Chrysler bosses outline four-point turnaround plan

Detroit. Chrysler boss Dieter Zetsche is relying on new models, more job lay-offs, increased productivity and higher quality to return the American brand to its former glory.

Zetsche acknowledges how serious the situation is after 2003 saw Chrysler's market share drop yet again.

"We have to prove that we are making progress," he said.

The first plank of Chrysler's turnaround program relies on successful new models. Chrysler Group COO Wolfgang Bernhard told Automobilwoche: "We want to grow, need to grow and will grow."

He said that for the first time in a long time Chrysler has the chance to really go all-out for success with its nine new models.

Hopefully customers will also go for it. Fredrik Westin, an automotive analyst for stockbrokers WestLB said: "The new models have to be a hit because there aren't many more ways to make further savings."

Westin added that Chrysler's future will seem even more doubtful if the first real Zetsche models are a flop.

No expert has dared to forecast whether the Americans will love or loathe the Chrysler 300 and the new minivans.

The second step in Zetsche's plan is more lay offs. Experts believe that the direction is right but not the pace. Chrysler needs to rid itself of one third of its workforce staff to be competitive, said Stephan Droxner from the Landesbank Baden-Wuerttemberg.

Chrysler's workforce has been reduced to 93,000 from 127,000 since 2001.

In productivity Chrysler managers hope to match the auto industry's best performers such as Toyota by 2007.

Experts believe this might be possible if excess capacity can be cut even more drastically.

The focus on quality is off to a bad start. Only last week Chrysler recalled 2.7 million vehicles because of faults in the manual gear control.

Bernhard remains aggressive.

"By 2007 we want to be on the same level with Toyota. In 2003 we already had significantly lower warranty costs than in 2002," he said.

Experts say that the quality goal is achievable, although it will take more time to convince customers that Chrysler models are equal to Toyota autos.

The turnaround plan overlooks the main challenge that many observers believe Chrysler faces: incentives.

Chrysler's management appears not to worry about the high level of incentives, which experts believe are the automaker's heaviest burden.

Westin said: "If the incentives rise by another 200 dollars per vehicle Chrysler's estimated profit in 2004 would fall by 500 million euros."

A worrying and unpleasantly real calculation, especially as Zetsche and Bernhard expect to just about manage to keep incentives at their current level -- at best.

Marketing director Joachim "Joe" Eberhardt does not believe that there is any room for cost saving measures.

"Until we have made clear to our customers that we have premium products, we will not be able to get rid of the price pressure," he said.

According to CNW Marketing Research Chrysler offered more average discounts than General Motors in December 2003-amounting to 4,394 dollars per car.

But experts believe that Chrysler will make an operating profit between 500 million dollars and 1 billion dollars in 2004, mainly due to cost saving measures. This would still be a very small margin, at an expected turnover of approximately 48 billion euros.

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