the group would consider launching a small Mercedes-Benz car in the U.S. market at some stage, but only with future generations of products.

"There are two hurdles we have to overcome. The first is it should not hurt the brand perception of Mercedes, which is different in the United States than in Europe. It is a luxury car and we want to keep that brand perception," he said.

"The second is profitability. It doesn't make any sense for the company if we go just for the sake of volume. It must be profitable at the dollar/euro exchange rate existing then."

The group dropped plans to sell its Mercedes B-Class compact car in the United States because the strong euro undermined the business case, but it has not ruled out U.S. sales for the next generation of the car due next decade, Maier said.

For years Mercedes strategic planning has been based on an exchange rate of $1.35 to the euro, he said, not far removed from current rates just over $1.30.

The group's snub-nosed Smart two-seater makes its U.S. debut early next year.

[sirAQUAMAN64]

Diesel Jeep Grand Cherokee starts at $38,475

Dale Jewett  |   |  Automotive News / January 23, 2007 - 11:53 am
 
The diesel-powered version of the Jeep Grand Cherokee will have a base price of $38,475, including shipping, the Chrysler group said today.

The diesel Grand Cherokee will be offered in two trim levels: Limited and Overland. It will be available in rear-wheel and four-wheel-drive versions. Sales begin in March.

The base price of $38,475 for the rear-drive version of the diesel Grand Cherokee Limited is $3,050 more than a similar Grand Cherokee equipped with a 4.7-liter V-8 gasoline engine. The diesel Grand Cherokee Limited with 4wd, with a base price of $41,715, is $3,700 more than the gasoline-powered equivalent.

The Limited trim level includes a five-speed automatic transmission, air conditioning, leather seats, a six-disc CD changer and Sirius satellite radio.

In Overland trim, the rear-drive diesel Grand Cherokee will have a base price of $41,960, which is $2,010 more than a Grand Cherokee Overland powered by the Chrysler group's 5.7-liter V-8. The 4wd diesel Grand Cherokee Overland has a base price of $45,395, a $2,010 premium compared with its gasoline-powered counterpart.

The Overland trim level adds a backup camera and sensors, trailer towing package, a navigation unit and the UConnect hands-free communication system to the equipment in the Limited trim level.

Diesel Grand Cherokees will be powered by a 3.0-liter V-6 engine built by Mercedes-Benz. The engine is rated at 215 hp and 376 pounds-feet of torque.

The Chrysler group said rear-drive Grand Cherokees with the diesel engine will have fuel economy ratings of 20 mpg city and 25 highway. Gasoline engine versions of the rear-drive Grand Cherokee are rated at 15 mpg city and 20 highway.

Fuel economy ratings for the 4wd Grand Cherokee diesel will be 20 mpg city and 24 highway. The gasoline-powered equivalents are rated at 14 mpg city and 19 highway.

[sirAQUAMAN64]

Long read on how Chrysler's transforming and integrating...
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070205/AUTO01/702050387/1148

[MKII]

Wow, this decision surprises me. I thought for sure MB would sell off Chrysler. I suppose there are not too many interested buyers though.

[airbalancer]

10,000 jobs gone, it will the youngest workers gone, to bad
The guys at the top will get their million dollar raise still

[Allen]

New car may not save shift at Chrysler
GREG KEENAN

Globe and Mail Update

The Chrysler Group is expected to dole out a gift to its Canadian operations next week, but may couple it with grim news in a restructuring plan for its North American operations that could wipe out as many as 10,000 jobs.

The unit of DaimlerChrysler AG is expected to announce that its Brampton, Ont., plant will build the Dodge Challenger muscle car — but that may not be enough to maintain the third shift of production at the plant, sources said Monday.

The Challenger will come on stream in April, 2008, the sources said, but its small volume of about 30,000 vehicles a year is not enough to offset a slump in demand for the Chrysler 300, Dodge Charger and Dodge Magnum made in Brampton.

“They could probably get away with two shifts right now,” said one source familiar with the Brampton plant, which employs about 4,200 people. Eliminating the third shift would wipe out about 900 jobs.

That was the biggest worry of Canadian Auto Workers union president Buzz Hargrove Monday, as he prepared for a meeting in Toronto on Tuesday with Chrysler executive vice-president of manufacturing Frank Ewasyshyn and vice-president of union relations Ken McCarter.

The Brampton plant has been shut for three weeks already this year and there is another one-week layoff scheduled in March.

“If that doesn't turn around, it's hard to imagine them keeping the third shift on,” Mr. Hargrove said Monday.

Chrysler is expected to reduce its 83,000-person North American work force by 10,000 people, close at least two plants and more closely integrate its operations with Mercedes-Benz as part of a plan to be unveiled on Feb. 14 by president Tom LaSorda and DaimlerChrysler chairman Dieter Zetsche, industry analysts and media reports said Monday.

