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Chrysler LLC has failed to address the needs of their customers and as a result business

has suffered. The company has a stagnant product line, less than efficient production techniques,

and quality control issues. Externally, Chrysler has also failed to address industry changes such

as the increased need for globalization and hybrid technology. New CEO Robert Nardelli has

been tasked with turning around this sinking ship. There are several key steps both in the short

and long-term that will determine Chrysler¶s future. It will be up to Nardelli and his top

executives to strengthen the company and enter foreign markets by stabilizing management and

re-innovating the business.



Robert Nardelli¶s recent appointment as CEO of Chrysler marks the company¶s fourth

major restructuring move in the last three decades. For the second time since the early 1980s,

Chrysler has been caught off-guard in a period of rising oil prices. In a time when consumers are

increasingly demanding fuel-efficient, hybrid, and reliable vehicles, Chrysler¶s products have

been unable to deliver. Chrysler¶s product portfolio has mainly consisted of gas-guzzling SUVs

and outdated minivans. Coupled with a history of poor management decisions, the appointment

of Nardelli, known as a political and hard-nosed cost-cutter, comes at a time when Chrysler is in

need of an organizational restructuring. Nardelli¶s tenure at General Electric and Home Depot

has been characterized by process improvements and increased profits at the expense of

employee morale and customer service.(Robert L. Nardelli 1948-) Although Nardelli has

improved companies¶ financial numbers in the past, Chrysler¶s long-term future remains unclear.







Chrysler¶s largest problem is its inability to react to customer demands and industry

changes. It has fallen into a ³competency trap´ since its successes with large passenger vehicles.

Right now, Chrysler is a regional player, with all but 8% of its $62 billion in sales coming from

North America. (Muller) In order to increase its market share and remain competitive, Chrysler

must increase its global presence. The company has shown little product innovation since its

introduction of the minivan in 1984, which has led to a stagnant product line. Additionally,

Chrysler¶s past management failed to respond to increasing oil prices and environmental issues.

As U.S. vehicle sales decelerate, Chrysler is actively attempting to strengthen its

international presence, which have led to rising international sales. (Reed) The newly separate

Chrysler stated that sales growth in Asia and Latin America fueled a 26% increase in sales

during August 2007. (Chrysler says overseas sales rose) As seen with General Electric and Home

Depot, Nardelli has proven his ability to improve sales and gross margins. Chrysler also plans to

improve fuel efficiency by reducing vehicle body structure weight by 13% over the next three to

six years. (Higgins)

While Chrysler is currently revamping its operational strategies, it still showed a $1.5

billion operating loss in 2006. (Flint) Regardless of Chrysler¶s attempts to break into foreign

markets, it still trails behind Toyota in productivity and market share.

Chrysler¶s early restructuring plans allow the company to go in many strategic directions.

Any decision that Chrysler makes will ultimately determine the fate of the company.







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Cut Workforce Immediate reduction in costs Not necessarily sustainable.
which will improve the bottom Must eventually drive
line revenues with sales
Increase efficiency Longer term increases in Takes time and money to
revenue. Already started in implement.
some plants.
Introduce models that more Will increase sales Time, Money, Already a little
accurately represent consumer behind other automakers. A
demand lot of capital tied up in models
that will be scrapped.
Merge with/Purchase a Inherit R&D on fuel Already tried that with
Japanese maker efficiencies, working Daimler. Costly proposition.
platforms, and existing If you purchase, the weight of
distribution outlets. Capitalize Chrysler may bring the
on international marketing via merged firm down if the
established vendors. smaller maker can¶t help keep
Increased economies of scale it afloat.
to benefit both makes
Flatten the management Increases efficiency, cuts cost, Alienates some managers,
structure is more Nardelli¶s style causes chaos in culture and
political structure
Increase plant flexibility Increases market agility, Expensive. Not necessarily
further ability to respond to changing most efficient while running.
situations faster
Increase R&D and look to Could put Chrysler ahead of VERY risky. Technology
leap a generation of the game often builds off old
technology technology, where Chrysler is
behind the game.
Scale down the company, Will help with the ROA by May decrease brand
focus on productive, cost decreasing assets and focusing recognition and waste a lot of
efficient models on more productive models, investment in scrapped
but will shrink an already models.
decreasing market presence

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In the short-term, Chrysler should stabilize management at the top level. As seen from

recent news, it is evident that Chrysler has already undertaken this task. Nardelli¶s previous
CEO positions show that firing current managers and replacing them with ex-colleagues are the

norm. While this management displaced the old management it has proven to be successful in the

past such as in the case of Home Depot. Additionally to strengthen the automotive focus,

Chrysler has brought on top Toyota Executive Jim Press as Vice Chairman/ President. His views

are aligned closely with Nardelli¶s in regards to increased profits through cost-cutting. However

the fact still remains that Nardelli¶s team is fairly inexperienced in the automotive industry.

Chrysler needs to maintain its current market share though increased quality control and

efficiency. This fact is highlighted by the recent recall of 300,000 SUV¶s due to brake problems.

(Thomas) Nardelli¶s planned implementation of Six Sigma quality controls should reduce such

issues in the future. Additionally, continuing to retrofit plants with ³flexible manufacturing

equipment and processes´ will allow Chrysler to increase efficiency in the future.

(DaimlerChrysler financial statements)

Looking past the short-term, Chrysler is already planning for future successes by its

creation of its first hybrid division, ENVI. This division, which is planning to debut two new

hybrid models in 2009, will help Chrysler capture a portion of the environmentally friendly

automotive segment. (Valdes-Dapena) In doing so, Chrysler has gotten an extremely late start on

this new technology compared to competitors such as Toyota who have been making hybrids for

nearly half a decade. Chrysler needs to be more aware of changing market conditions and stay

ahead of customer demands. To aid in the development of this new division, Chrysler should

continue to recruit top innovative management whose values are closely aligned with Nardelli¶s

and Press¶s.

Additionally, it is imperative that Chrysler continues to expand globally. Chrysler may

find a beneficial partnership in a minor Japanese automaker. Such a relationship could provide
new technological possibilities as well as overseas marketing opportunities. This could

potentially shake up the organizational culture of Chrysler.

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Chrysler is currently on the right path to recovery and returning to profitability.

Nardelli¶s proven cost-cutting ability is just what Chrysler needs to weather the storm. Nardelli

should continue recruitment of top executives to head divisions such as ENVI. The efficiency of

each individual employee and business unit should be evaluated. The least efficient groups

should be phased out of their respective divisions. To help prevent unnecessary costs, Chrysler

needs to maintain a strict quality control system to limit the number of future recalls.

Chrysler should create a task force specializing in international business development.

Members of this task force should come from top management levels within the company. This

task force should concentrate on finding potential partners who can aid in building economies of

scale, technology sharing, and cross-marketing.