Chrysler CEO Says Weak Offering of New Vehicles Hurt Profits in 2003

DETROIT January 6, 2004 John Porretto writing for the AP reported that Chrysler Group chief executive Dieter Zetsche says a weak offering of new vehicles was the main drag on profits in the past year, but the DaimlerChrysler AG division hopes to remedy that with 25 new or redesigned cars and trucks over the next few years.

Zetsche, speaking Wednesday night to a gathering of Wall Street analysts in conjunction with the North American International Auto Show, said he inherited a product pipeline with two or three annual vehicle launches when he took control of Chrysler three years ago.

One of Zetsche's first tasks was to beef up that supply. This year alone Chrysler will introduce nine all-new or redesigned vehicles.

"We're now clearly seeing the start of the harvest of the seeds we planted on the engineering side throughout the past three years," he said.

Chrysler's performance also has been hurt by an influx of competitors -- new vehicles from Asian and European companies arriving in U.S. showrooms -- and a fierce pricing war with rivals General Motors Corp. and Ford Motor Co.

Chrysler lost $1.1 billion in the second quarter and is on track to reach a break-even profit target for 2003. The company earned $639 million in 2002 after losing $4.7 billion in 2001.

Zetsche said Chrysler was able to offset product deficiencies and resulting poor revenue for a while with heavy cost cutting. He said the company has cut material costs by 15 percent and fixed costs by 25 percent since the turnaround effort started.

The company also reduced its head count from 127,000 to roughly 92,000 through late last year.

"But this is basically defense," he said. "That's blocking and tackling. The offense, the revenue side, obviously we haven't been similarly successful, and this is ultimately the reason we were failing last year in the second quarter."

Zetsche said he was encouraged by a slight U.S. market share gain for Chrysler in the fourth quarter of 2003, but for the year the company's share fell to 12.8 percent from 13.1 percent in 2002. Chrysler's 2003 U.S. sales fell 3.5 percent from its 2002 level.

Business was helped late in the year by the Chrysler Pacifica sports tourer and the introduction of the Dodge Durango sport utility vehicle.

Among the new vehicles scheduled for 2004: the rear-wheel-drive Chrysler 300C sedan, which Zetsche has called the brand's flagship; a convertible version of the PT Cruiser; and a revamped minivan lineup.