A hot Chrysler
A German boss has the American auto company's pedal to the metal
After a day of meetings with car dealers in Mexico City, Chrysler CEO Dieter Zetsche has removed his tie, kicked off his shoes, and taken on some unfinished business: coming up with a catchy name for a new "concept car." Aboard a company jet back to the States, one of his executives pulls out an atlas. "Check Brazil," Zetsche suggests, sitting cross-legged in one of the Gulfstream's seats. "Look along the coastline."
Zetsche and a few lieutenants try out some names. The Chrysler Barra? The Chrysler Recife? None seem right. Then, after 30 minutes of brainstorming, a town in Mexico finally yields the answer. "We have a winner!" Zetsche announces. "The Chrysler Camacho!"
"The Camacho ?" razzes Chief Operating Officer Tom LaSorda. "You've got to be kidding me." Zetsche jabs back: "I told you this wasn't a democratic process."
Chrysler executives are feeling loose these days, and for good reason. Until this year, the Chrysler Group--including the Jeep and Dodge nameplates--was the family charity case in DaimlerChrysler A. G., the company born of Daimler-Benz's 1998 union with Chrysler. Its losses dragged down the parent's stock price, and shareholders began clamoring for the august Daimler to "divorce" its American partner. Chrysler has finally executed a long U-turn, however, and is the darling of the business. There are waiting lists for its brash new 300 sedan, which Motor Trend named car of the year last week. And more than a dozen other new vehicles are on the way. The company should earn well over $1.5 billion this year, while Ford and General Motors are likely to lose money on their automotive operations. Chrysler is even outshining sibling Mercedes-Benz. "It's the first time since the merger," says Morgan Stanley analyst Steve Girsky, "that Chrysler's margins are higher than Mercedes's."
Few expected Chrysler to emerge as a hip, freewheeling profit center when Daimler took over the company. At Chrysler headquarters in Auburn Hills, Mich., workers feared that arrogant Europeans would stifle Chrysler's flair for bold American styling and botch popular people movers like the Dodge and Chrysler minivans. For a while, the critics seemed right. German managers, including Zetsche, took over several of the company's top posts. They slashed the workforce. Domestic market share fell from 16.1 percent in 1998 to less than 13 percent last year. In 2003--a year in which company executives had proclaimed Chrysler would earn $2 billion--it lost $47 million instead.
The Daimler deal itself probably caused part of the decline. "The merger seemed to have been very disruptive," says Joe Ivers, a partner at J. D. Power & Associates. There were also inherited problems. Franchise vehicles like the Jeep Grand Cherokee and the minivans were losing share to new competitors. Other Chrysler cars lacked pizazz. And quality problems forced Chrysler to offer a costly seven-year, 70,000-mile warranty.
Throttled. The Germans made some mistakes too. "We, and I, underestimated the competitiveness of the market," says Zetsche, who was Mercedes's chief engineer before taking over Chrysler in 2000. "One reason was I came from a luxury-car maker, where it's competitive but in a completely different way." Lavish rebates and cut-rate financing, which proliferated during the recession, hit Chrysler harder than other automakers.