AUBURN HILLS, Mich., Jan. 22 - Dieter Zetsche has a history of parachuting
into ailing Daimler subsidiaries and whipping them into shape. But the
47-year-old German executive has never confronted a challenge like the one
he faces today: turning around Chrysler, the U.S. car company Daimler-Benz
AG bought two years ago in the belief that it was the most profitable auto
maker on the planet.
[NL]
TODAY CHRYSLER IS LOSING more than $1 billion a quarter.
DaimlerChrysler AG's share price has plummeted to $45 from $108. Thousands
of jobs and billions of dollars are on the line. So is the reputation of the
man who chose Mr. Zetsche for the job, DaimlerChrysler Chairman Juergen
Schrempp.[NL] Mr. Zetsche's mission isn't just to save Chrysler. It's
to prove that DaimlerChrysler, Mr. Schrempp's grand experiment in
globalization, wasn't a colossal mistake.[NL] Next month, Mr. Zetsche
expects to lay out plans for major cutbacks at Chrysler. But he is expected
to announce the biggest piece of the restructuring within the next few
weeks: Over about three years, as many as 6,000 of Chrysler's 30,000
white-collar jobs will probably disappear, along with 10,000 to 15,000 of
its 95,000 manufacturing workers and about six of its 41 plants, according
to people familiar with the company's thinking.[NL] To comply with
Chrysler's union contracts, the bulk of the staff cuts could come through
attrition and early-retirement buyouts rather than layoffs. Some of the
factory shutdowns could be billed as indefinite "idlings" rather than formal
closures. The company will report at least one earnings charge this year to
pay restructuring costs.[NL] Working with Wolfgang Bernhard, a
confident, 40-year-old German executive boasting a business degree from
Columbia University, Mr. Zetsche last month ordered Chrysler's suppliers to
slash the cost of their contracts with the auto maker by 5%. Now the pair
from DaimlerChrysler's home office in Stuttgart, Germany, has assigned 1,500
of Chrysler's 9,000 engineers to spend at least the next two years working
with these same suppliers to wring a further 10% out of Chrysler's $40
billion annual materials budget.[NL] At Chrysler's headquarters in
this Detroit suburb, they have set up "war rooms" where vehicle parts are
placed on big tables and then pored over with supplier representatives to
find cheaper ways to make them. Engineers plan to tear apart more of their
competitors' cars and trucks, as well, to learn new tricks for building
their own vehicles more efficiently.
DaimlerChrysler AG (DCX)
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Click here for Quotes Behind Mr. Zetsche's ambitious bid to repair a
deeply troubled megamerger is a story that pokes some holes in one of the
hallowed tenets of modern capitalism: Bigger is better, and global and
bigger is best. It turns out the company Mr. Schrempp found so alluring
wasn't quite the company he got. Chrysler was minting profits when the
German company was watching it with great interest during the mid-1990s. But
Daimler-Benz didn't go through the formal due-diligence applied to many
deals, mainly because the German company wanted to be depicted as merging
with Chrysler, not taking it over. By the time the deal was sealed in
November 1998, the famously lean Chrysler was rapidly putting on fat. The
company, says Mr. Zetsche, let itself "get a little loose on the cost side."
Although Mr. Zetsche's predecessor, James Holden, the Chrysler veteran
installed as chief a year after the merger, came up with a strategy to deal
with the problem, by then relations between him and Mr. Schrempp had become
poisoned.[NL] Now Mr. Schrempp, who is feeling increasing heat from
shareholders, says he is putting the "huge resources" of DaimlerChrysler at
Mr. Zetsche's disposal. "I will not rest until this company, this American
icon, is back where it belongs - at the top of the industry," he vowed in a
speech in Detroit last week.[NL] Indeed, DaimlerChrysler flexed its
muscles earlier this month to float a $7.1 billion bond issue intended in
large part to provide cash for Chrysler. Asked if he would consider selling
off Chrysler, Mr. Schrempp responded with a flat "no."[NL] Mr. Zetsche
has played the fixer before. In 1991, he was sent to Portland, Ore., to turn
around Daimler's Freightliner unit, a money-loser that Daimler-Benz was
considering selling. He attacked costs, in part by laying off about 25% of
the work force, and put the truck maker back on the road.
