Re-inventing Chrysler National Chrysler Retirement Organization January 23, 2013 Bruce M. Belzowski Assistant Research Scientist University of Michigan Transportation Research Institute www.umtri.umich.edu/aad/
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Overview Why Re-invention? Putting Chrysler in context Re-inventing Chrysler 1960s and 1970s 1980s 1990s 2000s Re-inventing Chrysler: The Fiat Way
Why Re-invention? Chrysler embodies the definition through the dramatic changes it has made to the company. In the modern era (1960s+), Chrysler was one of the first companies to joint venture with a Japanese company (Mitsubishi) The first U.S. company to ask and receive survival loans The first U.S. company to switch a major portion of its vehicles to front wheel drive. The first major U.S. auto OEM to merge with a foreign brand, Daimler The first major U.S. auto OEM to be owned/run by a private equity firm, Cerberus The first major U.S. auto company (with GM) to declare bankruptcy, and merge with another global OEM, Fiat
Why Re-invention? Because of its re-invention(s), Chrysler has Many leaders that provided inspiration and direction that helped it survive under very difficult circumstances Developed a variety of different products that surprised and delighted customers Experimented with and adapted to a number of different processes for vehicle development and manufacturing Engineers that adapted to a number of major engineering and manufacturing process changes Provided a model for the challenges of becoming a global manufacturer Re-invention is the model for today s world from the company level to the personal level.
Overview Why Re-invention? Putting Chrysler in context Re-inventing Chrysler 1960s and 1970s 1980s 1990s 2000s Re-inventing Chrysler: The Fiat Way
Sales (in millions) U.S. Auto Sales 1960 to 2012 By U.S. Recessions 20 18 16 14 12 10 8 6 4 2 0 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Big 3 U.S. Market Share 1960 to 2012 60% GM Ford Chrysler 50% 40% 30% 20% 10% 0% 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
A Difference in Scale: U.S. Sales 1960 1970 GM: 3.3 million - GM: 4.0 million Ford: 2.0 million - Ford: 2.9 million Chrysler: 960K - Chrysler: 1.5 million 1980 1990 - GM: 4.8 million - GM: 4.4 million - Ford: 2.1 million - Ford: 3.0 million - Chrysler: 809K - Chrysler: 1.5 million 2000 2010 - GM: 5.0 million - GM: 2.2 million - Ford: 4.2 million - Ford: 2.0 million - Chrysler: 2.5 million - Chrysler: 1.1 million
Chrysler Market Share 1960 to 2012
% Change In Sales From 2007 to 2012 80 60 40 20 0-20 -40-60 -80 Toyota GM Ford Chrysler Honda Hyundai Nissan 2008 (-18%) 2009 (-35%) 2010 (-28%) 2011(-21%) 2012 (-11%) (EST)
U.S. Market Share From 2007 to 2012 30 Toyota GM Ford Chrysler Honda Hyundai Nissan 25 20 15 10 5 0 2007 2008 2009 2010 2011 2012 (EST)
Overview Why Re-invention? Putting Chrysler in context Re-inventing Chrysler 1960s and 1970s 1980s 1990s 2000s Re-inventing Chrysler: The Fiat Way
Re-inventing Chrysler: The 60s and 70s Leaders: Lynn Townsend, John Riccardo, Lee Iacocca, Hal Sperlich Challenges: Fuel economy and emissions regulations Cash and profitability (Sales bank) Successful models Vehicle quality
Re-inventing Chrysler: The 60s and 70s Response: First Japanese JV (Mitsubishi) Early attempts at globalization (Simca, Rootes, Barreiros) Canada! Infusion of Ford talent Willingness to change within product development Lobbying Washington and banks for support
Re-inventing Chrysler: The 80s Leaders: Lee Iacocca Challenges: Recovery from near bankruptcy Growth Response: Introduction of new front wheel drive vehicles and the minivan (product innovation) Repayment of government loans with interest in advance Purchase and integration of AMC/Jeep and Beijing Jeep production
Re-inventing Chrysler: The 80s Response: Selling off internal parts companies, reducing vertical integration and beginnings of supplier development Purchase of Maserati and Lamborghini Buying and selling of non-auto companies (Gulfstream, Electrospace) Incorporating learnings from Japan, particularly Honda and Mitsubishi for quality improvements Negotiating a modern operating agreement with UAW for Jefferson North plant Development of cross-functional teams for product development
Re-inventing Chrysler: The 90s Leaders: Lee Iacocca, Bob Eaton, Juergen Schrempp Challenges: Growth/Globalization Reorganization into platform teams and cross-functional teams for development Hostile takeovers Response: Introduction of Viper and LH models with cab forward design Best in class supplier relations (process innovation)
Re-inventing Chrysler: The 90s Response: Best in class time to market using cross-functional teams Strong light truck sales Merger with Daimler in order to reach global scale and avoid hostile takeovers No one seems want Chrysler when it is weak, and Chrysler is not interested in merging with other companies when it is strong. Both companies with money, strong managers, strong products: What could go wrong?
Re-inventing Chrysler: The 2000 s Leaders: Bob Eaton, Juergen Schrempp/Dieter Zetsche, Jim Holden, Bob Nardelli, and Sergio Marchionne Challenges: Integration of engineering, purchasing, and management between companies: autonomy vs. integration Integration of Daimler, Chrysler, Hyundai, and Mitsubishi into a cooperative global operation Managing U.S. healthcare and pension costs Bankruptcy
Re-inventing Chrysler: The 2000 s Response: Exodus of top U.S. managers within a year or two after the merger with Daimler Incompatible engineering purchasing, and management philosophies with Daimler 9/11 sales disaster and continuing massive discounts Dramatic cuts in white collar and blue collar workers Sale to Cerberus by Daimler Daimler overestimated the potential synergies of the two companies and American volume customers are not willing and able to pay premium prices for premium technologies
Re-inventing Chrysler: The 2000 s Response: Sale to Cerberus by Daimler leaves Chrysler with no small car development as gas prices increase Manufacturing agreements to fulfill needs (Nissan): flexible globalization? Banking crisis: Sept. 2008, worse than 9/11 sales crash as the country pulls back from buying new vehicles. Chrysler prepares to stop all production when the government provides loans Agreement with Fiat allows ownership and control of Chrysler Marchionne provides product plan integrating Chrysler and Fiat brands
Overview Why Re-invention? Putting Chrysler in context Re-inventing Chrysler 1960s and 1970s 1980s 1990s 2000s Re-inventing Chrysler: The Fiat Way
Re-inventing Chrysler: The Fiat Way Challenges: Integrating vehicles among the Fiat and Chrysler product lines Integrating engineering, purchasing, and management between the two companies Meeting dramatic increases in fuel economy standards within a light truck dominant company Developing new powertrains to meet fuel economy standards Keeping up morale after years of dramatic changes and long hours Globalizing Fiat-Chrysler: The 6 million vehicle company
Q U E S T I O N S & A N S W E R S Bruce M. Belzowski Assistant Research Scientist University of Michigan Transportation Research Institute www.umtri.umich.edu/aad/ Phone: 734-936-2704 bbl@umich.edu