Daimlerchrysler's Decision to Keep or Sell Chrysler

DaimlerChrysler's Decision to Keep or Sell Chrysler

Table of Contents

EXECUTIVE SUMMARY AND GENERAL INTRODUCTION 3

CORPORATE DESCRIPTION 4

Company and Industry Description 4

EXTERNAL AND INDUSTRY ANALYSIS 6

Macroenvironment 6

Industry Environment and Strategic Group 9

Summary of Opportunities and Threats 12

Evaluation of Strategic Fit with External Environment and Industry 12

INTERNAL STRATEGIC EVALUATION 13

Strategic Condition of the Firm 13

Organizational Culture 15

Summary of Strengths and Weaknesses 15

Current Strategies 17

Evaluation of strategic fit with internal organization 22

COMPETITIVE EVALUATION AND RECOMMENDATIONS 22

EXECUTIVE SUMMARY AND GENERAL INTRODUCTION

Industries are heavily reliant upon their strategies in order to gain market share. Which strategies a company chooses dictates their success or failure in the future. This is no exception to Chrysler Automotive Group which is a subsidiary of DaimlerChrysler. Recent trends have revealed issues within the company structure of the umbrella company and more specifically within Chrysler Group division. Recent discussion has brought up the advantages of possibly selling Chrysler off, spurring our interest in evaluating DaimlerChrysler's options.

Through analysis of the company and industry we have given a detailed evaluation of the flaws and problems of the American automotive industry, more specifically Chrysler. Looking at the industry and company structure we have been able to identify external threats and opportunities that have affected Chrysler's competitive edge.

Their internal organization has not allowed Chrysler to adequately adapt to changing market conditions. Due to these changes DaimlerChrysler has undergone significant restructuring in an attempt to stay competitive in the industry. Namely, they have focused their attention on developing a new cost management structure, while maintaining brand identity. This reorganization affects all of their strategies, including generic, business, functional, global and corporate.

What has allowed Chrysler to maintain a competitive edge in the industry is no longer what consumers demand. After careful analysis we recommend several strategic approaches to keep the company profitable in the future.

Most vital is that they be able to align themselves with current market trends through a continuation of their current restructuring, a change in product line, and using marketing to change consumers perception. Also employee benefit programs have proved problematic in cutting costs of production, we believe upper management of DaimlerChrysler needs to spend more time understanding the unique issues for each of their divisions. Lastly, Chrysler's current inventory forecasting system is indeed of dire alteration. Instead of manufacturing vehicles from simple forecasting they need to only manufacture based vehicles based on demand.

With these proposed solutions we believe that Chrysler will be able to regain market share and be profitable in the future. Chrysler's long standing tradition of innovation will aid in their survival.

CORPORATE DESCRIPTION

Company and Industry Description

Chrysler was founded in 1925 by Walter Percy Chrysler. The Chrysler Group exists within DaimlerChrysler Motors Company and its subsidiaries DaimlerChrysler Corporation, DaimlerChrysler Canada Inc., and DaimlerChrysler Mexico, Daimler-Benz, as well as other international automotive affiliates. These companies manufacture, assemble, and sell cars and trucks under the brand names Mercedes, Chrysler, Jeep, and Dodge. The Chrysler Group also provides its customers with parts and accessories marketed under the Mopar brand name.

Chrysler, along with the rest of the industry, suffered from the gas crisis of 1973. At that time the company changed its line up to more efficient, compact cars. Throughout its existence Chrysler has had many close encounters with bankruptcy. In an act of desperation the company, in 1979, had to petition 1 billion dollars in loans from the U.S. government in order to avoid bankruptcy. After this Chrysler began to regain its position in the market. With the introduction of the minivan, a market that Chrysler still has a strong stake in, the company was repaying their debts at a brisk pace. A joint venture with Mitsubishi helped Chrysler improve their small cars. Additionally, the acquisition of AMC added the Jeep line up to the company's offerings.

In the early 1990s, Chrysler made its first tentative steps back into Europe, setting up car production in Austria, and beginning right-hand drive manufacture of certain Jeep models. The continuing popularity of Jeep, bold new models for the domestic market such as the Dodge Ram pickup, Dodge Viper sports car, Plymouth Prowler hot rod, and new "cab forward" front-wheel drive sedans put the company in a strong position as the decade waned.

Although Chrysler appeared strong again they had to merge with Daimler-Benz in order to stay competitive in the industry. Initially, this merger was viewed as a "merger of equals," however it quickly became evident that Daimler-Benz was the stronger partner. The Plymouth brand was phased out in 2001, and plans for cost cutting by sharing of platforms and components began. The strongly-Mercedes-influenced Chrysler Crossfire was one of the first results of this program. A return to rear-wheel drive was announced, and in 2004, a new Chrysler 300 using this technology and a new Hemi V8 appeared and became a solid hit. Financial performance began to improve somewhat, with Chrysler now providing a significant share of DaimlerChrysler profits due to restructuring efforts at the Mercedes Car Group. The long-standing partnership with Mitsubishi was restructured as DaimlerChrysler divested its stake