For
Dieter Zetsche (nicknamed Dr.Z), the charismatic CEO of DaimlerChrysler, who has
had an envious record of recuperating the troubled 1998 merger of the transcontinental
auto giants, Daimler-Benz AG of Germany, and Chrysler, America's third largest
automobile company, thanks to his massive restructuring initiatives in 2000, which
earned him the top job at the world's third largest car maker, these are surely
not happy days. His frustration manifested clearly when the worried CEO candidly
accepted recently that this time all his efforts to make another turnaround to
the ailing US-based Chrysler division went in vain. After two years of steady
gains and unquestionable synergies, which rekindled the hope that the eight-year-old
merger was finally on track, the American division suddenly began stagnating;
it reported a loss of $1.26 bn in 2006.
The
US division has been facing a hostile market environment with rising inventory,
mounting costs for employees and retirees, a stronger shift in demand towards
smaller vehicles, rising interest rates and continuing high fuel prices. The Chrysler
Group posted an operating profit of 51 mn in Q2, 2006, which is a 91% decline
from that of Q2, 2005. In July 2006, its sales dropped by 37.4% from that of its
previous year, whereas its August sales declined by 4.2%. s estimate that
the Chrysler Group may incur losses equivalent to $1.52 bn in Q3, 2006more than
double the amount anticipated. The burgeoning loss of the Chrysler division could,
in turn, reduce the group's operating profits by $1.3 bn this year.
However,
Chrysler is not alone in battling the rough fortune as the same slump is discernible
in the entire US car market. General Motors, the number one US automobile manufacturer,
announced that it is expecting the third-quarter production to drop by 8% from
the same period last year and the fourth-quarter production to decline by 12%.
Ford, another US auto giant, declared that it would temporarily freeze production
at 10 plants by the end of this year, pushing full-year production down by 9%
from last year. Ford announced that it would suspend the quarterly dividend for
its shareholders and cut 14,000 salaried workers. |
