CASE SUMMARY

Chrysler Motors LLC (CHRYSLER) was introduced in 1920s. In 1924, a new vehicle named
Chrysler Six was launched in U.S. automobile market. The Chrysler Airflow and Firepower was
introduced in 1934 and 1951 respectively. Chrysler expanded into Europe and formed Chrysler
Europe by acquiring UK-based Rooted Group, Simca, and Barreiros in 1960s. The new
challenges faced by the company such as environmental population, rising gas prices and
competition from foreign car manufacturers including Honda Motor Company (Honda) and
Toyota Motor Corporation (Toyota). Performance of Japanese cars was superior and their
price were competitive compared to America cars. Chryslers sales declined in 1970s. The
company had a debt around US$4.75 million and deep financial trouble in the late 1970s.
The company emphasized on manufacturing passenger cars and designing fuelefficient K Cars. Between 1984 and 1988, Chrysler acquired Gulfstream Aerospace Corporation,
Lamborghini, Finance America, America Motors Corporation, etc. The company increased its
shareholdings in Mitsubishi Motors Corporation and entered into a strategic alliances with
Samsung. The financial condition of Chrysler Corporation started deteriorating in late 1980s.
Chrysler Corporation and Daimler-Benz AG (Daimler) agrees to combine and named
the company as DaimlerChrysler in 1998. The merger resulted in the worlds third largest
automobile company and the fifth largest in terms of number of units produced. The market
share of the Chrysler Group declined from 16.2% to 13.5%, started faced the cultures
differences between two companies. The company sell 80.1% stake of Chrysler to Cerberus
for US$7.4 billion. Daimler sold off the majority stake to Cerberus in 2007. Chrysler became
Chrysler Motors LLC (Chrysler) and DaimlerChrysler AG became Daimler AG.
Chrysler reported a net loss of US$1.6 billion in 2007 and sales continued to decline in
2008. The U.S. Treasury and the U.S. Auto Task Force rejected Chryslers stand-alone Viability
plan in 2009. Chrysler and its 24 wholly-owned U.S. subsidiaries filed for bankruptcy in 2009.
Cerberus and Daimler were to give up their respective equity stakes of 80.1% and 19.9% in
Chrysler. The company bankruptcy was approved by the Manhattan Bankruptcy Court. In 2009,
the company reached an agreement to establish a global strategic alliance with Fiat. Chrysler
decided to sell all its assets to Fiat except 8 factories. According to analysts, the reasons for
Chryslers faced financial problems were its poor business strategy, lack of innovation, global
financial crisis and some challenges including the rising competition in car market, Chrysler
being jointly owned by different entities, cultural issues, wondered whether Marchionne
successfully run the business, viability of company, etc.

SWOT ANALYSIS
Key Factors
Strengths

Weaknesses

Access to fuel efficient engine, powertrain and other technology from Fiat

Large portfolio of vehicle types from light trucks, performance cars and fleet
vehicles

Access to European market from Fiat network

Various strong brands in its portfolio such as Jeep, Fargo and Dodge

Great consumer loyalty in the companys brand

Unique products differentiate their products with competitors

Poor business strategy by focusing on the wrong vehicle trends

Lack of innovation (outdated technology)

Too dependent of US market (more than 73% of sales)

Too many manufacturing facilities/ location causing inefficiency/ costly

Weak cash flow/ financing options (too much debt (USD 6.8 Billion))

Focusing too much on big cars/ light trucks for profit

Very weak international sales (less than 30% of sales)

Opportunities

Threats

Increasing demand/ car sales overseas (due to economic growth)

Changing in needs and wants of consumers towards more fuel efficiency cars

New technology could assist in meeting consumers needs and wants with new and
improved products and services

Increase in environmental awareness

Continuous increase of price in oil and gas increasing demand for fuel efficient cars

Emergence of cheap media such as online as social media for marketing platform

Strong competitions from foreign car manufacturers in the US market

Intense competition in the U.S automotive industry

Weak US economy due to recession causing declining vehicle sales

Bad economy/ financial condition causing harder lending from financial institutions

