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DaimlerChrysler predicts rough ride in coming year
By TIMES WIRES © St. Petersburg Times, published February 27, 2001 STUTTGART, Germany -- With his own career and the fate of the world's biggest automobile merger hanging in the balance, the chairman of DaimlerChrysler announced his plans for a turnaround Monday even as he forecast a grim year ahead. Juergen Schrempp, DaimlerChrysler's chairman, warned that Chrysler's American car and truck business will lose about $2-billion or more this year and will not begin to break even until 2002. To pay for the costs of reducing Chrysler's work force by 26,000 people, DaimlerChrysler will take a charge against earnings of $2.8-billion and will post a first-quarter operating loss as high as $3.9-billion. Details of the plan were released as Chrysler reported a stunning $1.3-billion fourth-quarter loss, double that of the $512-million it lost in the third quarter of 2000 and the complete opposite of the $1.26-billion in operating profit it made in the fourth quarter of 1999. The poor results pushed the German-American automaker to its first quarterly deficit -- it lost $269-million -- since its 1998 creation through Daimler-Benz AG's acquisition of Chrysler Corp. "The situation in the United States has deteriorated dramatically," said Schrempp, who faces lawsuits from Chrysler shareholders who accuse him of misleading promises of a "marriage of equals" when what has happened is a Daimler takeover. The Chrysler rescue strategy envisions nearly $1-billion in cost savings this year to be achieved by forcing suppliers to cut prices, broader sharing of components among all brands, and common platforms -- the costly undercarriages -- for small and mid-sized cars produced by Chrysler and Mitsubishi. The company wants to reduce the number of Chrysler and Mitsubishi platforms from 29 to no more than 16. The German managers made clear, however, that there would be no cross-breeding of Chrysler or Mitsubishi components with Mercedes-Benz products -- a potential cost efficiency they have long and steadfastly rejected for fear it would degrade Mercedes' elite image. "When a customer buys a Mercedes, he can assume he's getting a Mercedes," division chief Juergen Hubbert retorted when asked if the company was reconsidering its opposition to platform-sharing or using Chrysler engines in the German luxury models. Saying repeatedly that Chrysler's downturn stemmed in part from "internal factors," Schrempp emphasized that "a new, competent leadership has been put in place." A newly created automotive management committee will be headed by Schrempp and four other longtime senior Daimler executives from Stuttgart. Tellingly, Schrempp and all other executives on the podium spoke only in German. No Americans were on the podium. Schrempp conceded his managers had erred in failing to recognize strategic mistakes committed by Chrysler, which produced too many older-model minivans that now need expensive sales incentives to move them out of inventory and too few of the popular PT Cruisers. Management here and at Chrysler's Auburn Hills, Mich., headquarters also failed to foresee the current downturn in the U.S. sales market. Chrysler chief Dieter Zetsche also noted there was no hope of raising prices in the current market conditions, adding to the already daunting challenge of restoring profitability. Modest profitability can be expected in the first quarter of next year, Zetsche said, adding that Chrysler should be able to maintain its 14 percent U.S. market share despite tough competition. DaimlerChrysler's U.S. shares fell 68 cents to $48.12. - Information from the New York Times, Los Angeles Times and Associated Press was used in this report.
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From the Times Business report
From the AP
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