Chrysler Motors Corporation
Chrysler Motors Corporation
founded: 1925 as chrysler corporation
headquarters: 1000 chrysler dr. auburn hills, mi 48326-2766 phone: (248)576-5741 fax: (248)512-2912 toll free: (800)992-1997 url: http://www.chryslercorp.com
Chrysler Corporation is the number three automaker in the United States behind General Motors and Ford Motor Company. It markets cars and light trucks under the Chrysler, Dodge, Eagle, Jeep, and Plymouth brands. Chrysler Corporation, which formally became Chrysler Motors Corporation on April 1, 1998, announced a proposed merger in 1998 with Daimler-Benz, which would result in the creation of DaimlerChrysler, a new German company. Both companies have very distinct product lines, and compete in different markets for different customers (except in the sport utility vehicle category). DaimlerChrysler plans to expand into global markets where only one of the former companies may have previously been competing. The largest proposed industrial merger in history—valued roughly at $92 billion—will combine two companies with similar corporate cultures to create a single entity capable of becoming one of the world's leading designers and producers of cars and trucks. The merger, if approved by regulators, shareholders, and unions, will be completed by the end of 1998.
For the second quarter of 1998, Chrysler Corporation reported net earnings of $1.0 billion ($1.55 per common share), compared to the same period in 1997 when net earnings were $483 million ($.71 per common share). Increased earnings reflected increases in vehicle shipments, improved product mix, and decreased warranty costs, which were partially offset by an increase in average sales incentives and higher profit-based employee compensation. Chrysler reported total revenues of $61.1 billion for 1997, compared to $61.4 billion in 1996. Pretax earnings in 1997 were $4.6 billion, and net earnings were $2.8 billion. Net earnings per common share were $4.15 and the dividend declared per common share was $1.60. In 1996 pretax earnings were $6.1 billion, net earnings were $3.5 billion, net earnings per common share were $4.83, and the declared dividend per common share was $1.40. Revenue in 1997 was affected by a very costly 29-day strike at the Mound Road Engine Plant located in Detroit, Michigan.
In 1925 the Chrysler Corporation was incorporated by Walter Percey Chrysler. Chrysler was a former vice president of General Motors who had resigned over policy differences and had gone on to restore the Maxwell Motor Corporation to solvency. He designed Maxwell's first Chrysler automobile and exhibited it in 1924 in the lobby of the Hotel Commodore in New York City, since a vehicle not yet in production could not be displayed at the New York Auto Show. The car was a major success—the company sold 32,000 vehicles at a profit of $4 million before the year's end.
Following the success of his first car, Chrysler designed four more automobiles—the 50, 60, 70, and Imperial 80—named for their maximum speeds, which surpassed the 35 mph top speed of the Ford Model T. By 1927 the Chrysler Corporation had firmly established itself with sales of 192,000 cars, becoming the fifth largest company in the industry.
Chrysler realized the need to build his own plants in order to exploit his firm's manufacturing capabilities. Dillon Read of the New York banking firm of Dillon Read and Company had bought the Dodge Corporation of Detroit from the widows of the Dodge Brothers and reached an agreement with the now well-known Walter Chrysler. In 1928 the Dodge Corporation became a division of the Chrysler Corporation, and the size of the company increased fivefold.
The manufacture of Chrysler, Plymouth, and Dodge cars was suspended during World War II while Chrysler converted to war production. Chrysler's wartime service earned it a special Army-Navy award for reliability and prompt delivery. Some of its main war products included the B-29 bomber engines and anti-aircraft guns and tanks.
The company began experiencing three significant problems in the immediate postwar period: a loss of the initial enthusiasm and drive that had helped its constant innovation and experimentation in the early days; an exhaustion of engineering breakthroughs; and changes in American tastes and the increased demand for sleeker, less traditional models of cars. In addition, Chrysler did not focus on marketing, which was then an emerging trend in the auto industry.
L.L. Colbert, a lawyer, became the president of Chrysler in 1950 and hired McKinsey and Company, a management consulting firm, to put Chrysler back on track. The result was three reforms—development of international markets, centralized management, and a redefined engineering department—but Colbert's reforms did not significantly improve Chrysler's competitiveness.
Lynn Townsend was hired to be the new corporate head in 1952. He consolidated the Plymouth and Chrysler car divisions, closed some unproductive plants, reduced the workforce, installed an IBM computer system to replace 700 clerical staff workers, and enhanced sales by providing the best warranty in the industry. Within five years Lynn Townsend had revitalized the corporation. A Space division was formed that became the prime contractor for the Saturn booster rocket. By the end of the 1960s Chrysler had plants in 18 different countries.
Before the end of the decade, the domestic market was undergoing major changes—inflation was taking a toll, imports of foreign vehicles had increased, and crude oil prices had risen steadily. Chrysler, intent on fighting domestic competition, lost pace in the rapidly changing market and did not produce enough of its popular compact cars to meet consumer demand. In addition, with an overstock of larger vehicles, Chrysler reported a $4-million loss in 1969 in sharp contrast to its profit of $122 million the previous year.
John J. Ricardo succeeded Townsend as president and immediately began cutting expenses by reducing salaries, workforce, and the budget, and experimented with the marketing of foreign cars. However, Chrysler was not reading the public mood. The company continued manufacturing large gas-guzzling cars even during the 1973-74 Arab oil embargo in a market already dominated by Cadillacs and Lincolns. In 1974 losses totaled $52 million, and the following year's deficit was five times that amount. The company experienced a brief respite in 1976-77.
