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Detroit's Car Maker Formulates Comeback Plan
By Glady Reign
Several German shareholders have expressed their interest in Chrysler. But the interest becomes so rousing that they now wish to acquire the brand itself. But their wishful thinking would be held in abeyance since DaimlerChrysler AG has no intention to sell the brand. At this point, a secret restructuring plan called "Project X" is aimed at transforming Chrysler into a smaller yet efficient car maker.
"Project X" intends to create closer ties between Chrysler and the Mercedes-Benz luxury division, the latter's German parent company. The secret plan, to be revealed on February 14, includes the production cars and sport utility vehicles together. Its restructuring plan also draws deep cost cuts identical to those at General Motors Corp. and Ford Motor Co. that includes job cuts, plant closures and more. However, the restructuring plan is not as simple as using Volvo park lights for the entire Ford performance lineup. Chrysler's restructure plan goes beyond its perceived borders.
According to sources, plant closures will cover an engine plant in Detroit and an assembly plant in Newark, Delaware. The company believes that the future of Chrysler depends largely on the success of the "Project X" restructure plan. It can be recalled that the automaker has projected a $1.2 billion loss in 2006. In addition, its US sales have declined to 13 percent late last year.
In Germany, investors are putting pressure on Dieter Zetsche, the DaimlerChrysler Chairman, to sell all or a part of Chrysler. However, Zetsche has consistently refused to consider a sale. In fact, he has now staked his own career on pushing for greater levels of integration between mass-market Chrysler and the upscale Mercedes-Benz brand. "We need to go deeper and faster, or else what's the point?" Zetsche is said to have told Chrysler officials recently.
The details of the restructuring plan have been successfully withheld by the automaker. Its executives have declined to comment on the matter. But according to sources behind the bright spotlight of the mass media is an intense discussion on the restructure plan.
Teams from Mercedes and McKinsey & Co., a consulting firm, have become common fixtures in Chrysler headquarters in Auburn Hills. Company officials said that a 48-seat Airbus corporate jet has been jammed with staffers shuttling to and from DaimlerChrysler's offices in Stuttgart, Germany. Last month, DaimlerChrysler's global management board reviewed Project X in final preparation before actually submitting it to the company's supervisory board.
According to the people familiar with the plan, Chrysler and Mercedes Benz will work together on their next generation of small cars that will be built in America and Germany. Furthermore, work is under way on a common SUV architecture for the Mercedes Benz M-Class and Chrysler's Jeep Grand Cherokee as well as Dodge Durango.
"Either there needs to be much more true integration by Chrysler and Mercedes, or they need to separate the business," said John Casesa of the investment firm Casesa Shapiro Group. "Right now, Chrysler is in no man's land."
The restructure plan is penned by three mighty players - Zetsche, Chrysler Chief Executive Tom LaSorda and Mercedes-Benz Chief Operating Officer Rainer Schmückle. Together they have weaved a potent plan to assuage the misery of the automaker.
Sharing engineering and other costs on a new platform should be a win-win situation for Chrysler and Mercedes, said Erich Merkle, an analyst with the market research firm IRN Inc. which is based in Grand Rapids. "We're anticipating that they will be using one platform and it will be a derivative of the W164 Mercedes platform," he said. "You're using (platforms) for multiple vehicles and that's the whole name of the game."
When asked about the restructuring at a media event in Las Vegas on Saturday, LaSorda conceded that Chrysler has had a rough ride in the past year. "There is a feeling that this is a chance to get it right."
About the Author
Glady Reign is a 32 year old is a consultant for an automotive firm based in Detroit, Mi. She is a native of the motor city and grew up around cars hence her expertise in the automotive field. You can visit Volvo park lights for more information.
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