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In 1992, he returned to Germany to oversee a push to develop a
more-profitable lineup of cars at Mercedes-Benz. Mercedes was under assault
around the world, particularly from Japanese luxury brands. The prevailing
philosophy among Mercedes engineers was that a new car wasn't an improvement
if it didn't cost more than the old model. Mr. Zetsche tried to impose some
new thinking.[NL] Mike Jackson, then the head of Mercedes's U.S. sales
arm and now chief executive of car retailer AutoNation Inc., recalls
accompanying Mr. Zetsche and several Mercedes engineers to the western U.S.
in the mid-1990s to drive a new version of Mercedes's flagship sedan, the
S-Class, then in development. The engineers told him they could use the
traditional suspension system or design a new one that wouldn't cost more
but would be better - if they could make it work. Mr. Zetsche told them to
risk it, Mr. Jackson recalls admiringly, adding: "You could see the blood
drip out of the engineers' faces."[NL] Mr. Zetsche says he aims to
attract buyers with a combination of innovative American styling and
high-quality German engineering. He's spending much of his time in
Chrysler's design studios, where he has made clear that he wants to improve
the craftsmanship of the interiors of Chrysler vehicles, says Trevor Creed,
Chrysler's senior vice president for design, who says he welcomes Mr.
Zetsche's attention to detail.[NL] A vital part of Mr. Zetsche's
strategy is pushing Chrysler to fight the U.S. auto market's predilection
for discounting its wares. But, as Chrysler found out last year, those who
refuse to slash prices often lose precious market share. It's a risk Mr.
Zetsche, more accustomed to selling luxury cars to well-heeled buyers, says
he'll take. Already, he has directed Chrysler's advertising to tout the
quality of Chrysler's newly redesigned minivans, not their low prices.[NL]
The first Chrysler vehicle bearing Mr. Zetsche's imprint will be a
more-bare-bones version of that minivan, which Chrysler rolled out just last
fall. What's known in the company as an "Odyssey fighter" is a version of a
$26,000 Chrysler minivan with some of its gadgets removed so it has a
sticker price of around $24,000, the same as a comparable version of Honda
Motor Co.'s Odyssey minivan.[NL] But the history of the Chrysler
minivan - which accounts for about 20% of Chrysler's sales - illustrates the
rift that developed in DaimlerChrysler's boardroom as the company's biggest
unit slipped into the red. The Germans blamed the Americans for letting
Chrysler's costs increase and then slapping huge discounts on its cars and
trucks in a desperate grab for market share. The Americans blamed the
Germans for demanding the high profits anticipated at the time of the merger
without bothering to comprehend the facts of life in a slowing American mass
market. Mr. Zetsche will continue to face these challenges as he tries to
reverse Chrysler's slide.[NL] [NL]A MINIVAN TRIUMPH[NL] The
original minivan was a triumph of Chrysler's old innovation-on-a-shoestring
culture. Strapped for cash in the early 1980s, Chrysler took the
underpinnings of a ho-hum family sedan and bolted them to a box with far
more room than a normal car. These original minivans, which hit the market
in 1984, were hits with baby boomers and their kids.[NL] General
Motors Corp., Ford Motor Co. and Japanese manufacturers launched copycat
minivans. The Chrysler minivans clobbered them all - until 1998, which
happened to be the year of the DaimlerChrysler deal. That's when Honda
rolled out a redesigned version of its Odyssey.
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The new Odyssey, which replaced a cramped vehicle best known for its
popularity with New York cabbies, was every bit as big as Chrysler's
offerings. It also had Honda's trademark tight handling, smooth engine
performance and a cleverly designed interior. And it sold for $2,000 less
than the Chrysler minivan. Between December 1998 and December 1999,
Chrysler's share of the U.S. minivan market fell to 36% from 40% as
consumers waited in line for Odysseys. Chrysler minivans stacked up on
dealer lots.[NL] [NL]TOP OF THE CLASS[NL] Meanwhile, Chrysler
executives were gearing up to launch the fourth generation of their prized
money-spinner in late 2000. Convinced the company had to erase its lingering
reputation for second-rate quality, Chrysler's leaders spent a whopping $2.6
billion to make the 21st-century minivan the class of its field. The new
vehicle had nifty new features, including a rear hatch that opens with the
press of a remote-control button. But it cost an average of $1,800 per
vehicle more to build than its predecessor.[NL] Chrysler executives
were confident the new minivan would generate profits to justify the
expense. Until the new minivans hit the showrooms, Chrysler executives vowed
to engage in a price war if that's what it took to stop competitors from
grabbing more minivan market share. "I'd go down on my sword before I'd let
them do that," Mr. Holden promised in November 1999.[NL] Back in
Stuttgart, Mr. Schrempp and his lieutenants failed to grasp the intensity of
the storm gathering over Chrysler. One of Mr. Holden's first acts as
Chrysler's president was to submit the unit's 2000 profit outlook to Mr.
