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For anybody confounded by the headlines about
Chrysler -- the just-announced layoffs, the earnings troubles,
and the imbroglio over the "merger-of-equals" -- there could
be no more illuminating endeavor than reading this account
by Vlasic and Stertz. One caveat is in order: to fully enjoy
the jet-setting, deal-making pace of this book, with its rivetting
portrait of a very charismatic, very dynamic Jurgen Strempp,
as well as a host of other "car guys," it may be necessary
for the non-CEOs among us to send the rest of the family to
the movies for the evening, sit back in a comfortable chair
with a martini (or two), and try to IMAGINE what it's like
to control the destinies of tens of thousands of workers,
plants in countries across the globe, not to mention a handful
of the most venerated brands in automotive history.
For those who need convincing (or for those
who just want the bottom line) here's an extended quote:
Eaton Runs the Numbers
-- "[Chrysler CEO Bob] Eaton sat alone at his desk one
morning in June 1997. Spread out before him were documents
detailing the size, products, and profits of the world's forty
automobile manufacturers. About ten, Eaton figured, were making
money. Even fewer earned a decent return on investment. The
industry landscape seemed to be shifting in ways unimaginable,
he thought. An astonishing number of new assembly plants were
going up around the globe, way more than needed to meet current
demand. Eaton started scribbling calculations. He tallied
up the industry expansion in Korea, Southeast Asia, Central
Europe, Latin America, and elsewhere and came to the stunning
conclusion that by the year 2002, demand would lag production
by the equivalent of eighty assembly plants. The overcapacity
would equal the size of six Chrysler Corporations. Eaton shuddered.
"Current events looked just as troubling as
the future. The Asian economies were imploding. South Korean
car sales had plunged 50 percent, and Indonesia and Thailand
looked to be headed down the same ugly road. Japan's economic
crisis had dried up sales there, which surely meant Toyota
and Honda would ratchet up exports to the United States. Brazil,
the powerhouse of South American industry, appeared strong
for now, but there were warning signs that the collapse in
Asia would prompt the Brazilian government to hike interest
rates. The gold rush to capture the emerging markets had spawned
an unprecedented expansion that looked precariously risky.
Nations such as Vietnam, Malaysia, the Philippines, and China,
the biggest of them all, coveted an auto industry of their
own. Mass-producing cars provided a developing nation with
the jobs and respect that no other industry could. The world's
established automakers -- the GMs, Volkswagens, and Toyotas
-- fell over themselves in their stampede to stake their claim.
Chrysler, by comparison, nibbled around the edges, unsure
if it could partake in the full meal. But as the news grew
gloomier and gloomier in Asia, Chrysler could at least breathe
easy because it had little at risk. From another perspective,
though, Chrysler's modest forays into the international arena
would never deliver big results.
Global Overcapacity
-- "As Eaton studied the numbers, worldwide automotive capacity
stood at sixty-six million vehicles. Demand totaled only fifty-one
million. By the year 2002, capacity was projected to hit seventy-nine
million vehicles, chasing a demand of only sixty-one million.
Something had to give. The idea of converting billions of
bicycle riders into motorists in a few years' time seemed
fanciful, even ludicrous. The bets being placed now wouldn't
pay off for a decade, if not longer. For all the talk of the
potential in a country like Vietnam, the reality proved sobering.
The price of Chrysler's smallest, most economical car, the
Neon, equaled the average Vietnamese villager's earnings for
forty years.
"Some Chrysler executives might have though
Eaton unintelligent or lacking in ideas and leadership. But
Eaton did his best thinking alone, when he could size up options
and alternatives without having to defend or argue his point.
Eaton wasn't a debater or a negotiator. He was a methodical,
committed automotive engineer turned executive. And the facts
and figures laid out on his desk concerned him deeply. Chrysler's
lifeblood, the North American market, was in the midst of
the strongest period of sustained demand in history. But the
numbers didn't lie. Chrysler had a 16 percent share of the
U.S. market, and even the most optimistic internal projections
put its potential at 20 percent. To achieve that, Chrysler
would have to sell about six hundred thousand more vehicles
a year, an enormous leap that would require new assembly plants
and another two or three smash-hit products. The competition,
meanwhile, was only getting tougher. The burgeoning overcapacity
would make it worse in a hurry. If the Asian producers can't
sell their cars in their own collapsing markets, the wide-open
American market would be their safety net.
Changing at Warp
Speed -- "Other pressures were being brought to bear.
The retail end of the business was changing at warp speed.
Cars were being marketed over the Internet and sold over the
phone. Public companies bought up mom-and-pop auto dealerships.
The auto manufacturers reacted as fast as they could, but
who knew where the retail revolution was leading? Chrysler
poured millions of dollars into outfitting dealerships with
information kiosks, so consumers could punch up data on cars
and trucks before interacting with a salesman. But the kiosks
turned obsolete almost overnight. In a wired world, consumers
wanted to access information on a new Concorde or Grand Cherokee
at home, on their computer, over the Internet. The customer
was grabbing control of the retail process, and Chrysler could
ill afforsd to be unprepared.
Will Chrysler be
a Survivor? --"But looming larger than any other change
was the growing belief that, one day, the internal combustion
engine would be rendered obsolete. Environmental concerns
about global warming had forced auto manufacturers to fund
enormous reserach and development efforts into fuel cells,
electric cars, and hybrid-powered vehicles. Chrysler's "clean
car" expenses had multiplied astronomically, but its R&D budget
was stilll dwarfed by those of General Motors, Ford, Toyota,
and Mercedes-Benz. Eaton didn't expect he'd be around by the
time the internal combustion engine bit the dust. But when
it did, the companies that lagged behind would die off with
it. "The variables seemed so immense, the challenges so daunting.
Eaton looked over the list of the top forty automakers again.
In ten years half of them could be gone. In twenty years,
the number would dwindle further. Then the thought crossed
his mind for the first, but not the last time. Would Chrysler
be one of the ultimate survivors? And if it survived, would
Chrysler be destined to struggle forever to keep up with bigger,
stronger, wealthier competitors? He figured that automotive
CEOs in France, Germany, Japan, and Korea were asking themselves
the same question. Eaton, like most car guys, always though
of the industry as a race to develop a new product, a better
organization, a smarter strategy. But the track had changed
and the stakes were raised. The race would be toward consolidation,
and the loser would never see the finish line. "Walter P.
Chrysler never foresaw 1997. Growth generated from within
was not enough anymore for the company that bore his name.
Chrysler, Eaton concluded, would not make it on its own. To
be a survivor, it needed a partner. "'We need to do something,'
he would tell Castaing later. 'We need to do something big.'"
(Excerpted from TAKEN FOR A RIDE: How Daimler-Benz
Drove Off With Chrysler by Bill Vlasic and Bradley A. Stertz.)
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