Chrysler Group`s Road in 21st Century

DETROIT, Feb. 11 Chrysler Group President and Chief Executive Officer Dieter Zetsche, in a speech titled "Creating Value In The 21st Century Business World," provided a glimpse of the Chrysler Group`s response to the challenges facing the business world in the new century, while also addressing a wide-range of current automotive and economic issues.

In addition, Zetsche reiterated that the Chrysler Group stayed on-track last year to meet the better end of the financial forecasts outlined in its turnaround plan, and that it remained "absolutely committed to achieving break-even in 2002." Zetsche delivered the keynote address at the Economic Club of Detroit luncheon at Cobo Center.

"No matter what business discipline or pursuit we`re engaged in, we have all come to understand that since the horrific events of last September, life is never just about numbers or the bottom-line -- it simply can`t be," said Zetsche. "With people becoming more in tune with what they value and what is really important to them, we in the business community must re-evaluate things, as well. We are being called upon to bring our own perspectives to bear on a dramatically changed world.

"It has also served to remind all of us that integrity also plays a crucial role in our day-to-day activities. We need to strengthen our values and forge a re-invigorated sense of ethics. We must do a better job of finding our moral centers and be vigilant about how we conduct ourselves."

Chrysler Group in 2002 and Beyond

Although full-year results will be announced on February 20, Zetsche again highlighted the Chrysler Group`s success in 2001 in exceeding expectations in terms of reducing plant, fixed and material costs. He also outlined figures that showed Chrysler Group`s vigilant cost-containment policies were starting to pay huge dividends in being able to deliver competitive, highly desirable products to market.

"Our current $30 billion, five-year product spending plan -- with five additional vehicles included -- is substantially less than the $42 billion plan we had in place for the five-year period just one-year ago," Zetsche said. "The one thing that will never change with our future product plans is this -- the product is still the most important part of our business. Nothing delivers value faster than a newly launched product that captures the imagination of the customer."

In addition, Zetsche noted that the Chrysler Crossfire is proof of the possibilities now open to Chrysler Group because of resources available throughout the DaimlerChrysler family. "We are now on the verge of delivering to our customers innovative designs at unprecedented value," Zetsche added. "And we`ll be doing it on a consistent basis and in ways our competition isn`t expecting -- I can assure you."

Zetsche also addressed a number of other current economic issues facing the automotive industry, including:

* The long-term negative consequences of incentives;

* The circulation of draft proposals by U.S. Senators for radical increases in Corporate Average Fuel Economy (CAFE) standards; and

* The deliberate manipulation to depreciate the Yen compared to the Dollar.

Sales Incentives

"I won`t mince words here -- I view incentives as a drug. Short term, it may make us feel good, but I believe it will have long-term negative consequences for our industry and our customers," Zetsche said.

"As Jack Welch once said, the best way to serve the country and economy is to make sure you build a profitable company -- one that drives real value. As far as I can tell, there is nothing profitable in the word `incentives.`"

Corporate Average Fuel Economy

"Please make no mistake about our company`s commitment to developing new technologies that make great strides in improving the fuel economy of our vehicles - especially light trucks," Zetsche said.

"But the key is that our customers by their choice define the mix of our products in sales. Technically unfeasible requirements for fuel efficiency of the entire fleet would force a change of that mix, would drive customers out of their vehicles, and jobs out of our truck plants. This is a clear recipe for disaster and for conflict with the basic American value of market-driven economics."

Yen Depreciation

"This is an interesting turn of events, mainly because the Japanese auto manufacturers have proven to be hard-nosed competitors with excellent business acumen, who can do very will on their own merits," Zetsche said. "It appears that they certainly don`t need any help to compete."

"But this deliberate manipulation of the yen is giving them cost and price advantages that they can pump right back into their products. Some analysts have put that cost advantage at $1,200 to $1,400 per vehicle per year."

Zetsche added, "This isn`t just about a competitive edge. It could ultimately be about jobs here in the United States. I read with interest last week that even Honda is now questioning the yen/dollar relationship ... and that it may now feel it necessary to re-evaluate its policy of building where it sells because of the yen/dollar relationship. That could translate into more exports from Japan, and possible fewer Honda jobs in the U.S."

Zetsche concluded his remarks by addressing President Bush`s call to give back to America, and highlighted the important role of business in continuing to create value in American communities.

"President Bush has been speaking out lately that we need to give back in some way to this great land, so that the promise of America and the American dream is not just relegated to some vague ideal or some privileged few," Zetsche said. ...