GENEVA - The new Chrysler LX large car and replacement Mercedes-Benz E class will be the first visible fruits of DaimlerChrysler CEO Juergen Schrempp's vision for molding his troubled, scattered empire into a unified, high-tech carmaker.
The two rear-drive vehicles, both due about 2004 or 2005, will share a common electronic architecture that enables them to use many of the same systems and components, senior DaimlerChrysler executives, speaking not for attribution, disclosed here last week at the Geneva auto show.
'Development of this electronic architecture is more important than sharing the underlying platform - which the two brands will never do,' said one executive.
Platform sharing will be limited to Chrysler and Mitsubishi. A common electronic architecture, or network, would allow Mercedes, Chrysler and Mitsubishi vehicles to share engines, axles, transmissions, braking systems, traction control and navigation systems, with potentially huge savings in procurement costs from economies of scale.
'Today, even if we tried to put an electronic stability program on a Chry-sler, we couldn't,' the executive said.
'But the common electronic architecture for all our products within the group, the basic structure of this nerve structure of cars, will be the same, allowing us to use plug-in technologies. We can then say, `We have that, it fits, put it in.' '
`Check on our progress'
The coordination, even unification, of product development by Mercedes-Benz, Chrysler and Mitsubishi is at the center of the $3.9 billion, three-year turnaround plan unveiled Monday, Feb. 26, by Schrempp and Chrysler CEO Dieter Zetsche.
The plan forecasts that Chrysler will break even and perhaps show a slight profit on an operational level in 2002 and turn an operating profit of more than $2 billion in 2003.
The plan - which entails 26,500 job cuts, plant closings and a push for a 15 percent reduction in procurement costs - is expected to save Chrysler $3.1 billion, including a $1 billion improvement in revenues this year and a total of nearly $17 billion by the end of 2003.
Zetsche said if the plan were not put into place, Chrysler would lose about $5.2 billion annually. He based those estimates on Chrysler's fourth-quarter loss of $1.29 billion.
By making the targets public, Zetsche said, Chrysler is clearly illustrating its commitment to the turnaround.
'Product launches, plant adjustments, head-count reductions and material cost reduction are all defined and with a timeline so you can check on our progress and delivery,' Zetsche told reporters.
Some analysts last week expressed doubt about Chrysler's main assumptions underlying the recovery plan: a steady market and quick returns from cost-cutting and technology-sharing initiatives.
'Chrysler is far more dependent on light-truck demand for profits than the other domestics,' said Peter Schmidt, principal of AID, an industry market-research firm in Warwick, England.
'If the light-truck machine takes a steeper drop than Zetsche has anticipated, coupled with shrinking margins because of Japanese competition, their recovery plan may not work.'
The plan also rests on the positive assumption that suppliers will agree to cut prices as deeply, and as quickly, as Chrysler wants, Schmidt pointed out. 'Suppliers consider their livelihood under threat,' he said. 'They can't give DaimlerChrysler any additional cuts on top of the ones they've already given.'
But a senior Chrysler official said privately last week that many suppliers are cooperating. (See story at left.)
Steve Reitman, senior auto analyst for Merill Lynch International in London, points out that the rush to a common electronic architecture could cause other problems.
'The idea of a common electronic platform yielding benefits presupposes that they won't encounter the (cost) problem of having to re-engineer Chrysler products to accommodate the technology,' Reitman said.
'And, then, it's all well to say they can put Mercedes technology into a Chrysler. But we have seen with the minivans that there is buyer resistance to paying for extra features, so there is no obvious trickle-down benefit.'
A newly created Executive Automotive Committee headed by Schrempp and Juergen Hubbert, DaimlerChrysler's board member in charge of Mercedes-Benz and Smart passenger cars, will coordinate product and technology sharing between Mercedes, Chrysler and Mitsubishi.
A joint program already under way, the Z-car program, will yield a five-door hatchback for Mercedes' Smart unit and a subcompact for Mitsubishi, and is being considered for the next Neon, Zetsche said. The Z-cars will be equipped with new three and four-cylinder direct-injection gasoline engines.
Chrysler also will get access to Mercedes engines, Zetsche said. The PT Cruiser sold in Europe will be available with a Mercedes 2.2-liter common-rail diesel engine in January.
Said Zetsche: 'We have not excluded using Mercedes-Benz engines for Chrysler in the U.S.'