Chrysler in the Junkyard?

Chrysler: DrivingInnovation on the Road to Recovery

By Ted Santos

Chrysler has a grand opportunity unlike any thing theyhave seen in the past.  Even withthe price of oil near $100 a barrel, Chrysler is optimally positioned to seizea large, available part of an untapped market. To capture it, they will need toexecute a four-point plan committed to developing a line of luxury automobilesthat caters to the top 10% of consumers.  

To penetrate that market, Chrysler will need not onlya new business model to be successful in an ailing US industry it will requirea new mindset for all involved.

Historically the strategy to turnaround automobilemanufacturers has been to close plants and lay-off employees.  Has that strategy produced an honestturnaround? NO. So why continue to execute a strategy that has not created athriving enterprise? Let¹s take an opportunity to view Chrysler from anotherperspective.

Because of Chrysler’s recent relationship withDaimler, they can exploit the fact that they have learned much about developingluxury automobiles. I see a four-point strategy that can earn Chrysler thereputation of “world-class designer of quality automobiles that are knownfor innovation, style and exclusivity”. Thisturnaround strategy involves: Re-branding Chrysler as a producer of automobilesfor affluent consumers; Capitalizing on aftermarket sales; Partnering withApple Computer on design; and Orchestrating a transformation in corporateculture. Can this strategy be justified? 

In the US, the explosive growth in the ranks ofmillionaires has swelled demand for luxury and high performing automobiles,yachts, and personal airplanes. And the population in this segment continues togrow. More importantly, they continue to spend money. On November 15th,2007, Sotheby’s auction generated $316 million exceeding the $286 millionrecord set in 1990.[1] (High salesvolume of expensive art can be an indicator as to whether or not the affluentare spending money.) Yet, GM, Ford and Chrysler have allowed Europe to take100% of the affluent auto market in the US. Why haven’t US car manufacturerspursued this target market?

When you lift the hood on this situation, you see thisuntapped market resembles the opportunity the minivan created for Chrysler in1984. The concern then was the cannibalization of the station wagon market:Perhaps cannibalization is the reason Daimler has kept Chrysler away fromaffluent consumers.   

On its own and following its relationship withDaimler, Chrysler is positioned to leverage its current affiliation withluxury. If Chrysler shows the same initiative they displayed when introducingthe minivan, there is little doubt they can secure a leadership position in theupscale market.  

To illustrate the opportunity to which I am referring,it may be best to view Chrysler from the perspective they have already executedthe four-point strategy I introduced earlier. I ask that you take a journeywith me to the future where Chrysler has unquestionably earned a reputation asa world-class maker of high-end luxury automobiles and high performance sportscars.

Imagine it is the year 2020, thirteen years afterCerberus bought Chrysler and took it private.

To start, Cerberus focused on Re-Branding Chryslerwhile Dodge continued its operation as a separate brand. At the time of theacquisition, Chrysler’s nascent brand was fairly neutral. However, Cerberus sawan opportunity to parlay what they identified as America’s only meaningfulcontribution to the high performance automobile market, Chrysler¹s own DodgeViper. The Viper had cemented Chrysler¹s reputation as a leader in performanceengineering. To penetrate the affluent market, Chrysler leveraged the Viper¹sposition amongst other sports cars, and the company¹s relationship with theluxury Daimler brand. From there they built two more high-performance sportscars. These retained the Viper¹s performance, except with unprecedented luxuryfeatures and a style that exuded exclusivity. To continue their success, theydesigned several new lines of stylish and innovative luxury cars.

In addition, management redesigned Chryslerdealerships to cater to the affluent. While these first steps were successful,it was not enough.

Continuing with the strategy, management exploredaftermarket sales to augment the line¹s exclusivity. At the time of Cerberus¹purchase, car buyers were spending in excess of $30 billion annually inaftermarket upgrades. Management saw this as money left on the table. So theyincorporated aftermarket services into the assembly line. They redesignedMopar, the renowned arm of Chrysler dedicated to parts and services. During themanufacturing process, Mopar now provides all the customizations theafter-market allows­. 

The third strategy helped Chrysler to further enhancetheir growing reputation for luxury and innovation. Chrysler partnered withApple to design driver and passenger interfaces. Apple developed a stunninglyoriginal dashboard and entertainment system with a range of entirely newcapabilities in an original but intuitive format. This exclusive collaborationhelped make it nearly impossible for other auto manufactures to compete withChrysler.

Finally, to ensure the turnaround was sustainable,Chrysler brought in a change management company to create a culture capable ofexecuting high-level change initiatives. Staff and management adopted a mindsetappropriate for an affluent market while staying committed to profitability.The changes were so pervasive that Chrysler¹s suppliers had to go through asimilar transformation. 

As for management’s transformation, they created a newplatform from which to lead. They shifted their focus from fixing problems tointentionally creating large-scale problems for staff and management to solve.Far from disrupting employee morale, it was the catalyst to drive innovationand inspire team commitment.

Chrysler¹s bold leadership has ushered in a new senseof pride for US auto manufacturers in 2020. GM and Ford have followed suit byproducing their own luxury and high performance cars­. However, Chryslercontinues to be the market-leader and premier maker of automobiles for theaffluent. Not only are they profitable, they are known throughout the world forexclusivity, innovation, quality, and performance. And in the year 2020 they have20/20 vision for the future.

[1] http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20071115/FREE/71...