DETROIT -- Four years after taking over a floundering Chrysler group, CEO Dieter Zetsche says the US operation has completed its turnaround.
Now Chrysler is ready to attack competitors.
"Our turnaround plan was to enable ourselves to become kind of the fastest of the prey, to survive the attack. We think we accomplished that," Zetsche says. "Our objective is to become a predator, to get to the other side of the equation."
Zetsche's aim is lofty. By 2007 he wants to:
Zetsche played defense.
He slashed Chrysler's cost base. He attacked warranty costs. He called in two key German executives soaked in the Mercedes-Benz culture. Wolfgang Bernhard overhauled Chrysler's product portfolio. Joe Eberhardt searched for ways to survive the brutal North American price war.
Now, Zetsche is ready to go on offense.
Chrysler's operating profit reached $269 million (currently E209 million) in the third quarter, up 47 percent. The Chrysler 300 is an undisputable hit. Vehicle quality is improving, showing a 25 percent percent drop in warranty costs from 2001 to 2003.
Chrysler still faces sizeable challenges, says Catherine Madden, a US-based analyst with Global Insight in Massachusetts.
For example, Zetsche is extending the Jeep brand beyond its rugged off-road roots. The company's product development with Mitsubishi is in flux. And Chrysler is still learning to gain flexibility from vehicle platforms and manufacturing plants, Madden says.
Analyst Bruce Belzowski, a research scientist at the University of Michigan, says Chrysler has stopped losing ground. But Chrysler must fill gaps in its product lineup with stronger small- and mid-sized cars, he says.
John Schenden, co-chairman of the Chrysler-Jeep National Dealer Council and owner of a Denver dealership, credits Zetsche with being "honest and upfront" when he arrived in 2000, telling dealers "we are going to have a dry period and get through this together." Now, Zetsche is delivering well-built, competitive entries, he says.
Zetsche's offensive push follows a three-year turnaround strategy begun in February 2001.
He delivered what the company calls an $8.1 billion "balance sheet improvement." That figure includes cost savings, reductions in net assets and improvements in productivity and revenue. Chrysler will not provide details of cost savings.
Most savings were achieved by extracting price cuts from suppliers. Zetsche also cut 35,000 jobs in the US, Canada and Mexico.
The darkest days hit when the Chrysler group reported an operating loss of $637 million in 2003, including $591 million related to selling its parts operations, closing a foundry and cuting jobs.
One leg of Zetsche's strategy is establishing product leadership.
"We want to be in the product leader position in 2007, as perceived by the marketplace," Zetsche says.
Zetsche will rely on the technological prowess of Mercedes and Chrysler's creative talent.
"We have excellent history and capabilities in Auburn Hills, especially on the styling, packaging, creative side of the business," he says. "We have proven that in the past, and we intend to further grow these capabilities.
George Peterson, president of AutoPacific, a Tustin, California, USA-based marketing and consultancy group, says the US will add 50 new nameplates between 2003 and 2009. Chrysler cannot fight "a purely product war," he says.
"The marketplace is going to become exponentially more difficult to compete in," Peterson says. Winning companies will need "super marketing, innovative ways to cut through the clutter."
Chrysler group sold 1,842,464 light vehicles in the US through October, up 3.1 percent from a year earlier.
"It is the first year we can prove that there are more than just improvements of productivity and cost reductions," Zetsche says.
He says Chrysler will emphasize design, function and practical innovations, such as Stow 'n Go minivan seats that fold flat into the floor and the fuel-saving multi-displacement system of the Hemi V-8.
The stakes are enormous, Peterson says. "It isn't only a battle for today," he says. "It's a battle for survival in 2008 through 2015, not just for Chrysler but for everybody."