DaimlerChrysler Canada Inc. spokesman Stuart Schorr would not comment.

“We have to wait for Mr. LaSorda to discuss the restructuring on the 14th,” Mr. Schorr said.

The actions come after a third-quarter operating loss of $1.5-billion (U.S.) at Chrysler and an expected loss of about $1-billion for all of 2006. Chrysler is facing the same woes as Detroit-based rivals Ford Motor Co. and General Motors Corp., which have already announced job cuts and plant closings in the face of years of market share decline and the swift and unexpected drop last year in sales of full-size pickup trucks and sport utility vehicles.

Several industry analysts and sources said Chrysler's sport utility vehicle plant in Newark, Del., will be shut, along with components plants elsewhere in the U.S.

Some observers expect output of full-sized pickup trucks to be slimmed down to two plants from three, because two of them are operating at less than full capacity.

“This is a company under immense pressure and one that has to shrink,” said long-time industry analyst John Casesa, managing partner of Casesa Shapiro Group in New York.

A Toronto components factory that puts together pistons for engines may also be on the hit list, but Mr. Hargrove said the current contract prevents the company from closing it until 2008. About 450 people are employed there.

During the Chrysler restructuring of 2001, the company eliminated the third shift in Brampton, but restored it in 2005 when its new mid-sized cars became a success.

The 5,500 jobs at the Windsor assembly plant are expected to be safe because Chrysler is retooling it to build a redesigned version of its minivans, which the company expects to succeed in part because Ford and GM are getting out of the minivan market.

More critical question involve the degree of integration between Chrysler and Mercedes, such as whether one platform will be used for both a Chrysler vehicle and a Mercedes vehicle.

“This is the decision,” one industry source said. If Chrysler and Mercedes become more deeply integrated, it means DaimlerChrysler has decided to keep Chrysler. That decision is “a career make-or-break for LaSorda and Zetsche,” the source said.

Mr. Casesa agreed that the integration of the two divisions is critical.

“The management of DaimlerChrysler faces a fundamental question with this company,” he said in an interview Monday. “Either they need to much more rapidly and aggressively integrate it with Mercedes and the rest of DaimlerChrysler, or separate it.”

[Allen]

Mercedes key to Chrysler revival
New blueprint: report: Major job cuts, bigger Mercedes link in works
Nicolas Van Praet, Financial Post
Published: Tuesday, February 06, 2007
Daimler Chrysler AG will next Wednesday hold its fullyear earnings news conference in the United States for the first time since Chrysler merged with Daimler-Benz nine years ago.

The location has not been picked by chance. Investors in Germany have been vocal in calling on Daimler Chrysler chairman Dieter Zetsche to dump Chrysler and sell it since the American auto maker posted a US$1.5-billion operating loss for the third quarter. They've said Chrysler is a drag on profitable Mercedes and must be cut loose.

Instead, the mustachioed chief executive appears set to take the stage at Chrysler headquarters in suburban Detroit to announce he's doing the exact opposite.

Chrysler will mount a comeback attempt by offering more than 10,000 factory workers and office employees buyouts and early retirements, cutting assembly line shifts, and shutting down at least two plants, according to Detroit news reports yesterday. And it will develop much closer ties to its parent company and its luxury Mercedes-Benz division.

Chrysler's restructuring blueprint, to be unveiled next week, will call for unprecedented sharing of vehicle architectures and parts between Chrysler and Mercedes, including developing small cars and SUVs together, the Detroit News reported.

To a limited extent, that's already happening. Chrysler has borrowed Mercedes parts on its 300C sedan, for example. But Chrysler executives are said to be broadening the alliance dramatically to develop vehicles together -- something that has not been done since the trans- Atlantic merger in 1998.

"Apart from the fact that they've brought in a few German managers [to run Chrysler], there doesn't seem to be that much collaboration," said Chris Piper, an auto industry specialist at the University of Western Ontario.

"The retail channels haven't changed one iota. The product designs are not noticeably different yet. But that could change."

The Detroit News, citing unnamed sources, said Chrysler and Mercedes will collaborate on their next generation of small cars built in the U.S. and Germany. They'll also work on new SUVs together -- specifically Mercedes M-Class and Chrysler's Jeep Grand Cherokee and Dodge Durango -- that will share the same basic chassis and integral systems, the newspaper said.

One concern about such cooperation in the past has been that Chrysler will cheapen the Mercedes brand. Company officials in the U.S. declined to comment on the information yesterday, calling it "speculation."

Until last summer, it looked like Chrysler would avoid the mass buyouts and cost cutting that rivals Ford Motor Co. and General Motors Corp. initiated to respond to shrinking demand for their vehicles. But by the fall, it became clear Chrysler was also in crisis.