Many established small car/ fuel efficient car manufacturer in the market

Financial crisis making it harder for consumer to make loan

High oil price may decrease demand for cars

EFE MATRIX
Key External Factors

Weight

Rating

Weighted
Score

0.09

0.36

0.08

0.32

0.07

0.21

0.09

0.36

0.09

0.36

0.08

0.24

0.08

0.32

0.08

0.32

0.05

0.15

0.07

0.28

0.07

0.28

0.07

0.14

0.08

0.16

Opportunities
1. Increasing demand/ car sales overseas (due to
economic growth)
2. Changing in needs and wants of consumers
towards more fuel efficiency cars
3. New technology could assist in meeting
consumers needs and wants with new and
improved products and services
4. Increase in environmental awareness
5. Continuous increase of price in oil and gas
increasing demand for fuel efficient cars
6. Emergence of cheap media such as online as
social media for marketing platform
Threats
1. Strong competitions from foreign car
manufacturers in the US market
2. Intense competition in the U.S automotive
industry
3. Weak US economy due to recession causing
declining vehicle sales
4. Bad economy/ financial condition causing harder
lending from financial institutions
5. Many established small car/ fuel efficient car
manufacturer in the market
6. Financial crisis making it harder for consumer to
make loan
7. High oil price may decrease demand for cars
Total

1.00

3.50

Chryslers weighted score for the external factor evaluation is 3.50 which indicates that the
business has high ability to respond to external factors.

IFE MATRIX
Key Internal Factors

Weight

Rating

Weighted
Score

1. Access to fuel efficient engine, powertrain and

other technology from Fiat

0.09

2. Large portfolio of vehicle types from light trucks,

performance cars and fleet vehicles

0.08

0.32

3. Access to European market from Fiat network

0.08

0.24

4. Various strong brands in its portfolio such as

Jeep, Fargo and Dodge

0.10

0.40

5. Great consumer loyalty in the companys brand

0.10

0.10

0.05

0.06

0.06

0.08

0.08

0.08

0.16

0.05

0.10

0.05

0.05

0.10

0.20

0.08

0.16

Strengths

6. Unique products differentiate their products with

competitors

0.05

0.36

Weaknesses
1. Poor business strategy by focusing on the wrong
vehicle trends
2. Lack of innovation (outdated technology)
3. Too dependent of US market (more than 73% of
sales)
4. Too many manufacturing facilities/ location
causing inefficiency/ costly
5. Weak cash flow/ financing options (too much
debt (USD 6.8 Billion))
6. Focusing too much on big cars/ light trucks for
profit
7. Very weak international sales (less than 30% of
sales)
Total

1.00

2.28

Chryslers weighted score for the internal factors evaluation is 2.28 which indicates that
Chryslers internal business is weak.

CPM MATRIX
Chrysler

General
Motors

Ford

Toyota

Key
Success
factors

Weight

Rating

Weighted
score

Rating

Weighted
score

Rating

Weighted
score

Rating

Weighted
score

U.S Market
share
Fuel efficient
Growth
Customer
loyalty
Global
expansion
Financial
position
Management
experience
Product
quality
Operation
costs

0.13

0.13

0.26

0.39

0.39

0.09
0.07
0.13

1
1
3

0.09
0.07
0.39

2
1
3

0.18
0.07
0.39

3
2
3

0.27
0.14
0.39

4
3
2

0.36
0.21
0.26

0.08

0.08

0.08

0.16

0.32

0.12

0.12

0.12

0.24

0.36

0.13

0.26

0.26

0.39

0.39

0.10

0.20

0.30

0.40

0.30

0.15

0.30

0.30

0.45

0.45

Total

1.00

1.64

1.96

2.83

3.04

Chrysler has a total weighted score of 1.64 while General Motors has 1.96, Ford has 2.83 and
Toyota has 3.04. Toyota has the highest weighted score among the four automotive
manufacturers which shows that Toyota has a strong position in the automotive industry and
also a strong competitor for Chrysler.

PROBLEMS
1.

Chryslers present financial problem were its poor business strategy, lack of innovation
and the global crisis.

2.

Chrysler failed to bring out new vehicles that met changing customer needs ahead of
the competition.

3.

Chryslers sluggishness in launching innovative models when its Japanese competitors

kept coming out with new designs resulted in the companys declining sales.

4.

Chrysler introduced some new models after merger with Daimler. However, those
models did not get much consumer attention.

5.

The company could not invest enough money in research and development because of
the declining sales of Chryslers vehicles.

6.

The tight credit situation, volatility in the stock markets, problems in the U.S. housing
market, increases unemployment and declines in incomes started affecting consumer
spending.

7.

Those who wants to purchase vehicles found it difficult to get loans or found the available
financing too expensive.

8.

Chrysler was struggling to stay afloat even after receiving financial aid in the form of a
federal loan of US$4 billion, and with declining of sales, it had become increasingly
difficult for Chrysler to continue with its operations.

9.

Chrysler had to face new challenges such as issues related to environmental pollution
and rising gas prices.

