Automotive Industry and Chrysler

Topics: Chrysler, Fiat, Automotive industry Pages: 7 (1867 words) Published: December 1, 2013

Case Study 17 Chrysler

Chrysler Corp was established in 1929 ( by Walter P. Chrysler) during the time when the auto industry had just began to bloom. During the depression, smaller more specialized companies began to disappear and the larger companies began to consolidate and buy up some of their smaller competitors. It was at this point in time that the Big Three emerged (Ford, GM, and Chrysler). It was also around this time that the UAW (United Auto Workers Union) was established, and this union holds a major role in the auto industry to this day.

From the 40's-50's Chrysler had some ups and downs, but some key factors were the development of their parts division (MoPar). The "Hemi" designed motor was created, they were the first to recognize the need for aerodynamics, and also created power steering, power windows, fuel injection, and alternators, just to name a few innovations that we still see today.

During the fuel crisis (early 70's), Chrysler stumbled badly. To try to compete in a new environment (need for fuel efficiency), Chrysler bought a 15% stake in Mitsubishi Motors. This move, they felt, would re-secure their position in the market, due to the technology Mitsubishi possessed. Unfortunately, that decision proved to be a vital error on their part. Consumer perception of the new automobiles seemed to be that Chrysler had cheapened its brand. By 1979 Chrysler was on the brink of bankruptcy.

It was the combination of a 1.5 billon dollar Federal loan and the cost saving measures of newly appointed CEO Lee Iacocca that soon brought the company back to its feet. By 1983 a new "Iacocca" lead Chrysler had paid back all Fed monies. Some of Iacocca's measures involved scale downs of factories, plant closings, layoffs, and benefit reductions. He also restructured the company in a way that would increase production of family passenger cars (Caravan, Voyager) and re focused the company on the development of mere fuel efficient vehicles.

By mid 80's Chrysler was a powerhouse and began to buy up companies (Gulfstream, Lamborghini, Finance America, EF Hutton, AMC, to name a few).But, within years, Chrysler began to fall back into financial trouble. Primarily brought upon by poor workmanship and eventually customer disapproval.

Like so many other companies, Chrysler had lost its focus. They had forgotten who they were and no longer concentrated their efforts on the production of automobiles. Instead entered markets and industries that did not properly align with who they were and where their strengths lied.

1998 began the merger of Chrysler and Daimler-Benz. This 37 billon dollar infuse of money brought upon a name change to DaimlerChrysler Motors Comp. and also brought them back as, one of the top three largest automakers.

Entering into this partnership, each company had their own agenda. Chrysler felt that the large influx of money, coupled with the backing of German engineering could help to bring their company back to the top. Daimler felt the merge could open up their presence in the American market, particularly amongst middle income customers.

Initially, Daimler had separated themselves from the US group in terms of management. In 2001 Chrysler group reported major losses. After that quarterly report, Daimler began to take a major managerial role in the company (replaced both CEO and COO). In the following years we see a major cultural difference in management style. These cultural differences ranged from management pay structure, to methods of design processes. Ultimately, these differences lead to the selloff of the company to Cerberus Capital Management (DaimlerChrysler sold off 80.1% stake) and changed the company back to Chrysler Motors.

Cerberus's hands off approach was to allow Chrysler management to concentrate on long term planning, rather than tying them down to short term gains. Chryslers sales continued to decline and by 2008 Cerberus had entered into talks with GM to try...

Bibliography: LUDVIGSEN 'S COLUMN: Fiat’s fraught future
Marchionne still wants Fiat-Chrysler merger
Fiat in Talks With Banks About Chrysler Deal, CEO Says no IPO
Strategic Management and Business Policy, Thomas Wheelen ; J. David Hunger
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