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CHRYSLER GROUP   
Employee Impact - 13,000 employee reduction; Newark Assembly Plant to be idled, shifts eliminated and total capacity reduced by 400,000 units Redesigned business model for long-term competitiveness, including greater emphasis on fuel-efficient products, global growth and partnerships €2.3 billion ($3 billion) powertrain investment leads to more fuel-efficient line-up DaimlerChrysler is looking into further strategic options with partners
€ 2.3 (US $ 3) Mrd. Investitionen in Antriebstrang führen zu verbrauchsgünstigerer Produktpalette DaimlerChrysler prüft weitere strategische Optionen mit Partnern |
Chrysler Group Recovery and Transformation Plan Seeks Return to Profitability, Redesigns Business Model
Auburn Hills, MI. - DaimlerChrysler AG's Chrysler Group today announced a three-year Recovery and Transformation Plan that seeks a return to profitability by 2008 while also taking steps to change its business model for the long run. The plan will result in an employee reduction of 13,000 people from 2007 to 2009. Chrysler Group President and CEO Tom LaSorda outlined the plan at the DaimlerChrysler AG Annual Press Conference, held in Auburn Hills, Michigan. Dr. Dieter Zetsche, Chairman of the Board of Management of DaimlerChrysler: "The Chrysler Team worked out a comprehensive Recovery and Transformation Plan using all resources within DaimlerChrysler. In addition to that and in order to optimize and accelerate the presented plan we are looking into further strategic options with partners beyond the business cooperation partners mentioned. In this regard, we do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler." Overall, the Recovery and Transformation Plan is aimed at a return to profitability with a primary focus on costs. It is structured to over-achieve in order to offset potential unforeseen market headwinds, resulting in a target of €3.5 billion ($4.5 billion) of financial improvements - or a return on sales of 2.5 percent - by 2009. "There are two integrated parts to the plan," LaSorda said. "First, the Chrysler Group needs to solidify its position in the North American marketplace. In addition, the key to our long-term success will be our ability to transform the organization into a different company to achieve and sustain long-term profitability." The program will be supported by a €2.3 billion ($3 billion) investment in new engines, transmissions and axles, which will set the table for a product offensive of more than 20 all-new and 13 refreshed vehicles from 2007 to 2009. RECOVERY The Recovery plan is aimed at a return to profitability through a combination of revenue programs and by sharply focusing on costs. The key measures include: Revenue Management
Material and Fixed Costs
Capacity & Efficiency
Employee Reduction
LaSorda said these actions complement significant other restructuring measures taken since 2001. Previous to this announcement, the company closed, idled or sold 16 plants (five assembly, 11 component) and reduced its workforce by one-third. The financial impact of these Recovery measures will be seen beginning in 2007 with a restructuring charge of up to €1 billion ($1.3 billion), with the net cash impact for the year of about €800 million ($1 billion). The impact of the balance will be in the following two years. In 2007, the Chrysler Group expects to further reduce dealer inventories to align with market demand, which will result in a reduction in operating profit of approximately €230 million ($300 million). TRANSFORMATION Key parts of the Transformation will be a greater global footprint and a shift in the product mix to smaller, more fuel-efficient vehicles. Currently, North America represents some 90 percent of the Chrysler Group's business, and its product line-up has historically been heavily weighted toward minivans, trucks and sport utility vehicles. "Those two factors were advantages for Chrysler Group once upon a time," said LaSorda, "but the rules of the global marketplace have changed. High fuel prices and other dramatic shifts in the market have driven a shift in consumer preferences to smaller, more fuel-efficient vehicles. We must make some strategic adjustments to build off our historic strengths, but not rely on them so much so that we are put at a competitive disadvantage" he said. "That will require a redesigned business model, with three primary areas of strategic focus", LaSorda said. "First, the Chrysler Group will add a more robust customer and brand focus while continuing to stress product leadership. In addition, we must achieve better global balance and rely more heavily on leveraging partnerships to manage costs while finding growth opportunities." Specifically LaSorda pointed to the following initiatives: Customer and Brand Focus
Increase Global Presence
Partnerships
This document contains forward-looking statements
that reflect our current views about future events. The words "anticipate,"
"assume," "believe," "estimate," "expect," "intend," "may," "plan," "project",
"should" and similar expressions are used to identify forward looking statements.
These statements are subject to many risks and uncertainties, including an
economic downturn or slow economic growth, especially in Europe or North
America; changes in currency exchange rates and interest rates; the introduction
of competing products and possible lack of acceptance of our products or
services; competitive pressures which may limit our ability to reduce sales
incentives and raise prices; price increases in fuel, raw materials, and
precious metals; disruption of production or delivery of new vehicles due
to shortages of materials, labor strikes, or supplier insolvencies; the ability
of the Chrysler Group to reduce costs, especially in light of restructuring
activities underway at some of our major competitors in the NAFTA region,
and to respond to shifts in market demand towards smaller, more fuel-efficient
vehicles; effective implementation of cost-reduction and efficiency-optimization
programs, including our new management model; the business outlook of our
equity investee EADS, including the financial impact of delays in and potentially
lower volume of future aircraft deliveries; changes in laws, regulations
and government policies, particularly those relating to vehicle emissions,
fuel economy and safety, the resolution of pending governmental investigations
and the outcome of pending or threatened future legal proceedings; a decline
in resale prices of used vehicles; and other risks and uncertainties, some
of which we describe in the current Annual Report under the heading "Risk
Report". If any of these risks and uncertainties materialize, or if the
assumptions underlying any of our forward looking statements prove incorrect,
then our actual results may be materially different from those we express
or imply by such statements. We do not intend or assume any obligation to
update these forward looking statements. Any forward looking statement speaks
only as of the date on which it is made.
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