Daimler Might Shed Assets to End Losses
DaimlerChrysler might sell off the Chrysler Group’s aviation unit or some of its component plants in further restructuring moves this year to help pull the company out of its sea of red ink, Chief Executive Dieter Zetsche said Monday.
Such cuts would be beyond the dramatic announcement by the troubled auto maker three weeks ago that Chrysler would eliminate 26,000 jobs, or 20% of its work force, and shutter six factories while significantly reducing production at seven others.
Further restructuring “does not exclude some asset aspects that we might separate ourselves from, any assets which are not directly linked to mainstream manufacturing activities,” Zetsche said in an interview with The Times at Chrysler’s head office in this Detroit suburb.
“It could be about Chrysler Aviation, for instance, or this could be about component plants,” he said. “The question would be whether there could be a change of ownership in one of those cases.”
The Chrysler Group--a DaimlerChrysler unit that consists of the Chrysler, Dodge and Jeep brands--operates a network of factories that make parts from electronics components and climate-control systems to car and truck axles, transmissions and engines. DaimlerChrysler Aviation is a wholly owned subsidiary that operates charter flights for DaimlerChrysler and other corporate clients.
Chrysler lost $512 million in last year’s third quarter and is expected to post a loss of about $1.2 billion in the fourth quarter. Zetsche is scheduled to detail the fourth-quarter financials and present his turnaround plan at DaimlerChrysler’s annual meeting at its Stuttgart, Germany, headquarters next week.
Zetsche was dispatched to Auburn Hills in November by DaimlerChrysler Chairman Juergen Schrempp to stem accelerating losses from the botched launch of a new generation of minivans and intense competition with American and Japanese rivals.
Although Zetsche has said he wants to do away with marketing that relies on incentives such as rebates or cheap loans, Chrysler increased incentives last week, slapping on an additional $500 to $1,000 discount on Jeeps and the Dodge Durango sport-utility vehicle and Dakota pickup truck. Chrysler also tacked on a $1,000 discount on the relatively new Chrysler Sebring and Dodge Stratus passenger cars.
Chrysler had stood by as competitors implemented incentives that targeted key Chrysler products, while gloomy headlines about Chrysler’s financial problems proliferated, Zetsche said.
“All of that news hadn’t been very encouraging to customers to go for [Chrysler] brands,” he said. “We thought that it was time now to get a kick-start into a positive mood again and go for this direction [of incentives]. We couldn’t just stay behind the competition for a longer period of time, and we saw the effects on our sales, so we had to catch up again and that is what we did.”
Sales of Chrysler vehicles, including the now-defunct Plymouth brand, which was axed a little over a year ago, fell 4.4% last year, a record year for U.S. auto sales. Chrysler brands’ U.S. market share fell to 14.5% last year from 15.6% in 1999, but Zetsche said Chrysler could well hold steady at 14.5% this year, when the auto market is expected to shrink by as many as 1.5 million units to about 16 million.
“Based on the strength of our products and new products coming up, we think we really have this possibility,” Zetsche said. Chrysler has two key vehicles that will be for sale in the next few months: the all-new 2002 Jeep Liberty SUV, a somewhat upscale cousin of the Jeep Cherokee that is being discontinued, and the entirely redesigned 2002 Ram full-size pickup truck.
Both are trucks that will bring in hefty profit margins, and Chrysler is hoping they will help tow the company out of its current financial morass.
