Chrysler's New Boss: "The Clear Task Is to Stop the Bleeding"

CEO Dieter Zetsche describes the challenges he's confronting as he tries to turn the troubled division around

Dieter Zetsche is an exec on the griddle. The 47-year-old DaimlerChrysler veteran was named in November to head ailing Chrysler, which Daimler took over in 1998. Chrysler is now expected to lose $1.3 billion in 2000's fourth quarter -- on top of the $512 million it lost in the third. Zetsche is now developing a detailed turnaround plan that's expected to be announced next month. Meanwhile, the company has idled several plants for the remainder of January.

On Jan. 7, at the North American International Auto Show in Detroit, Zetsche talked about Chrysler's future plans with Business Week Frankfurt-based Correspondent Christine Tierney, Detroit Correspondent Jeff Green, and Business Week Online Contributing Editor Thane Peterson. Here are edited excerpts from their conversation:

Q: You've already announced some major moves. Is there a danger that when you announce the turnaround plan it will be anticlimactic?


Creating great theater, trying to create a great fireworks at the end -- that's not what this is about. But it might be that our plan will have more credibility if some things are already more than promises and are already out there as facts. The clear task is to stop the bleeding and get going.

Q: In terms of getting a grip on what's wrong at Chrysler, what has been the most difficult part of the restructuring to quantify?


It's the fact that everything was set up based on growth and price levels of two, three, four years ago, when the growth rate was 3% annually. Now the outside reality is very different, and we've got a major mismatch.

But you should not translate that into a forecast that, for instance, there will be major plant closures at Chrysler. If capacity at a plant starts at 20% overtime, which we had, it can go from normal three-shift production to two shifts. We can have down weeks at a plant. There's a wide variety [of possible actions] before you have to talk about the necessity or possibility of shutting down a plant.

Q: Might you also transfer some production from one plant to another?


You would be surprised at what huge investments are [needed for] such moves. We are very inflexible in our manufacturing.

Q: What's the most surprising thing you've found going into this?


Certainly there have been very positive surprises, like the tremendous position we have with the PT Cruiser. There's very, very strong demand for this vehicle that we can build on. And finding out that we have our small sport-utility product ready for launch. It's in the middle of a hot segment that has virtually the only growth potential for 2001. Those are very positive surprises.

On the other side, there are areas where we have room for improvement. It's my impression that the normal toolbox of marketing -- the basic Ps: pricing, promotion, placement -- has been reduced to one: Pricing. That's one thing I will deal with in our company.

Q: Given all the problems, how much smaller a company is Chrysler likely to end up being?


We expect something like 16 million [unit] sales in the industry this year. The sales rate in December was only 15.5 million annually, so this doesn't seem like an overly pessimistic annual forecast. We intend to build on the market share we had last year and go from there. And then, as a one-time effect, we should try to reduce dealership inventories. What that means in specific actions is what you want to know, and I can't tell you yet.

Q: Is there a concern about simply adjusting production to meet reduced demand?


I'm more than aware that you never can save a company on the cost side. Clearly, we must spend at least as much time dealing with our product plan, our portfolio, and revenue opportunities, as we are with the traditional restructuring/turnaround/cost-reduction piece. In the future, we know we can only win in the marketplace with great products, with the right segments addressed, and not by cutting another 2% from costs.

Q: Some have suggested that this company's future rests on its vans and trucks. Do you agree?


Almost the entire American auto industry has basically said, "Let's make trucks. That's where the profits are. As far as making cars, you can't make money there anyway." Surprisingly enough, import competition is now showing up in trucks. You have it in sport-utility vehicles, and you'll have more of it in pickup trucks, as well. What should we do now? Make bicycles? This is, in my opinion, not a winning strategy. If you want to be a successful company, you have to be successful in cars as well.

Edited by Nancy Ferris

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