DaimlerChrysler Is On A Very Rough Road

ByJohn S. McClenahen There is simply no other way to put it: The merger of Chrysler Corp. and Daimler Benz AG will be road tested in 2001 on a very tough track. Financials for year 2000, released just today, show operating profit at DaimlerChrysler AG's Auburn Hills, Mich.-based Chrysler unit down 90% to US$500 million (500 million euros). And for the company as a whole, operating profit, excluding one-time adjustments that would have added $4.3 billion, was down 49% to $4.9 billion (5.2 billion euros). DaimlerChrysler today announced a six-element turnaround plan for the Chrysler unit, aimed at, among other things, returning Chrysler to profitability in the year 2002. This year, the company expects Chrysler to incur an operating loss of between $2 billion (2.2 billion euros) and $2.5 billion (2.6 billion euros). Four elements of the turnaround plan are focused on cutting costs: material management, plant management, fixed-cost management, and restructuring. The other two elements -- revenue management and product strategy -- are focused on growing revenues. Since last December, the company has announced four specific turnaround-directed actions at Chrysler: a 15% reduction in material costs, a workforce cut back of 26,000 people (20%) over three years, the idling of six plants through 2003, and a revenue-enhancing plan for dealers.