DETROIT - New Chrysler CEO Dieter Zetsche has created six teams to craft a plan to put Chrysler back in the black.
Four teams are focusing on managing costs, and two are examining revenues and product plans, Zetsche said. Wolfgang Bernhard, Zetsche's top lieutenant, is overseeing the cost management effort. Zetsche is handling revenues and the product plan.
Zetsche said the teams are exploring every option for cutting costs and improving efficiencies, including job cuts. The final restructuring plan, to be presented to DaimlerChrysler's supervisory board Feb. 26, will reflect difficult choices that must be made to end Chrysler's financial tailspin, he said.
Zetsche's comments came Tuesday, Dec. 19, during his first meeting with reporters since he replaced Jim Holden as CEO last month and Bernhard became COO. The management shake-up followed Chrysler's $512 million operating loss in the third quarter.
In an unusual letter to shareholders the previous day, DaimlerChrysler CEO Juergen Schrempp indicated that Chrysler will lose another $1.4 billion in the fourth quarter. The second-half losses will nearly wipe out first-half profits, resulting in a $453 million operating profit for the year, down from $4.7 billion in 1999.
Any special charge against earnings related to the restructuring will not come until 2001, after the plan is in place.
Zetsche offered no details about the restructuring plan, saying it still is being developed. But he already has cut production at several plants to shrink bloated inventories. Chrysler's $36 billion product plan remains in place, but every program is being reviewed to identify potential cost savings that won't sacrifice quality, he said.
Zetsche also is demanding further price cuts from suppliers. He said he expects suppliers largely will cooperate with the new cuts, but he acknowledged that most are not happy about them.
Zetsche has not issued a similar directive to cut incentives immediately. Dealers had feared such a move because they say consumers won't buy without discounts.
'I'm not that stupid,' Zetsche said. He suggested that he hopes eventually to reduce incentives by building fewer vehicles and making them so attractive to buyers that they will sell without incentives.
Zetsche said three factors are mainly to blame for Chrysler's troubles:
A general softening of the market
Too many old minivans were built, forcing generous consumer incentives to sell them and cutting into demand for the new 2001 models, forcing more incentives
An assumption that the market would continue to grow, justifying increasing production and higher sticker prices to pay for product improvements.
'The result is a breathtakingly fast decline in our bottom line,' he said.
The responsibility for a turnaround lies squarely with Zetsche and his management team, he said. They will not simply execute orders from headquarters in Stuttgart.
'There is no lack of autonomy here,' Zetsche said. 'The situation here can't be fixed in Stuttgart. It can only be fixed here.'