Chrysler Sees Opening in GM’s Woes

Chrysler Chief Executive Dieter Zetsche, who has been trying to set the company apart from its larger U.S. rivals, this week said he saw opportunity as well as adversity in the fallout from last week’s bombshell profit warning from General Motors Corp.

On the one hand, Zetsche said GM might be poised to ratchet up profit-eating consumer incentives again to boost sales by escalating the price war it started with the rollout of interest-free car loans after the Sept. 11 terrorist attacks.

If that happened, the U.S. arm of Germany’s DaimlerChrysler and other automakers would have to put “more money on the hood” as well, beefing up discounts to keep showroom traffic moving, Zetsche said.

“We will not necessarily match them, but we have to be competitive with our prices. We have been in the past; we will be in the future.”

On the other hand, even as he said he wished the best for his cross-town rivals in Detroit, Zetsche acknowledged that there might be opportunity for Chrysler in the troubles at GM.

“We are competitors and we are ultimately fighting for the same customers,” Zetsche said. “You want to be stronger than your competition.”

GM, the world’s largest automaker, roiled financial markets March 16 by cutting its 2005 earnings outlook by as much as 80%. A scathing report by Merrill Lynch fixed-income analysts Thursday said the auto giant looked set to suffer accelerating share losses in an increasingly competitive marketplace.

Since they are fighting for the same car buyers, GM’s losses could mean market share gains at Chrysler.

Chrysler’s market share and profit have already been increasing lately, and it earned more than its deep-pocketed Mercedes-Benz sibling in the fourth quarter.

GM and Ford Motor Co. both lost vital U.S. market share last year and appear likely to do so again in 2005. They also face uphill battles in making their automotive operations profitable.

“We are proving right now that you can have your headquarters in Detroit and still gain market share,” Zetsche said.

Attractive new models like the Chrysler 300 sedan have underpinned Chrysler’s recent success.

Chrysler has had many ups and downs, and it came close to bankruptcy in the early 1980s. But Zetsche, who has been credited with a remarkable turnaround at Chrysler since he arrived in Detroit almost five years ago, seems determined to reshape the automaker and add to its recovery by pulling away from Detroit’s traditional boom-and-bust cycles.

He stressed, for instance, that his plan to have Chrysler match the best automakers in the business in quality and production by 2007 could add momentum to the automaker’s turnaround.

“On the productivity side, there’s no doubt whatsoever that in 2007 we will be as productive as the very best Japanese company,” he said.

Chrysler’s last profit warning came in 2003, when its second-quarter results were hurt by high incentives and a failure to get new products to the marketplace fast enough.

That was the same year that GM Chief Executive Rick Wagoner, who has led Detroit’s incentives war almost single-handedly, admonished the auto industry to “stop whining” about the cost of interest-free loans and other discounts.