MAJOR CHANGES AND CHALLENGES AT CHRYSLER LCC AND CHRYSLER EGYPT

Chrysler Chairman and CEO Bob Nardelli confirmed that the market situation has changed dramatically, which led to Chrysler LLC announcing today that they will eliminate an additional 12,000 jobs according to the three-year Recovery and Transformation Plan (RTP) which had already included the elimination of 13.000 jobs. In addition to that Chrysler LCC announced the elimination of four models through 2008, including Chrysler PT Cruiser (convertible), Chrysler Crossfire, Chrysler Pacifica and Dodge Magnum. Major personnel changes are also expected at Chrysler Egypt.

It seems that Chrysler is not coming to a rest. After major personnel changes worldwide (including DaimlerChrysler Egypt, Mercedes Egypt and Chrysler Egypt) Chrysler LCC announced today it will also eliminate 13.000 jobs (a total of 25.000 jobs) in addition to eliminating four models from its current model range. Chrysler announces that these new plans are for balancing supply and demand. This balance will require product and plant changes, plant adjustment due to industry-wide volume reduction and sales slow down and will result in a cancellation of four products from the Chrysler line-up while adding two all-new products and two hybrid models.

Chrysler LLC confirmed it would make volume-related reductions at several of its North American assembly and power-train plant

Shifts will be eliminated at five North American assembly plants which, combined with other volume-related manufacturing actions, will lead to a reduction of 8,500-10,000 additional hourly jobs through 2008.

Additional actions include reductions of salaried employment by 1,000 and supplemental (contract) employment by 37 percent. The Company also plans to eliminate hourly and salaried overtime and reduce purchased services due to reduction in volume.

The volume-related actions are in addition to 13,000 jobs eliminated by the three-year Recovery and Transformation Plan (RTP) announced in February. The objectives of the RTP remain the same.

"The market situation has changed dramatically in the eight months since Chrysler established the Recovery and Transformation Plan as its blueprint," said Bob Nardelli, Chairman and Chief Executive Officer. "Annual industry volume (U.S. market) then was running at a 17.2 million clip. Now, we expect a seasonally adjusted annual volume for 2007 to be significantly lower and carry over into 2008."

"We have to move now to adjust the way our company looks and acts to reflect a smaller market," added Tom LaSorda, Vice Chairman and President. "That means a cost base that is right-sized and an appropriate level of plant utilization."

LaSorda added that third-shift operations at assembly plants usually reflect a high demand after a product is launched. Three of the five plants affected by this action are the result of elimination of third shifts" in Belvidere, Illinois; Toledo, Ohio, and Brampton, Ontario.

In contract negotiations just concluded with the United Auto Workers, Chrysler committed to spending more than $15 billion on products, plants and engineering during the life of the contract through 2011.

The company announced that it will eliminate four models through 2008, including Dodge Magnum, the convertible version (only) of Chrysler PT Cruiser, Chrysler Pacifica and Chrysler Crossfire. In the same time frame, Chrysler will add two all-new products to its portfolio: the Dodge Journey and Dodge Challenger, along with two new hybrid models, the Chrysler Aspen and Dodge Durango.

"These actions reflect our new customer-driven philosophy and allow us to focus our resources on new, more profitable and appealing products," added Jim Press, Vice Chairman and President. "Further, these product actions are all in response to dealer requests."

Manufacturing Actions

Chrysler will eliminate shifts at five assembly plants, and take further volume-related actions at several other facilities. It will:

Drop third-shift operations at Belvidere (Ill.) Assembly Plant in the first quarter 2008. Belvidere builds the Dodge Caliber, Jeep Patriot and Jeep Compass.

Drop second-shift operations at its Jefferson North (Detroit, Mich.) Assembly Plant in the first quarter 2008. It's expected that the plant will return to two shifts in first quarter 2010 with the introduction of the next generation of sport-utility vehicles. The addition of a third shift will remain an option, depending on market demand. Jefferson North builds the Jeep® Grand Cherokee and Jeep Commander.

Drop third-shift operations at the Toledo (Ohio) North Assembly Plant in the first quarter 2008. Toledo North builds the Jeep Liberty and Dodge Nitro.