U.S. buyers, hit with US$3-agallon gasoline, were shunning the automaker's high-profit SUVs and trucks just as they did those of Ford and GM. Chrysler nevertheless continued to pump out vehicles, building up a bank of 100,000 cars and trucks that had no buyers and pushing its dealer customers to take vehicles that weren't selling.

"We won't be in the situation we had in 2006 ever again," Chrysler chief excutive Tom La Sorda vowed in Las Vegas this past Saturday. "We built too much."

Chrysler is suspending output at some plants to fix the inventory surplus. In Canada, the company's Brampton, Ont., car plant shut down for three weeks in January and two more idling weeks are planned, union officials said. The minivan plant in Windsor also saw one week of downtime last month. The shutdowns will reduce Chrysler's first quarter output in Canada by 15% year-over-year, Scotiabank said in a report Jan.31.

Beyond that, the company is expected to start wider cuts that will likely see it post its second restructuring charge topping US$1- billion in the past seven years.

Buzz Hargrove, president of the Canadian Auto Workers union, said he is concerned Chrysler may cut the third shift at the Brampton plant, given that the facility is being hit hard so early in the year. That would affect an estimated 700 workers. "Anything is possible right no w," Mr. Hargrove said.

[sirAQUAMAN64]

I think it was only a matter of time before the 3rd shift went at Bramalea. Surprised it's lasted this long, which is commendable.

[airbalancer]

Is this not the way with a lot of Chrysler vehicles, not seller that get cold quickly

[Allen]

Chrysler to axe 20% of Canadian work force
Industry's woes deepen as sources say firm will cut 2,000 Canadian jobs
GREG KEENAN

From Thursday's Globe and Mail

The Chrysler Group will eliminate as many as 2,000 jobs in Canada in a restructuring announcement next week that will deepen the massive job cuts and plant closings that are reshaping the auto industry in North America.

The cuts in Canada represent about 20 per cent of the 10,000 jobs the Chrysler division of DaimlerChrysler AG is wiping out as it undergoes a downsizing similar to those already undertaken by Detroit rivals Ford Motor Co. and General Motors Corp., industry sources said.

The last of the Detroit Three to take an axe to its North American operations will cut jobs in the Ontario cities of Windsor and Brampton as part of a plan to restore profit and reduce capacity.

Chrysler employs about 11,500 people at those plants, its Etobicoke Casting Plant in Toronto and a head office in Windsor that overlooks the Detroit River and the Motor City.


Chrysler Group has refrained from discussing the plan, which is scheduled to be presented by its Canadian-born chief executive officer, Tom LaSorda. Mr. LaSorda grew up four blocks from the Windsor Assembly Plant and is the son of a former head of the union local at the plant.

It's not clear precisely where the Canadian cuts will be made, but industry sources said they likely will be a combination of reductions in vehicle output at the two assembly plants, closing or further downsizing of the Etobicoke plant, contracting out of jobs now done by unionized employees at DaimlerChrysler Canada Inc. and cuts in the salaried ranks. Chrysler has about 1,500 salaried employees in Canada.

About 5,500 people assemble Caravan and Town and Country minivans and Pacifica crossover utility vehicles in Windsor. Another 4,200 Canadian Auto Workers union members put together Chrysler 300 and Dodge Magnum and Charger cars in Brampton. About 450 people work at the Etobicoke plant making pistons and other engine components for various Chrysler engine plants in the United States.

There are about 280 CAW members in the firm's transportation unit, which is expected to be outsourced.

CAW officials who attended a meeting with two senior Chrysler executives earlier in the week refused yesterday to give any details of what they were told about the plan.

Buzz Hargrove, CAW president, said after the meeting on Tuesday that the information Chrysler provided about the cuts was worse than he had anticipated, but he would not provide details.

The moves by Chrysler follow those by Ford and GM, which are shutting dozens of factories and shedding tens of thousands of jobs as they adjust to years of declining market share and soaring health-care and other costs.

Chrysler is expected to shut its Newark, Del., and St. Louis North plants permanently, close an engine plant in Detroit, and sell or close components plants in the Detroit area as well as cut salaried jobs at head office in Auburn Hills, Mich., said Sean McAlinden of the Center for Automotive Research in Ann Arbor, Mich.

The smallest of the Detroit Three appeared to be healthiest until it got sideswiped last year when a sudden and steep rise in U.S. gas prices sent sales of sport utility vehicles and full-sized pickup trucks skidding. Those vehicles represent almost three-quarters of its sales.

The company needs to better integrate its operations with those of sister company Mercedes-Benz and develop some successful cars to reduce its dependence on mid-sized SUVs, Mr. McAlinden said.

“That market in 2010 will be zero,” Mr. McAlinden said. “Everybody's running from that market.”