10.

Chrysler started facing competition from foreign car manufacturers such as Honda Motor
Company and Toyota Motor Cooperation.

11.

The oil crisis, resulted in a high demand for fuel-efficient cars.

12.

The merger entity started facing problems mainly because of the significantly different
cultures of the two companies.

13.

Too dependent of US market (more than 73% of sales)

14.

Too many manufacturing facilities/ location causing inefficiency/ costly

15.

Focusing too much on big cars/ light trucks for profit

16.

Very weak international sales (less than 30% of sales)

17.

Intense competition in the U.S automotive industry

18.

Weak US economy due to recession causing declining vehicle sales

19.

Bad economy/ financial condition causing harder lending from financial institutions

PROBLEMS DISCUSSION
Chryslers present financial problem were its poor business strategy, lack of innovation and
the global crisis. Chrysler failed to bring out new vehicles that met changing customer needs
ahead of the competition. Chryslers sluggishness in launching innovative models when its
Japanese competitors kept coming out with new designs resulted in the companys declining
sales. Chrysler introduced some new models after merger with Daimler. However, those
models did not get much consumer attention. The company could not invest enough money
in research and development because of the declining sales of Chryslers vehicles. The tight
credit situation, volatility in the stock markets, problems in the U.S. housing market, increases
unemployment and declines in incomes started affecting consumer spending. Those who
wants to purchase vehicles found it difficult to get loans or found the available financing too
expensive. Chrysler was struggling to stay afloat even after receiving financial aid in the form
of a federal loan of US$4 billion, and with declining of sales, it had become increasingly difficult
for Chrysler to continue with its operations. Chrysler had to face new challenges such as issues
related to environmental pollution and rising gas prices. Chrysler started facing competition
from foreign car manufacturers such as Honda Motor Company and Toyota Motor Cooperation.
The oil crisis, resulted in a high demand for fuel-efficient cars. The merger entity started facing
problems mainly because of the significantly different cultures of the two companies.

MAIN PROBLEMS STATEMENT

How do Chrysler increase the sale of its cars to enable itself to go back to
profitability?

ALTERNATIVES STRATEGIES
1) Focus on cost cutting
Chrysler focus more on cost cutting in their operation. In order for their financial to be
backed on track.

2) Focus more on new design and fuel efficient and small passenger car
Chrysler have few competitors which are Honda and Toyota, thus Chrysler should focus
more on producing new design and fuel efficient passenger car to reach the customers
needs and expectations.

3) Focus on high end and performance vehicles

Performance and luxury cars are more resistance from recession as the customer for
these cars are the highly affluent. The margin of these cars are also higher and thus the
company will be able to make more profit will less income.

EVALUATION OF ALTERNATIVE STRATEGIES

ALTERNATIVE
STRATEGIES
Focus on cost cutting

POSITIVE OUTCOMES

NEGATIVE OUTCOMES

1. Decreasing cost will increase profitability

1. The company operation might become inefficient.

2. Increasing the

2. Bankruptcy will hinder some necessary operations

Focus more on new 1. Ride the trends of fuel efficient and smaller cars

1. Time and capital necessary to develop and produce

design

2. Restructuring of the companys operations are

efficient
car

and

fuel 2. Technology available from Fiat

passenger 3. Potential in overseas market

4. Larger market

Focus on high end 1. Higher margin

and
vehicles

necessary

performance 2. More recession proof

1. The company currently do not have the necessary

brand and technologies
2. Large competitor such as Mercedes, BMW and Land
Rover
3. Very high switching and R&D cost is needed

BEST STRATEGY AND JUSTIFICATION

The best strategy for the company is to focus on new design and fuel efficient
and small passenger cars. The alliance with Fiat clearly made available to Chrysler the
technology and experience in designing and producing fuel efficient cars for the US
marker.

Fiat is a fairly successful small car producer in Europe. The alliance can also bring the
strength of Fiat brand name in producing small cars to Chrysler. Other than that, the
design, production, technology and the marketing necessary for the production of small
car will also be available for Chrysler to be utilize.

Current trends in the automobile market are shifting towards fuel efficient and small cars.
This is because of the increase of oil price has increase the running cost of cars. Small
cars have the advantage of low fuel using and this will increase the attractiveness of the
companys car. Other than that, the increasing environmental awareness globally has
increased the demand for small and fuel efficient cars due to the decreasing greenhouse
emissions and low use of fossil fuel use of such cars.

One possible reasons for the small international sale for the company is the companys
product that is focusing on large cars and light trucks are not attractive for the
international market, especially for the smaller Asian people that is the largest market
due to its population and economic growth. Venturing into the small or compact car
segments will further open the companys product to the international market.

