USA Today reported that Chrysler will lose about $1.6 billion this year, worse than the $1.4 billion operating loss it posted for 2006, a source says CEO Bob Nardelli told a group of designers and engineers recently, and the automaker still plans to break even in 2008.
Apparently the Chrysler CEO told employees during a webcast last week that although he believes the automaker has cut as many workers as it needs to, Chrysler will continue slashing jobs if it cannot meet its goals. The company said previously it would cut 25,000 jobs, including 1,000 buyouts. Chrysler announced 12,000 of those in November, just after employees represented by the UAW ratified a new four-year contract.
It is worth noting how difficult it is for businesses these days that even such a well-known brand such as Chrysler is reporting such major losses. The way they are handling it though is quite respectable. The open communication lines and transparency with regards to what is happening and what is going to happen is far better than just laying off employees with a slight of the hand.
A rule of thumb in business strategy is that if you're not meeting top line, then you'll have to cut the bottom line. This is what they're doing by letting go of so many people. It's sad how thousands will lose their jobs, but the entire ship will sink (and everyone in it) if it is not done.
I have experienced having to let go of so many people because the business can no longer handle the cost. And it's quite painful. Nevertheless nothing can be done if management decides to do so.
Chrysler's other strategy to picking up business is a review of their existing products. Weeding out the non-profitable ones and launching more competitive brands. Chrysler already has said it will eliminate four products through 2008: Dodge Magnum wagon, convertible version of Chrysler PT Cruiser, Chrysler Pacifica crossover SUV and Chrysler Crossfire sports car. Chrysler plans to add two new products: Dodge Journey crossover SUV and Dodge Challenger sports car, along with gasoline-electric hybrid versions of its Chrysler Aspen and Dodge Durango SUVs.
There is significant cost to swallow as this is done, but if they've done their homework and market research, the newer lines should sell better compared to the products they are letting go.
(image from diseno-art.com)
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