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Last Updated: Monday, 14 January 2008, 13:22 GMT
Chrysler pedals hard to move forward
By Jorn Madslien
Business reporter, BBC News, Detroit auto show

Dieter Zetsche (middle), chief executive of Daimler
By day Dieter Zetsche (middle) is chief executive of Daimler

Dr Z is back in town, pouring beer, grinning below his walrus moustache.

The energetic automotive industry executive looks right at home as he mans the busy bar at The Firehouse, an iconic bar in a stripped-out fire station in downtown Detroit.

From across the counter, journalists throw him a buck, prompting him to ping the bell to signal being tipped. This is public relations with a difference.

By day, Dieter Zetsche is the chief executive of the German group Daimler, owner of Mercedes and Smart.

But it was here in Detroit that he made his name when, in 2000, he took over at the helm of Chrysler Group before bringing the loss-making carmaker back into the black.

It did not last. Chrysler's difficulties soon re-emerged, so last year Daimler sold an 80.1% stake in the US division to private equity investors Cerberus Capital Management in a $7.4bn (3.7bn) deal.

Riding to the rescue

For Chrysler's new management team, the show offers an opportunity to explain its revival strategy, after seeing sales slip 3% in 2007.

Jim Press in front of the new Ram truck
Cowboys were on show to launch the new Dodge Ram

Much is being made of the company's American heritage: the firm put on a crowd-pleasing display of mounted cowboys herding longhorn cattle through the streets of Detroit to unveil its Dodge Ram, a huge gas-guzzling beast of a truck with a 5.7 litre 345 horse power V8 engine.

"You can drive a big truck and still be responsible," Chrysler vice chairman, Jim Press tells BBC News, pointing out that the new Ram is 5% more fuel efficient than its predecessor.

"You have a full-size truck that meets all the customers' requirements, it's kind to the environment and it's still fun to drive," he insists.

But in spite of such confident statements, Chrysler is painfully aware that the Ram is being launched into a fast-declining market that has been hit by soaring fuel prices and growing environmental concerns, as well as by an economic downturn that is hitting some of its core customers the hardest.

Sales of so-called conventional pickup trucks fell from more than 2.5 million in 2005 to less than 2.2 million in 2007.

"Full-size pickups are aimed at fleet, at the house building sector and at agriculture, all sectors that aren't doing that well at the moment," observes auto analyst Michael Robinet of CSM.

Global partner?

Moreover, Chrysler's reliance on the US market, which shrank 7% last year, offers little opportunity for growth.

You can drive a big truck and still be responsible
Jim Press, Chrysler

So the company is searching high and low for other solutions.

"Chrysler is really a regional car company that needs to operate in a global market place," explains Mr Robinet.

Indeed, confirms Mr Press: "Our market share outside of Nafta is still just 1%."

Hence, whilst Chrysler itself insists it is happy to operate as a lone ranger, analysts say the search is on for a new international partner to fill the void left by Daimler.

A product alliance has already been launched with Nissan, which will produce a small car on behalf of Chrysler for the South American market.

"The Nissan deal is just one isolated incident," says Mr Press, amidst speculation that the Japanese car maker headed by industry guru Carlos Ghosn will take a stake in Chrysler.

"We think it's probably going to be a partial purchase," predicts Sean McAlinden, chief economist and vice president of research at the Center for Automotive Research in Detroit. "It could be 30%."

Cutting costs

Behind the scenes, Chrysler's chief executive Bob Nardelli is busy sprucing up the company in what some critics have described as pre-sale asset stripping.

Though Mr Nardelli himself insists the planned sale of real estate and other assets is required to raise cash for investment.

"Our job is to execute that in as aggressive fashion as we can and then put that cash back into technology," he says.

Chrysler also has to "reduce overall fixed costs", explains Mr Robinet.

Mr Nardelli has axed 10,000 jobs at Chrysler, in addition to the 13,000 job cuts announced last winter, and he is ending production of models that fail to meet sales targets.

Compromise or die

Pay for workers is also being cut, with new deals struck recently with the UAW workers' union delivering "wages [that] will be very competitive", according to Mr Nardelli. However, this is not exclusively a Chrysler issue given that its two US rivals, General Motors and Ford, are also struggling.

"In the past a top designer could earn between $32 and $42 an hour," one autoworker who wants to remain anonymous tells BBC News.

"Now, a top designer makes $26 or $27 an hour, and they are trying to bring back people at $10 to $12 an hour."

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