A lesson for GM and Ford: Chrysler cuts its throat - Top Stocks
 
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A lesson for GM and Ford: Chrysler cuts its throat

Posted Feb 11 2008, 04:44 PM by Douglas McIntyre
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Like some many unsuccessful companies before it, Chrysler wants to cut its way to profitability. The privately held company, run by Home Depot exile Robert Nardelli, will probably chop its number of brands 50% and dealerships by a third.

According to The Wall Street Journal, "over the next three years or so, the now closely held auto maker plans to drop as many as half of the approximately 30 vehicles it now produces, a move likely to cut sales at least for a while." A while may be forever.

It is not believable to think that Toyota, Honda, and, to a lesser extent, GM will not market vehicles directly into the niches which Chrysler gives up. Toyota especially has the dealer network and broad brand line-up to do this.

Chrysler, which has about 12% of the domestic market will try to do with much less than that, perhaps 8%. But, it cannot source its production overseas to support lower revenue like Honda, Nissan, and BWM do.

A car company willing to purposefully cut its market share in an environment where it has at least a dozen legitimate competitors is a company risking its sales. It will not find a sustainable bottom.

With its current trouble, Ford may be looking at similar plans.

Comments

 

Typical! What morons to think they can back into a bottom line by killing half their product line!  I've never been fond of the stuff although I've run CPDJ stores for over 10 years, it still makes no sense to kill product without plans to unveil new stuff at the same time to save their Bacon!!

It actually makes sense to me if they cut the right vehicles.  Half of Chryslers product line are no longer viable.  Look at all the enormous gas guzzling trucks and SUVs that they sell.  Those will all die whether Chrysler produces them or not.  Those niches are not being vacated so that competitors can fill them.  The niches are gone, shrivelled into nothingness.  Look at all of the Chrysler product line that gets 40 mpg or better.  Oh wait, they don't sell anythign in that range.  That is the new rapidly expanding niche that Chrysler or any other success-aspiring car company will have to fill.  Since it will take time to devellop the new cars to fill this niche, Chrysler has decided to cut their losses over the next few years, and not continue to produce failing vehicles that won't sell.  They will ramp up production again once they have viable cars to sell.  Me personally, if I were in the market for a new car, I would buy used.  In 5 years, any car you bought now that gets less than 30-35 mpg on the freeway will get sent to the junkyard because its resale value will be nothing.  You won't be a ble to find anyone to drive it away from you.

Typical, indeed... Nardelli driving another company into the ground, eh?  (pardon the pun)  Is anyone surprised that the same CEO's make the same mistakes over and over again?  He couldn't run Home Depot, so he gets to run Chrysler?  HD is still recovering from his disasterous tenure!  Time for new blood in these corps., not just the same old idiots with half-baked ideas.

I agree with the comment, "about any vehicle with low mileage standards going to the junk yard".  I am an antique farm equipment buff.  I have an old 89 Ford 1 ton diesel.  It runs great, good looking for its age,  with a flatbed and racks, it can pull a real load and guess what...couldn't get just more than scrap price for it when trying to sell.  I have my name on the list for a Toyota Prius, the first foreign brand vehicle I ever considered.  No "domestic" automaker offers anything close to the economy standard this car has.  Ford, GM, Chrysler, all will be minor names in the niche of future automobile offerings.  These company's have got it wrong so many times before, now they have just run out of chance's to survive.  The pathetic product offerings with dismal economy standards will finish them off.  By the way, if anyone thinks 30 mpg is a good standard, well wait for $6 or $7 dollar fuel in the next 12 to 18 months.  Our own federal government tax policy even lacks common sense when trying to encourage conservation.  More financial pain is around the corner, any company such as the former Big 3 that can't provide good reliable economically operable vehicles will become manufacturers of collector memorabilia.  The gas guzzlers on lots now will set begging for a buyer and could conceavably be candidates for parts cars and trucks.  Supply and demand rules....gas guzzlers=no sales=no manufacturing=no jobs.    

Sounds to me like more of the same.  The CEO is trying to cut costs by eliminating half his company to produce a bonus, but whats he care, he isnt there for the long haul anyway.

Detroit just dosen't get it!

They can't look past tomorrow. There are a lot of people, muni's, fleets, farmers, coachs, etc. etc. etc. that are still gonna need, vans, pickup trucks, fast cars, SUV's. If Detroit cuts most of them out, then Toyota, Honda, etc. will be moving most of the things & people around. CNG(compressed natural gas) is the easiest change detroit could make to their excisting venue, and people would start buying them in droves, just ask Honda.

Thanks,

TP White

Not sure about Chrysler's future - unlike GM, Ford, Nissan, and Toyota - it doesn't have a true global footprint to cushion some of the terrible losses for N. America.   It does have some products which are more fuel efficient, but they are not the best platforms to work from and alot of other companies have great products in the B/C segment.   Most of it's profits have come from Jeep, Dodge Full Size Trucks, and Chrysler Minivans.   Where will it get the money to retool it's products to smaller size and unibody and re-launch innovative styling?   Cutting the right product might help, but it needs to find a global partner and soon!!!  

Well, now I know that there are no true Americans left... They would rather buy a foreign rice burner than drive anything with and American logo on it... For all you people thinking of buying a Hybrid, think again.  They do NOT deliver the kind of milage advertized... My neighbor has a Prius and is very disappointed with it... They are doing good to match the milage withthe cars they are in competition with... Around town, they do a little better but when you want to go on a trip, their enemic gas engine can't cut it... Read the reports from the consumers on the internet!... I'll keep my 99 Ford ZX2  that gets 40 mpg on the hwy and 30 in town.

Those who can drive $80K SUV's or $60K pick-ups will not stop buying such vehicles even if gas is $10.00/gallon. The price of gas is not the key element in the auto-makers downfall, but rather mismanagement, the overall political unstability and failing global economy. If you live in a $10M home-a $2,000 a month heat bill will not cause you to panic or trade-down to a smaller, more energy effecient home. Perhaps auto-makers should stop blaming their failures on the price of gas and start looking at the price of their products. The result of this tactic will be to further raise the sticker price on such vehicles to those who require them for their work and business.

I think the big three have made great strides in quality. The problem with them is the are more re-active to the market rather than pro-active. The Prius hasn't been the greatest seller in the past for Toyota, but it is there. Toyota thought ahead and they are in a good position now. If the price of oil goes the other way so will the Prius. I would hate to see any one of the Big Three fail because it would symbolize the fall of the great empire in the worlds view. As far as driving a foreign vehicle....I'm not sure there is any such thing. Most of them are produced right here in the USA and the Big Three have so many foreign parts, it's hard to distinguish the difference. Again, the difference is in the forward thinking of the foreign auto makers. They have cut out the high price of labor for manufacturing thier product while the Big Three are stuck with the UAW pushing them around. And it is really hard to bad mouth the foreign folks. At least they have created jobs in the USA lately. Can the Big Three say that? They (Big Three) are outsourcing to foreign factories so they can compete. This problem has been brewing for many years. Unfortunately, we are paying for the mistakes made by past generations.

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