The Chrysler Group is looking for advice from other DaimlerChrysler divisions on how to cut the cost of each vehicle it produces around $1,000 on average. DaimlerChrysler CEO Dieter Zetsche told CNBC in Paris that executives from Mercedes-Benz in particular were helping put together a plan to make the cost cutting happen. The group advising Chrysler CEO Tom LaSorda also includes execs from the company's commercial vehicle operations and some outside consultants.
There are more than a few ways to cut down the cost of the vehicle. Chrysler could close some plants and reduce its excess capacity, a strategy adopted by Ford in its Way Forward plan. Rumors that a Chrysler plant in Newark, Delaware producing the Dodge Durango and Chrysler Aspen could close are out there, which makes sense in light of the automaker's admission it will lose $1.5 billion this quarter because it didn't anticipate the SUV's fall from grace. Chrysler's health care costs for its U.S. workers also adds $1,400 to the price of every vehicle, but the United Auto Workers has already closed the door on giving the automaker any concessions. So where is Chrysler going to scare up a grand per vehicle? Other possibilities include reducing its white-collar workforce, investing in more efficient production techniques, and the last resort, skimping on the cars and trucks it sells by reducing the level of standard equipment offered while holding the price and using less expensive materials.
If Chrysler succeeds, the profit it makes per vehicle would rise from $144 to a margin just below that of Toyota or Honda, the industry leaders in bucks made per vehicle.
[Source: Automotive News]
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Reader Comments (Page 1 of 2)
Corey W. @ Oct 20th 2006 4:23PM
I agree, investing in more efficient production techniques, cutting down on redundant, management white collar jobs and sooner or later UAW is gonna have to give.
Reducing the level of standard equipment offered while holding the price and using less expensive materials, I think would be a mistake.
MAC @ Oct 20th 2006 4:36PM
Tom Lasorda? All of a sudden I want pasta....
thomas @ Oct 20th 2006 4:39PM
Please, Chrysler, don't make your interiors any more chintzy than they already are.
Gardiner Westbound @ Oct 20th 2006 4:43PM
Chrysler's model airplane quality silver plastic, mouse fur headliners and revolting carpeting are already inferior to most Japanese and Korean econoboxes!
Fabulo @ Oct 20th 2006 4:44PM
Cut the benefits to the union workers. Let them have the right to strike. While they are on strike, they will not:
1) build cars that cannot be sold anyway, so the glut of 200+ days of supply will ease out.
2) cost anything. As opposed to the guaranteed job bank shenanigan, striking workers are paid by the union.
When it's time to negotiate, they can restore partial benefits.
Everybody wins!
$0.02 @ Oct 20th 2006 5:04PM
'Reducing the level of standard equipment offered while holding the price and using less expensive materials'
Decontenting for a manufacturer in trouble is not an option. Toyota and Honda do it all the time, but their brand-image/rep. allows them to. My Honda dash is pure plastic and I was shocked recently to drive in Hyundai Santa Fe that made my Honda look cheap in more than dash appearance and ergonomics.
Chrysler has no other choice but to cut peripheral to their vehicles or they will lost another $billin a quarter.
fizzandpop @ Oct 20th 2006 5:22PM
#2: Didn't he used to be the coach of the Dodgers?
apt34 @ Oct 20th 2006 7:06PM
If there was a way to get rid of the anti-American leech that is the UAW, then that would really fix a lot of these guys' problems
Chivo @ Oct 20th 2006 9:20PM
Let the damn UAW go on strike... then hire non union workers, with good benefits, and not with overpaid benefits that members from other unions don't ge any how. Damn the UAW.
Or, close a plant, let the union members rebel against their own union.
Appliance Repairman @ Oct 20th 2006 10:52PM
Back to the good 'ole days of cars without air conditioning, the use of sealed beam headlights in place of the sculpted set, and a 2.5 watt per channel analog AM/FM radio without cassette. :D
Leo @ Oct 21st 2006 8:34AM
UAW does not have to give yet.
if they can make $1000/car that would be just fine.
they need to invest in re-freshing the plants with current new technologies. I kow that is a large initial capital investment, but if tehr are savings for 1-2yrs down the road I think they can make it work.
some of these companies are stuch not changing technologies as they set goals of a 6months-1year return on investment adn maybe pushing that out to ~2years may not be a bad idea.
Greg @ Oct 21st 2006 10:20AM
You 'Union Bashers' are a real joke.