Sales of the Durango mid-sized SUV, one of two models made at the Newark plant, plunged 39 per cent last year in the U.S. market. U.S. sales of the cars made in Brampton rose 23 per cent, while minivan sales fell 9 per cent.

Chrysler's two Canadian plants produced 606,000 vehicles last year, or about 25 per cent of the 2.5 million vehicles the auto maker cranked out in North America.

[airbalancer]

How many more in the part supplies industries will get layed off also

[Allen]

The prescription for Chrysler: Smaller cars
JEREMY CATO

From Thursday's Globe and Mail

E-mail
Detroit — Tom LaSorda, the Windsor, Ont.-born head of DaimlerChrysler's Chrysler Group, is less than a week away from delivering the nuts and bolts of Chrysler's latest restructuring at a management board meeting slated for Feb. 14.

It won't be fun, but laying out a plan to cut more jobs and close plants never is. For the personable LaSorda, a genuinely unpretentious executive, this must be particularly painful.

As recently as a year ago, Chrysler looked to be the healthiest of the Detroit-based auto makers. The 2003 turnaround at Chrysler had been deemed a success and Chrysler was delivering healthy profits to its German-based parent company.

Since then the wheels have fallen off and while LaSorda won't disclose details of the plan he is spearheading, no one doubts Chrysler will get smaller as it tries to regain profitability after posting operating losses of $1.3-billion (U.S.) in the first nine months of last year.
LaSorda, recognized as a manufacturing expert and one of nine children from a solid union household in Windsor, is clearly under pressure, though in this meeting he is calm and relaxed. Surely he would prefer to be heading Chrysler under better circumstances.

"I've had tough challenges before, but this one is bigger and I'm the guy [in charge]," says the 52-year-old executive. "The fundamental issue is how we see the market and where it's headed. We are reassessing our whole sizing situation."

LaSorda's biggest problem was shown at the 2007 Detroit auto show. The Chrysler Group's three brands, Chrysler, Dodge and Jeep, produce too many high-horsepower cars, pickups and SUVs. As fuel prices have gone up, Chrysler's fortunes have sunk.

Last year, Chrysler built far more cars and trucks than it could sell and unsold inventories piled up. Thus the losses, not to mention a horde of angry dealers who were pushed hard to move iron they could not sell.

"We built too much inventory last year," LaSorda concedes. The problem crept up on the company, he says, noting he cut production in July and August. But he didn't cut it enough, partly because Chrysler overestimated how many cars and trucks it could sell last summer and fall.

Since then, Chrysler has tried various marketing and advertising schemes, not the least of which included a series of television commercials featuring DaimlerChrysler CEO and former Chrysler Group boss Dieter Zetsche as "Dr. Z." The marketing did not prevent Chrysler from posting the huge loss in last year's third quarter, ending 12 consecutive quarters of profits.

"Our strategy didn't work," says Mr. LaSorda. "We didn't deliver. Ever since then, we've been taking production down, balancing it with the market."

LaSorda won't even hint at what will be in the latest restructuring plan. But it is clear that he has the support of his boss, Zetsche, who to be honest must bear some of the blame.

After all, Zetsche was head of Chrysler when plans to build all those high-horsepower models were put in place as part of Chrysler's last turnaround. Zetsche says publicly that LaSorda has his full support and will get the chance to turn Chrysler's fortunes around.

Still, LaSorda says he knows he's "on the hot seat — no question about it." To fix things, LaSorda is leading "Project X," the code name for the restructuring effort spearheaded by seven Chrysler teams.

It seems clear that the restructuring plan will do more than cut costs by $1,000 a vehicle, one stated aim. The seven teams are angling to boost revenue, sharpen the group's Chrysler, Dodge and Jeep brands, revamp the product portfolio and grow Chrysler's international business — up 15 per cent last year.

A key part of that growth will include the addition of more fuel-efficient small cars to Chrysler's lineup. To get them, LaSorda is turning to China. He has signed a letter of intent to import cars from Chery Automobile Co. in the future. This will likely make Chrysler the first Detroit-based auto company to import Chinese cars to the U.S.

"We can't compete in this segment with our cost structure in Canada and the U.S.," he says.

LaSorda says Chinese imports from clothing to iPods are nothing new to North Americans. Cars are the next logical step and quality won't be an issue.

"I walked through their plants," he says. "I walked through their [engineering] labs. I walked through their suppliers' plants and their design studios."

What he saw convinced him that Chery is quite capable of making cars that are well built enough for buyers here, and that meet tough safety and emissions standards.

[Leif]

This is all very new news for me. I was under the impression that the new models had made Chrysler the only American car maker to not loose money last year...

Although I also read an article about how Chrysler was paying dealers $6,000 for every 2006 car they put onto their lot...

Its very funny, so long as you don't have shares in Chrysler. The second they stop making small engined, economical vehicles, and start building powerful RWD cars the customers demands change...