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

 

I remember when all of the "big Three' used to ask the 1970's question "How much rust will the customer accept?"  Union CBA negotiators would ask for the moon and management would give it to them; anything to avoid a stike.  Meanwhile the foreign companies stepped in with a better mousetrap, no unions, and state tax incentives--- wa la the beginning of the end.  The only thing I hate is seeing the CEO morons leave in their 50 million dollar golden parachute while the working stiff

crashes in the burning plane.

The big 3 are doomed. they make to many of the same car under a different brand , but part of the same company eg. Gmc/chevy , Canyon and colorado, they are pretty much identical trucks , maybe they should stick with one brand. One big killer for the 3 . Quality. while quality is still improving it still not the same as a Honda/toyota . etc and its very true that foreign cars cost a little more , but you'll find that most people i know would rather spend a little more $$$ and have a more reliable car. i've owned 3 domestic cars (gm) and the one i'm on now will be my last, i refuse to buy another domestic. if these unions are worried about there jobs (AS IS EVERYONE about their jobs) then maybe give me a better product, give me a car/truck that runs great thats economical (ford gm and chrysler do it everywhere expet here) And RELIABLE ,I'n europe i can get a ford (similar to a taurus a 1.6 turbo diesal with 225 hp and yet in North America the only way i get the horse power is through an 3.0 v6 , with no turbo, no super charger, nope i'm stuck with a big goofy engine that drinks gas like its going out of style. I'm very thankful that i'm a memeber of AAA i've had to use them many times .. The big three are in trouble and its there own fault for believeing that those Rice burner could never surpass them and now the big three and behind and may never get the lead again. last time I checked for what it meant when being the the best part of the world was : 1: inovation 2: quality , (made in America should mean something GREAT, not a joke) 3: don't be afraid to look at other manufactures and take notes. 4:Reliable , MAke the customer happy to drive your product.

There thats my Rant on this subject , And domestric cars/trrucks and foriegn cars/ truck are very similar in price. so don't BS that their so much more in cost.

all they need to do is reduce the price of their cars. The majority of working people can no longer justify the expense of most new cars.I for example will not replace my vehicles untill they die.THE BIGSHOTS NEED A GOOD ASS-KICKING!

It might be a good idea depending on what nardelli decides to cut back if u look at most of the cars chrysler makes you'll see that most of his gas-consuming cars arent selling.Now if you look at that in the biggest sense he's just simply takin out the trash. but i agree that nardelli does not need to be running chrysler

I am amazed at the media bias.  If a production foreign car had driven 1, 400 miles on a single tank of gas, every media outlet would be screeming about their technology.  Ford does it with a very large hybrid Fusion and the only place you can read about it is on blogs about the stock market.  I was at a Ford dealership and the salesman didn't even kow about it.  I think FORD is fast becoming the Iconic American car company, but no thanks to our media.  I am biased, because my Ford stock has done very well, but a rational person could see that FORD is becoming a powerful American symbol, the way Harley Davidson motoercycles did in the 1980s.  I like the new CEO and his positive can do attitude.  The fact that he can work with the Unions is challenging my perception of American managers.

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