Maybe you'd rather have your vehicles built by Communist Chinese labor like everything else that is for sale in your local department stores.
I'd like to know what all of you guys who bash the unions do for a living.
Union's keep wages up, which help them afford the vehicles they drive, the money they spend in their local communities, go on vacation, send their kids to school.
Funny how the manufacturers who have their products built in other countries aren't so proud to show how their workers live.
Maybe if more American's made more money, and cheap imports with no Tariffs weren't so abundant, Chyrsler wouldn't be in this bind.
Also, if the USA had a real national healthcare program, and all the money that is going to things like the SPACE PROGRAM, the MARS PROGRAM and CAMERAS on every corner of the USA.. then USA companies like Chyrsler wouldn't be spending $1,400 per vehicle to pay for HEALTHCARE.
And don't go into 'well Canada has a national healthcare system and it doesn't work'.... because guess what, WE ARE NOT CANADA... and if we wanted to, we could MAKE IT WORK.
The other Bob @ Oct 21st 2006 10:51AM
The real joke about this article is that the Germans are supposedly teaching efficiency to Chrysler. I think Zetsche is letting nationalism get in the way of reality.
Here in Michigan where there is a auto engineer on every block, it was not secret that when the “merger” took place between Chrysler and Mercedes that it was Mercedes that was going to learn a lot about the efficiency of Chrysler’s engineering and assembly processes. It was well known that Mercedes took a multitude many more hours to build an equivalent car than Chrysler, plus Chrysler was then designing new cars in as little as 18 months, not the years that took many of their competitors.
There is a reason why Mercedes specializes in luxury. They could not compete in cheaper cars with the rest of world.
Say anything you want about these two brands, but efficiency has never been Mercedes specialty.
Glenn @ Oct 21st 2006 11:18AM
Heaven ... say NO to cheaper materials. Drove a Yaris for 3 days last week and neat little car, but Toyota is definately not what everyone says they are -- lots of cheap to go around in that car. My SX20 was like heaven to get back to -- silence, no wind noise, no misaligned plastic seams (if visible, which the Yaris has lots of). I did get the impression the Yaris was getting amazing MPG though .. the gauge never left the full level and I was all over the city in it. Also the centre gauges -- not a good idea -- a "neat" idea but you do have to take your eyes off the road to read them.
T @ Oct 21st 2006 12:24PM
I think the UAW benefits do have to go. It's not something to be proud of but I can't see how UAW car makers can compete with their non-UAW rivals when they have to pay more for every unit made. I just read recently about the plans for building the Camero in Canada were made because their costs are lower because they have state health care. I have no doubt there are other problems at the US car makers that need to be fixed too but how can the UAW expect to continue in business when they represent an added cost to their employers?
C @ Oct 21st 2006 4:46PM
Easy. Get rid of all the glass except the windshield, get rid of all the seats except the driver's seat, leave off the rear doors, no radio, no carpet. That should be about $1000 worth. At least everyone will know where the cost-cutting took place.
Chivo @ Oct 21st 2006 5:03PM
Me, a union basher? No, I am a UAW basher. Most unions out there do some good, but the UAW for the last 10 years has done more harm than good. Yeah, its Ford and GM's fault for being in the position they are now, but admit it, the UAW had at least a small part in it.
The UAW is crap! They don't care about their own union members, they are just arrogant idiots with a huge ego.
Phil @ Oct 22nd 2006 4:26PM
Take it right out of the soon-as-a-car-is-introduced incentives!!!!
ernie powell @ Oct 22nd 2006 5:57PM
dosen't people know that the unions get a raise, then so do the non-union employees, give me a break please, i am retired from ford mtr co, i can say that i could go home at night and get a good nights rest for the job i did that day. thank you. ernie.
Allen Klosowski @ Oct 23rd 2006 12:17PM
Seriously, reduce interior quality further? I'm seeing Suzuki, Hyundai, and Kia's with higher quality interiors than Dodge/Chrysler.
How about asking "does it have a highly fuel efficient engine with decent performance" instead of does it have a "Hemi". I love displacement (my '55 Chevy gets 6mpg), but for a daily driver let's be a bit more realistic.
The exterior designs are cool, but interiors are already cheap cheap cheap on these vehicles, and the engines are on the wrong side of fuel economy. I love the Dodge Ram's exterior styling, but it's interior and fuel economy stink when compared with some of the other options out there.