Schrempp.[NL] Mr. Holden knew Chrysler confronted big bills for
factories it had built in recent years, and that he would face additional
expenses during the autumn with the launch of the new minivan and two
redesigned midsize cars. So, initially, he proposed to commit Chrysler to an
annual profit of about $2.5 billion, according to people familiar with the
situation. That was just half of what Chrysler had earned in 1999. At the
urging of Mr. Schrempp and other DaimlerChrysler officials, he upped his
commitment - first to $4 billion, and then, under further pressure from his
bosses, to $5 billion.[NL] [NL]A TOUGH MARKET[NL] Mr. Zetsche,
who at the time was running DaimlerChrysler's commercial-truck division,
acknowledges that the company's board pushed Mr. Holden to deliver strong
results in an increasingly tough U.S. market. "There was an interest of the
whole board of management to show a 2000 performance better than the 1999
performance," Mr. Zetsche says. "That was a stretch for the Chrysler
Group."[NL] Chrysler struggled to meet those targets as a
record-breaking surge in new-vehicle sales during the first quarter of the
year began to ebb. Japanese, German, and Korean rivals, which had the
advantage of a strong dollar, went on the attack. Honda accelerated
production of its new minivan in North America. The result: Chrysler, GM and
Ford stumbled into a brutal war for market share. Defying Chrysler's
forecasts, inflation-adjusted new-vehicle prices declined on average.[NL]
Nevertheless, Chrysler executives were determined to defend their minivan
franchise. The company pumped out 120,000 more minivans during the first
half of the year than dealers were able to sell, one of Chrysler's current
top executives says. At that point, with overall demand slowing, Mr. Holden
and his managers turned to big rebates to try to move the old models before
the new, more expensive, ones arrived.[NL] By the spring, low-rate
financing designed to move the metal pushed Chrysler's marketing expenses up
to 13% of revenue from 11% a year earlier. DaimlerChrysler's board made it
clear to Mr. Holden that it wanted the numbers to improve.[NL]
[NL]FALLING PROJECTIONS[NL] In May, Mr. Holden tried to boost profits
by easing up on the sweet minivan deals. His hope was that GM and Ford would
follow. They didn't, and Chrysler minivans began to pile up on dealer lots.
Mr. Holden and his team ordered up new cash rebates. Then, as Chrysler's
position continued to deteriorate, Mr. Holden informed DaimlerChrysler's
board that he was dropping his profit projection for the year to $3.5
billion from $5 billion.
Advertisement[NL][PARA] To try to salvage the situation, he also
launched a campaign in Auburn Hills to improve Chrysler's bottom line by
about $2 billion, largely through cost cuts. He asked Chrysler employees,
for instance, to turn in their company-issued cellphones and pagers to save
money. But such requests, regarded in Stuttgart as amateurish, only served
to further convince Mr. Schrempp that Mr. Holden wasn't acting boldly enough
to ensure that Chrysler met his profit targets.[NL] Hoping an
assessment from an independent outsider would convince the board that its
profit expectations from Chrysler were unreasonable, Chrysler hired McKinsey
& Co., the consulting firm, to investigate why its costs were spiraling out
of control. McKinsey compared Chrysler with Ford and concluded that Ford was
growing more efficient while Chrysler was growing less efficient. The report
found, for instance, that Chrysler, which historically had prided itself on
a friendly relationship with its suppliers, had in recent years let that
relationship get so cozy that it was paying more for some parts than its
competitors were.[NL] Meanwhile, Chrysler continued to bleed cash.
Discounts on the minivan reached as much as $4,800 during the third quarter,
a staggering sum for a vehicle whose sticker price starts at around
$20,000.[NL] [NL]A SOBERING MESSAGE[NL] Once again, Mr. Holden
went to the DaimlerChrysler board and ratcheted down his profit promise.