Smaller cars are cheaper to make due to lower and more efficient raw material usage. As
the economic conditions in US are bad and consumers are struggling with the increasing
cost of living, more consumer will be looking for cheaper cars compared to large and
expensive cars and the company can capitalize on the trends by focusing on the small
cars segments.

The bankruptcy will make it necessary for the company to reduce cost and sell some
assets. Further cost cutting will severely decrease the companys operations and quality.
Further, competition in the luxury and performance is fierce and market is smaller
compared to the

IMPLEMENTATION

Chrysler are undoubtedly are going to keep producing large cars from its famous light
trucks/ pickups, Sport Utility Vehicle (SUV) and big performance cars. However, in the
short terms, the company need to utilize the alliance with Fiat to capitalize on the large
market for small and compact cars and turn the company financial situation around as
necessary.

Firstly, the company need to work together with Fiat to design and produce the necessary
technology and design for the small and compact cars with fuel efficient technologies.
This can be done immediately as Fiat are focusing on small and compact cars and have
the ability and technology for fuel efficient engine technologies. They will have to work
together to take note of the companys ability and facility to produce the cars.

The next necessary steps is to spin off/ sell unprofitable or non-performing assets that
the company is currently having. This is necessary not only to provide capital, but also to
decrease the cost necessary to maintain the assets. Such assets are manufacturing
facilities and non performing branch of the company. The company may also consider
stopping production of non performing bands and brands that are not in the long term
plan of the company such as Plymouth.

Chrysler will also need the marketing and promotions necessary not only to promote new
models, but also promote the sustainability of the company and increase confidence of
the consumer in the company. this is necessary as vehicle are long terms purchase with
necessary support and maintenance necessary for the product and confidence in the
company are needed to increase consumer confidence.

The company may also need to market and promote new product, especially the new
small and compact car of the company. The company need to focus on the fuell efficiency
and the technology offered in the companys product as well as the improvement of
quality.

In the long term, the company need to solve several problems that is faced by
the company. First and foremost, the company need to consolidate its manufacturing
to decrease cost associated with logistics and other problems. The company currently
have too many manufacturing locations spread around the US and also Canada and
Mexico and this will cause high cost burden especially in terms of the necessary logistic
and business cost associated with transporting the parts or cars across the many
manufacturing locations.

The company should also consider to locate to more cost efficient site. Although the
bailout from US government may prevent Chrysler from locating overseas, the company
may still be able to reduce cost by consolidating its operations to locations with tax
advantages such as Florida or location with lower operating cost such as Texas due to
cheap energy, labour and tax. By consolidating and relocating there, company will be able
to decrease the cost associated with logistic and business cost.

The company will also need to increase its Research and Development (R&D) to be able
to compete in the market. R&D is necessary for the company to be able to adopt in market
changes quickly for example with the increase of fuel prices by introducing small cars and
the usage of mobile devices to introduce car connectivity and other technologies. the
company would also need to introduce new cars, models and technology more frequently
to compete with the foreign manufacturer and keep the market attention and interests in
the companys products. Other necessary emerging technology that the company need
to focus on is on developing hybrid and electric cars, as well as the driverless cars. For
this, the company may need to search for strategic partners such as Samsung and Google
to develop the new emerging technologies

Next, the company need to focus on the international and not just on the US market. As
experienced by the company currently, the overdependence of Chrysler on US market
cause the company to be in trouble due to the crisis in US economy. The company need
to hedge itself by increasing the sales overseas, especially on the big Asian market.
Chrysler can utilize Fiat global marketing network to sell the new small and compact fuel
efficient cars to the global market, especially the Asian market.

The company currently do have strong brands in its coffers such as Dodge and Jeep.
While the brands are focus on performance, the company may also produce fuel efficient
and hybrid vehicles on these platforms such as a hybrid Jeep or Viper and fuel efficient
light trucks. Other than that, the company should also focus on expending and focusing
on the business vehicle market such as on the production of special utility vehicle, big
trucks and fleet vehicles with new technologies and fuel efficient engine. Chrysler will also
be able to utilize several Fiat trucks and buses in its portfolio to do technology and design
transfer or adoption to enable the company to be more competitive in the business vehicle
market.

CONCLUSION
Chrysler are currently not selling well as the companys product are unattractive due to
lack of innovations, wrong trends and high cost of product. The company should focus
and diversify on smaller, fuel efficient and cheaper cars to reach the mass market and
focus on overseas market