Chrysler's Nardelli: Private Equity Can Rebuild Chrysler
March 19, 2008

NEW YORK — Chrysler President and CEO Robert Nardelli reassured his audience of automotive reporters, often skeptical of late about the automaker's future, that a private-equity firm such as Cerberus Capital Management can build a car company like Chrysler back to greatness.

Nardelli was the keynote speaker Wednesday at the International Motor Press Association's breakfast kicking off press days at the New York International Auto Show.

Private Equity: Lean, Agile, Decisive, Fast
"As the first major North American automaker to be privately operated in more than 50 years, we have an ideal structure for the work we have to do," Nardelli said. "Being private helps us be lean, agile, decisive and fast to act on market opportunities."

He pointed out that in the first 60 days of the "New Chrysler", the management team approved 260 line-item product enhancements — representing an investment of a half-billion dollars in better
interiors, better materials, less noise and vibration. Since August nearly 500 total changes have been approved. "And we’re not stopping there," he said.

"We're like a $60 billion start-up company," he said. "Being private makes us fast, agile and flexible. It's a quick yes or a quick no, never a slow maybe."

The New Chrysler
Nardelli acknowledged being a newcomer to the automotive industry, but said he has surrounded himself with people of "exceptional intellect — men and women who really know the DNA of the auto industry, and of course Chrysler. These are dedicated employees with an average tenure of more than 20 years … who are passionately committed to helping the company succeed."

Specifically, Nardelli noted he shares the Office of the Chairman with Tom LaSorda, "who knows everything there is to know about building cars as a result of his 30-plus years in the industry," and Jim Press, who earned a reputation at Toyota for 37 years as one of the best executives around when it comes to working with dealers.

"In other words," he said, "we have world-class experts on both the supply and demand sides of our company. Along with my 38 years in business — Tom, Jim and I bring more than 100 years of experience to the Office of the Chairman.

"Together, we have a strategy to return Chrysler to profitability as an independent company and we have all the tools we need to succeed — even in this challenging economy.

Nardelli said his management team is moving aggressively to re-establish Chrysler as a profitable operating company once again. As a private company, Chrysler is not required to reveal its financial performance, but it is believed the automaker lost around $1 billion in 2007.

The Game Plan
Nardelli told the audience Chrysler doesn't have or want a 100-page strategy. "Ours fits on one page, and has three basic principles: enhancing our core, extending our business and expanding our markets."

Enhancing the core means doing the fundamentals better, starting with listening to customers and dealers. "We have rededicated ourselves to our dealers, and to increasing their profitability and franchise value. Simply put, we won’t succeed in this marketplace unless they succeed."

As an example, he noted dealers a year ago were choking on inventory. "So we acted fast to reduce it by more than 200,000 units at the end of 2007, when compared to July of 2006. This saved our dealers more than $1 million per day in floor plan costs." Nardelli said Chrysler will reduce inventory throughout this year.

Chrysler has changed its dealer-incentive plan, putting dealers back in charge of the regional advertising associations because they know their local markets better than does the automaker. In terms of service, Chrysler is making it easier and faster for dealers to order parts and obtain approvals for warranty work.

Nardelli said Chrysler also will focus on growing its aftermarket service and parts business, of which its Mopar division now gets only 20 percent of what it potentially could.

Improving Customer Satisfaction, Dealer Profits
Nardelli admitted "our customer satisfaction isn’t where we’d like it to be. To that end, Chrysler has established the first-ever Chief Customer Officer in the automotive industry to help get our entire organization aligned on satisfying customers."

Options and option packages have been reduced in number and complexity. "We’re eliminating the low-take options and instead packaging the popular ones ... and adding tremendous value and excitement in our “New Day” vehicles. The result: between 2006 and 2007, we’ve reduced ordering complexity by 93 percent," he said.

Similarly, low-take vehicles such as the Chrysler Pacifica, Crossfire, PT Cruiser convertible and Dodge Magnum are being eliminated from the product portfolio.

Chrysler's newly unveiled Genesis project is a plan to further simplify the automaker's product portfolio and dealer network to enhance dealers' profitability. 

"Our brands will get stronger as they become more highly differentiated and build on their traditional strengths," Nardelli said. "Our product portfolio will get stronger as we reduce overlapping products and add products to fill new segments and bring our customers the new technologies and innovation they’re asking for." He pointed to new promising products, including the 2009 Dodge Journey, 2009 Dodge Ram pickup and the 2009 Dodge Challenger line, one model of which was being unveiled at the New York show later Wednesday.

launch our first hybrids: the Classic Chrysler Aspen and, the Bold Dodge Durango. Both of these vehicles deliver a 25 percent overall improvement in fuel economy without sacrificing performance or the towing capabilities our customers have come to expect. The Aspen and Durango incorporate the same two-mode technology as the vehicle voted Green Car of the Year. We will continue to extend our two-mode hybrid program to other vehicles, including the Dodge Ram truck, which we announced in January.

"We’re also committed to mild-hybrid technology, which provides some of the benefits with less of the cost/weight penalty of a full hybrid powertrain. Within the next few years, we will offer mild-hybrid technology on other Chrysler vehicles.

"We are also extending our business through innovative new technologies. You may have already heard about our first-to-market innovations like:

Going International
Expanding into overseas markets, a move Chrysler is late on compared with its Detroit rivals, is another key step for the automaker's recovery. Nardelli noted Chrysler sold a record 238,000 vehicles in international markets in 2007. "And we’re off to a good start in 2008. Our year-to-date international sales are up 10 percent through February, as we reported our 33rd consecutive month of sales growth outside of North America," he said.

He added, "By 2012, we plan to increase our international sales to more than 400,000 units." Chrysler will do that through regional business operations that are closer to the markets, and the dealers and customers in those markets. It will expand sales, service and marketing in Europe. It will establish Global Centers of Excellent to support long-term overseas growth. And Chrysler will work with partners to expand its presence in China, India, Mexico and Russia.

Chrysler will add new dealers abroad, Nardelli said. Between 2004 and 2007, the number of dealer outlets and independent distributors outside North America increased by 17 percent.

Future vehicles will be aimed at global markets. He noted Chrysler recently signed a deal with Nissan to supply the B-segment Versa sedan for distribution in South America beginning in 2009. He also mentioned Chrysler's deal to build small cars with China's Chery, but gave no time frame for when that will happen. Originally, Chery-built Chryslers were to have been on the market in North America this year.

"Our return is critical for Detroit, for the auto industry, and for America," Nardelli said. "The job of bringing Chrysler back to its historic place is the opportunity of a lifetime, and a mission we take most seriously."

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