One-on-One With Chrysler's Phil Murtaugh
October 25, 2007

TOKYO -- Phil Murtaugh, credited with building General Motors’ phenomenally successful business in   China -- from scratch, vowed he’d never do that again. But when Chrysler Vice Chairman Tom LaSorda came calling, he said yes; he’d do it again -– this time for Chrysler and not only in China but in India and other parts of Asia.

Making his public debut as a Chrysler executive at the Tokyo Motor Show, Murtaugh, who wears the official title of CEO, Chrysler Asian Operations, has his work cut out for him. As he described it to AutoObserver in an interview at the show, he's got to sign on partners, assign dealers, fill a sparse product line, build brands and ultimately sell more cars and make money.

And that's just in China. Then he's got to do the same or more in fast-growing India and other Asian markets, where, in some case, Chrysler's presence is even less than it is in China or totally nonexistent.

Murtaugh’s Move to Chrysler

News of Murtaugh joining Chrysler in September came within hours of the automaker’s stunning announcement that it had hired away Toyota’s top-ranking Jim Press to head its North American sales and marketing efforts.

For industry observers in the know, the hiring of Murtaugh was every bit as important, if not more so, than that of Press. Both hires signaled the seriousness of Chrysler’s new owner, Cerberus Capital Management, in acquiring the world’s best automotive talent to turn Chrysler around. The hiring of Murtaugh illustrated Cerberus’ intent to expand internationally and make Chrysler a truly global automaker.

Murtaugh had built GM’s China business and then left GM for a top spot at Shanghai Automotive Industry Corp. (SAIC), the Chinese joint venture partner of not only GM, but also Volkswagen and others.

With his takeover of Chrysler on day one of Cerberus’ ownership, new CEO Robert Nardelli asked his first lieutenant LaSorda, former Chrysler CEO, who was the best person they could hire for Asia. LaSorda named Murtaugh, adding Chrysler would never get him. But Murtaugh said yes.

Focusing on China

In just over a month on the job, Murtaugh has been focused specifically on Chrysler in China because it is the market he knows the best, Chrysler already has some presence there and it’s the world’s second largest car market -- predicted to be first in a matter of years.

Murtaugh said he’s assessing exactly what Chrysler is –- “I’m still working on that one.”

In regard to specific Chrysler brands, Murtaugh said Jeep, the first American brand to have a joint venture in China roughly 20 years ago, “was a lost opportunity,” with Jeeps no longer being built there. However, the brand has great potential in China because its image as the premier off-road vehicle manufacturer is as strong there as anywhere. Indeed, Chrysler recently hosted its Camp Jeep, an event of off-road frolic by Jeep owners and would-be owners, in China for the first time, and 3,000 people attended.

Dodge, acknowledged Murtaugh, is recognized, albeit by older people who remember Dodge cars being delivered into China after World War II, not in Dodge in its modern "Grab Life By the Horns" rendition.

The Chrysler brand, despite the 300C being made and sold in China, has no recognition at all, he admitted.

"Demerger" of DaimlerChrysler in China

Murtaugh said his first order of business is to deal with “several burning issues that require immediate attention related to the demerger” of Chrysler and Daimler.

Currently, Chrysler 300C models are produced in a joint venture in Beijing that also produces Mercedes-Benz cars. China Motor Corp. builds the Chrysler Town & Country in Taiwan for the Taiwanese market.

Clearly, more manufacturing in China and elsewhere is required as is a wider product portfolio.

Chrysler has glaring holes in its Chinese product line that Murtaugh is looking to fill. Chrysler has no small car, no lower midsize car and no minicar, all fast-growing segments. “Filling those holes will take several years,” he said. “But if you fill that hole in the China market, you can fill those holes in your product lines in other markets.”

Three possible strategies to solving the product dearth are to develop new models alone –- an option Chrysler has long steered away from as not profitable –- co-develop new models or buy them, as GM did with Korean-made Daewoo models that were re-branded as Buicks.

Murtaugh is shopping for partners, and he didn’t rule out his former employer, SAIC, as one. But, he said, as with any partnership, there would have to be something in it for SAIC, which already has its large and successful partnerships with GM and VW and is developing its own brand as well.

Chrysler-Chery Deal

Chrysler has an existing memorandum of understanding with China’s Chery that came about when Chrysler was part of DaimlerChrysler. But Murtaugh hesitated in discussing details about the joint venture. He said it was going forward, but suggested it will take time to reach fruition –- “even Toyota takes four years to develop a car,” he said -– and he hinted it has hit some slowdowns.

In recent weeks, Chrysler executives have said Chery would not be providing the underpinnings for some small cars, as originally anticipated.

As for what precisely Chery is doing with Chrysler, Murtaugh deferred to the public relations person present at the interview who reiterated the company’s public statement nearly verbatim that Chrysler and Chery were codeveloping a vehicle to be built in China for export to North America and Europe. Murtaugh refused to say if Chrysler and Chery were codeveloping a vehicle for sale in China.

In addition to building a manufacturing base and product portfolio, Chrysler has to develop a dealer network in China. Successful manufacturers in China have 150 to 400 dealers; Chrysler has a scant 80 -– “after 20 years in the market,” noted Murtaugh.

On to Other Markets

Next on Murtaugh’s agenda is India, the fastest-growing market in the world and one in which Chrysler has zero presence. “We have no place to go but up,” he said.

Murtaugh defends Chrysler’s recent and seemingly senseless foray into the declining Japan market. In  fact, Murtaugh, in his first public appearance as a Chrysler executive, took to the stage at the Tokyo Motor Show to debut a new Dodge lineup as well as Chrysler and Jeep models for the local market.

“It’s still a big market and an important market,” he said. “Imports will always be a small segment but it is a segment. And Japan is a trendsetter. Things you see at this show will be in other markets in a few years.”

Private Equity Advantage

As surprising as Murtaugh's move to Chrysler was, so, too, was his abrupt departure from GM in June 2006, after 32 years. It is widely believed Murtaugh, who built GM China under GM's corporate radar, was unhappy that GM folded GM China into GM's Asia-Pacific Operations, which moved to Shanghai from the arm's distance of Singapore.

Asked if he thought he'd thrive under private equity ownership that allows –- no, insists upon -– fast action and quick results, Murtaugh responded simply: “Yes.”

He admits Chrysler is late to the game but not too late to play. "Chrysler has tremendous opportunities, but it won't be easy."

It's a challenge Murtaugh seems eager to take on -- a second time around.

 

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