SAVING GOOD SHIP CHRYSLER
New boss wanted excitement in new job, and he got it
So, what’s it feel like, moving from running the U.S. division of the world’s most successful automaker – Toyota – to running Chrysler? “What a great education,” says Jim Press, vice-chairman and co-president of Chrysler LLC of his first 11 months, two weeks on the job.
“My first six months were like drinking from a fire hydrant,” Press told an automotive audience here last week. “And the next six months were like that Whack-A-Mole game.”
Yet, after shocking the automotive world (not to mention his former employers) by jumping ship, Press says he couldn’t be happier than being at the helm of what is now routinely being described as perhaps the most troubled of this city’s three very troubled automakers.
“I wanted something more exciting and, boy, it has really been exciting,” Press said with his habitual big grin. Salvaging Chrysler has also been a successful experience, Press says. “We’re really coming to a point where there’s an improvement in our situation.”
Most of the barnacles have been scraped off the hull of the foundering ship called Chrysler, and the company has been put back on the only course that will keep it off the rocks. The goal is creating a financially stable corporation based on a “sustainable economic model.” That meant creating realistic sales goals, matching sales to realistic production numbers, and running the plants under a realistic labour contract.
“The first thing we had to do was face a new challenge called reality,” Press says, recalling his early days at Chrysler under Cerberus Capital Management, the private equity firm which bought the carmaker from Daimler. “Chrysler’s dreams didn’t match reality.”
What Press found when he arrived at Chrysler was a strange paradigm where the company kept dreaming of regaining its old market share of selling four million cars and trucks per year at a profit. “The only problem was, our revenue was based on sales of 2.5 million.”
Yet, when four million willing buyers couldn’t be found, Chrysler pressed on with its unsustainable plan: “We built ’em and shipped ’em anyway.” Using an ever wilder mix of incentives and cut-rate financing, the company resorted to buying market share “to make people think we were doing well.”
It was a self-destructive game, Press says, of “the more you sell the more you lose.” It paid off for a few consumers, if not the company. People who own a Chrysler Crossfire, for instance, might like to know that Chrysler lost more than $10,000 on each of the cars it sold in North America.
So Press and the new regime started cutting, starting with the Crossfire and the Pacifica, built in Windsor, and the Brampton-built Dodge Magnum, considered by some to one of be the best-designed vehicles to come out of Detroit in decades.
“They were tough, hard, gutwrenching choices,” Press says of the cuts to products and the people who made them. “It was very, very painful. You’re talking about lives and people and jobs.”
One of the first “reality” decisions made last year was to slash fleet sales. At their peak, 40 per cent of Chrysler’s sales were made to daily rental companies, governments and companies. “The only problem is, you don’t make money on (fleet sales) because they don’t cover your costs.”
So they started cutting plants and production schedules, which were heavily padded to build all those fleet vehicles, and they cut staffing levels at the plants they kept open. They cut overtime – which should come as no surprise to workers on the line who have questioned for years why they were working Saturdays half the year, only to be laid off in the second half.
“We were running plants on full overtime to build vehicles that were on full incentives.”
Complicating the radical corporate makeover of the past year was the sudden deceleration of the U.S. automotive market this summer, which threw all of management’s first estimates of required cutbacks out the window.
“We thought we were being really conservative in our 2008 estimates.” But mid-plan, additional production cuts had to be made. Chrysler will no longer “build cars people don’t order,” Press says.
Other significant improvements over the past year: gains in “root cause” quality problems. The remedy included putting $500 million worth of improvements into vehicle interiors and performance across the product line, “without raising prices.”
Financially, Chrysler is almost out of the woods and operating with a sustainable mix of products and sales. “It’s going to take time. You don’t get into these situations overnight.”
Next on the horizon: eliminating one of the minivans it builds in Windsor – one of the name plates, rather than production levels. “We have the best van in the world. But in 60 per cent of our stores, you walk in and there are two in the room.” Chrysler is wasting $100 million per year duplicating its van with two “so they can compete with each other.”
Most of the heavy lifting in Chrysler’s transformation is done, Press says. “The bones of the company — the innovation and the engineering — we’ve got it.”
Consumers will start to see those talents on display with future hybrids and electrical vehicles Chrysler is getting ready to unveil in the upcoming show season.
Press echoes the prevailing view at General Motors – that electrification of the vehicle is now irreversibly underway, and that the results will change the world. “I really feel we’re on the cusp of change in a major way,” he says of the industry.
“It’s the defining frontier of our industry: propulsion systems. That will be the differentiation between strong companies and those that are not.” To that end, the energies of Chrysler’s engineering brains have been redirected – away from performance and toward fuel economy and alternative fuels.
Does Press have any regrets about leaving Toyota so abruptly to take over a teetering company at the peak of crisis? “If I have a regret, I regret I didn’t come sooner. A lot could have been done if I’d come sooner.”