Chrysler Says It Will Cut Costs 30% by 1990

Chrysler will try to reduce its operating costs 30% by 1990 because of increased foreign competition in the U.S. car market, President Harold Sperlich said Tuesday.

Sperlich said the No. 3 auto maker would seek labor-cost reductions, more efficient manufacturing techniques and a unique relationship with its vast network of 15,000 suppliers.

Many suppliers, he said, will be encouraged to set up joint ventures with Samsung Group, the South Korean company that is to become a direct supplier of components to Chrysler.

Sperlich said the relaxation of quotas on Japanese cars, the strong dollar and Reagan Administration trade policies in general made these moves necessary by “opening the floodgates” to car imports. Supply will far exceed demand “because of the President’s actions,” Sperlich said.

‘We Have Two Choices’

Consumers will benefit through lower car prices, he said, but, “Guess what? Somebody’s going to get hurt. We have vowed it won’t be us.”

“We have two choices,” he said. “We can repeal the laws of mathematics and divide up 120% of the market. Or, more logically, we can move into a new world, which we think will be (a) donnybrook.”

Who survives, he said, will be determined by who best serves the customer. Sperlich said Chrysler’s strategy is to give the customer best-in-class products, best-in-class quality and best-in-class costs.

“We’re already the lowest-cost American producer,” he said. “That’s right in the corporate annual reports. But we’re not stopping there. We’ve launched a massive program to dramatically lower our costs by a full 30% by 1990. That’s $2,000 a car.”

Labor Force Reduction

Sperlich spoke at a Chrysler new-model introduction in Detroit.

Labor force reduction is a major goal of the Big Three auto makers, but Sperlich said it was uncertain how the drive for lower costs would affect employment.

“The plan is not to put this on the backs of the people” through layoffs, he said. “The plan is to become more efficient in every aspect of manufacturing cars--material costs, more efficient production, more efficient suppliers. The number of people employed will depend on how successful we are.”

Chrysler Vice Chairman Gerald Greenwald, who also addressed the gathering, reiterated the company’s resistance to the United Auto Workers’ call for wage and benefit parity for Chrysler’s 70,000 blue-collar U.S. workers.

The union wants Chrysler to match the wages and benefits of General Motors and Ford, but Greenwald said, “Even GM can’t afford GM parity . . . we’ve got a wide-open market.”