Now, he reported, Chrysler was on track to end the year with a profit of no
more than $2 billion. This implied that, in the third quarter, Chrysler
would post its first quarterly loss since 1991.[NL] By the time Mr.
Holden delivered that sobering message, Chrysler had ordered up a second
consultant's study, this time from Booz Allen & Hamilton. It concluded that
Chrysler's problems required a fundamental restructuring that would take 60
to 90 days to draft.[NL] The study became part of an overhaul plan for
Chrysler that Mr. Holden presented to Chrysler's top managers in October.
What happened next, according to people familiar with the events, was a
massive miscommunication between Mr. Schrempp and his American
subordinate.[NL] Messrs. Schrempp and Holden discussed Chrysler's
problems in a private chat outside a meeting of the DaimlerChrysler board in
New York. Then, in early November, Mr. Holden sent a note to Mr. Schrempp
requesting time to flesh out the turnaround plan for Chrysler - a note he
thought was simply confirming what they had discussed.[NL] Mr.
Schrempp was livid. He thought Mr. Holden had indicated at their meeting
that Chrysler's situation was about to improve, people familiar with the
events say. He regarded the note as one more sign of Mr. Holden's
backtracking.[NL] On Sunday, Nov. 12, Mr. Holden flew to Stuttgart to
deliver his assessment of Chrysler in a presentation the following day to
DaimlerChrysler's board. But over a private dinner Sunday evening, Mr.
Schrempp told Mr. Holden it was time for him to go. A week later, Mr.
Schrempp dispatched Mr. Zetsche to take control in Auburn Hills.[NL]
Copyright (c) 2001 Dow Jones & Company, Inc.[NL]All Rights Reserved.[NL]
--------------------------------------
Steven St.Laurent
2000 Dakota Hemi 4.7 (WRECKED!!)
2000 Ford Roush Mustang Stage III - TT version (sold)
1999 Chebby (gone in 2003)
1993 Tracker (still going-going-going...)
--------------------------------
Aspiring for now:
2003 Dakota Hemi 5.7 or a V-10 mod
2003/4 Viper GTS-R
-----Original Message-----
From: owner-dakota-truck@buffnet.net
[mailto:owner-dakota-truck@buffnet.net]On Behalf Of Chris Lambert
Sent: Tuesday, January 23, 2001 5:59 PM
To: dakota-truck@buffnet.net
Subject: DML: 87 octane test in the 4.7L
Strange, I have yet to actually dyno mine with the jet II with "good" gas,
but I can tell you that with the stage II I feel a difference between 87
and 93 octane. It just feels better with the 93+ than the 87. Also the
mileage is better with the 93+, I get high 17's mostly highway with the
93+, high 15's mostly city... like you mostly tire chirping fun... with the
87 I get 15.5 highway and low 14's high 13's mostly city ... I ahve tried
this a few times... for me it is worth the extra boost and the mileage
makes up for the cost difference... I never have any audible pinging
though. I do still have the 195 thermo.
Chris
>I decided to use 87 octane (Citgo) just to see if I could get this thing
>to ping. I've got a custom PCM with 5 degrees advanced timing. I'm also
>using a RS 180 tstat, but I'm blocking off the radiator for the winter to
>get the engine to run warmer (around 190-195). I just finished off a
>complete tank of 87 octane, under my normal driving habits, which are
>pretty hard driving! hee hee. My results were good, I did'nt notice any
>pinging, under any type of driving. Now, I must say you can't always
>"hear" pinging, so I can't say for certain there was none, but I never
>heard any.
>My gas mileage remained normal, 16 mpg mixed driving.
>I did'nt really notice any power decrease.
>For those of you concerned about upgrading your PCM and having to run
>premium gas in your 4.7L, I don't think you have anything to worry about.
>
>Matt Y2K-HEMI
>'00 RC 4.7L 5 spd
>14.23 @ 94.49
****************************************************************************
*******
'00 CC, Packin a 287 Magnum, 5-sp, Gibson Duals, Quick D Intake
http://www.intense99dak.com/chris.htm
In Action: http://www.dakota2.4mg.com/scca.htm
****************************************************************************
*******
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