Drop third-shift operations at Brampton (Ontario) Assembly Plant in first quarter 2008. Brampton will build the Chrysler 300, Dodge Charger and Dodge Challenger. The Dodge Magnum will be discontinued.

Drop second shift operations at Sterling Heights (Mich.) Assembly Plant in first quarter 2008. Sterling Heights builds the Dodge Avenger and Chrysler Sebring sedans and Chrysler Sebring Convertible.

In addition, Mack Avenue (Detroit) Engine Plant II will return to a traditional two-shift / two-crew operation in the first quarter 2008 after operating on a three-crew, two-shift, 120-hour-per-week (3/2/120) schedule. Mack II builds the 3.7-liter V-6 engine.

"I'm confident that we have the right team in place and a business plan that doesn't need to be re-written," concluded Nardelli. "Like all good plans, the RTP has built-in flexibility that allows us to stay one step ahead of market change. And that is the way to long-term sustained profitability."

So, what about the Chrysler situation in Egypt?

Well, beside the latest changes in the Chrysler management board and the announcement of assembling the new Army Wrangler at the Egyptian AAV plant there had been no positive news in the Egyptian media at all. Chrysler's best-seller in Egypt, the locally-assembled Jeep Cherokee 3.7, lost shockingly a recent comparison test against the local assembled Nissan X-Trail (224 points) and BMW X3 (195 points), in which the Cherokee only reached some disappointing 159 points.
Beside that comparison test a lot of Egyptian customers lost any confidence in the Jeep / Chrysler brand recently after countless Cherokee accidents with high numbers of seriously injured people and fatalities occurred. A lot of these accidents could have been avoided if Chrysler Egypt ( DaimlerChrysler Egypt at that time) had recalled those Cherokee models, which were affected by this world-wide recall announced by the mother-company in the USA due to technical failure of the suspension.

So, is there any hope for the Jeep / Chrysler brand in Egypt still?

Well, we will have to wait a few weeks to see how the new upper management at Chrysler Egypt will react to those not-so-promising circumstances, especially as there had been hardly any improvement for the past one year since John Stech became DaimlerChrysler Egypt CEO.

Besides not being able to put through his own management style, he relied too much on his PR and marketing department as well as his PR agency Rada Research, which at the end resulted in some unlucky decisions.
There were hardly any professional test-drives or features about Chrysler and Jeep models in the Egyptian media, showing the capabilities and advantages of the well-established 4x4 drive-train, for which the Jeep brand is famous for.
Instead of that the PR agency Rada Research wasted a lot of precious time and potential by organizing silly events for the journalist were they played film directors instead of car testers.
And instead of attracting non-Jeep owners to the over-priced Jeep Camp and Jeep Club events, they concentrated on the already existing Jeep owners only. Not to mention that we never heard about other test-drive events or promotion events for any other Jeep or Chrysler models here in Egypt.
But John Stech, who was recently criticized in several articles and feature in the Egyptian media, is history now as he was transferred from Chrysler Egypt to Chrysler Russia after less than one year. We wish him more luck in Russia than he had an Egypt, and we hope that the new Chrysler CEO will be much more successful then his predecessor.

So, how will the new CEO at Chrysler Egypt be able to re-establish the Chrysler / Jeep brand in Egypt?
First of all he needs to get himself some professional and competent advisors and PR managers around him.

Those neutral and competent advisors should analyze the needs and demands of the Egyptian market correctly. The new PR and Marketing managers should transfer a new, fresh, credible and reliable image to both the private consumers and the corporate clients of the Jeep and Chrysler models and they should also know that are more than just the Cherokee model and more then just the 3.7 petrol engine in the Chrysler and Jeep line-up.

Last but not least, Chrysler Egypt should also change all their current PR and media agencies by either exchanging them with fresh-minded, innovative and professional agencies or do all the marketing and PR in-house instead of out-sourcing it.

I am sure that if the new CEO will do these 'minor' changes in the next coming weeks, the Jeep and Chrysler brand will be reborn in Egypt again.
Like Nardelli said, Chrysler needs to have the right team in place and a business plan that doesn't need to be re-written. This goes for both Chrysler LCC as well as Chrysler Egypt.