In 1978 Chrysler reported a loss of $205 million, causing great concern among the company's financiers. Chrysler saved itself from bankruptcy through highly charged negotiations with the federal government, which guaranteed loans up to $1.5 billion on the condition that Chrysler raise $2.0 billion on its own. Under the leadership of Lee Iacocca, an ex-Ford executive with a flair for marketing and public relations, Chrysler recovered in spite of plant closures, layoffs, and a company-wide restructuring worth $577 million. The dedication and hard work of Chrysler's employees played a key part in the resurgence of the corporation.
The 1980s brought exciting changes to the corporate structure as well as to the product lines. General Dynamics bought Chrysler Defense, and the loans that the government had guaranteed were paid back seven years early. The K-car debuted in the 1981 model year, and minivans, a category Chrysler pioneered and continues to dominate, were introduced in 1983. A merger with American Motors put the Jeep and Eagle brands in dealers' showrooms. The Dodge Viper concept car excited crowds at the North American Auto Show in 1989 and revived interest in Chrysler's products.
In 1992 Chrysler introduced the concept of Cab-Forward design. This concept made the wheels appear to be pushed forward, back, and out, creating greater stability and enlarging the passenger compartment. The 1990s saw the reporting of record net earnings for multiple quarters and the dedication of the world headquarters building in Auburn Hills, the European headquarters in Brussels, and the Chrysler Japan office in Tokyo.
According to Robert J. Eaton, chairman of the board and CEO, Chrysler's strategy is simple. It consists of sticking to its core business, following through on an aggressive product development program, focusing on quality, continuously improving their operations and developing their international markets, and reducing costs.
The corporation was restructured in 1991 into platform teams in order to facilitate product development. In this team approach, engineers, designers, marketers, accountants, suppliers, and factory workers cooperate simultaneously on a specific product line. In the old system, each functional group independently did its own work and then passed it on to the next department.
In the 1930s Chrysler's farsightedness helped the company survive the Great Depression far better than others in the industry. Chrysler realized the dangers associated with rapid growth and the importance of maintaining flexibility in his vehicle models and designs. Although he had to pay more for car parts than other companies, he discontinued his policy of manufacturing as many parts as possible for his cars. On more than one occasion Chrysler did not keep pace with the rapidly changing industry and suffered massive losses. Restructuring the organization, its processes, and strategies maneuvered the company to its current position in the industry.
FAST FACTS: About Chrysler Motors Corporation
Ownership: Chrysler Motors Corp. is a publicly held company traded on the New York Stock Exchange.
Ticker symbol: C
Officers: Robert J. Eaton, Chmn. & CEO, 57, $4,612,500; Thomas P. Capo, VP & Treasurer, 46; Thomas T. Stallkamp, Pres., 51; Gary C. Valade, Exec. VP & CFO, 55, $1,412,503
Principal Subsidiary Companies: Chrysler Motors Corporation oversees many subsidiaries. Some of the most well-known are Chrysler Financial Corporation, Chrysler Insurance Corporation, New Venture Gear, Chrysler International Corporation, and Pentastar Aviation.
Chief Competitors: Chrysler Motors Corporation's mission is to be the premier car and truck company in the world by the year 2000. Achieving this is no easy task, given the other automotive manufacturers Chrysler faces in the marketplace. Competitors include: General Motors; Ford Motor Company; Toyota; Volkswagen; Nissan; Fiat; Honda; Kia; Hyundai; and Mazda.
Chrysler has been working to reduce the amount of time it takes for a vehicle to get from concept to market, and has provided a benchmark for others in the industry. Chrysler has a program in place for its suppliers to submit ideas for saving costs that resulted in identified savings of more than $1.2 billion during the 1997 model year.
With the 1998 proposed merger with Daimler-Benz, Chrysler may stimulate a global realignment of the automotive industry.
The Chrysler Corporation is known for many of its historical vehicles, which include the Imperial, New Yorker, Valiant, Barracuda, and the Viper, among many others. In 1997 Chrysler introduced the all-new Dodge Durango sport utility vehicle, which was recognized as "Sport-Utility Vehicle of the Year" by Four Wheeler's magazine. The Dodge Intrepid and Chrysler Concorde were also completely redesigned. The Dodge Ram Quad Cab and the 5.9 Liter Jeep Grand Cherokee Limited also made their debuts. A new 1998 Chrysler 300M and Chrysler LHS were also planned.
CHRONOLOGY: Key Dates for Chrysler Motors Corporation
Walter Percey Chrysler, a former GM vice-president, incorporates the Chrysler Corporation
Dodge becomes a division of Chrysler
Production of cars comes to a halt as Chrysler concentrates on war machine production
Chrysler's space division is formed and Chrysler becomes the main contractor for the Saturn booster rocket
Chrysler revolutionizes the industry with a 5-year, 50,000 mile power train warranty
Chrysler continues manufacturing gas guzzlers through the Arab oil embargo; losses totaled $52 million
Lee Iacocca becomes the head of Chrysler
Iacocca secures a federal loan worth $1.2 billion to keep Chrysler alive
Chrysler pays off loan seven years ahead of schedule
The company boasts record earnings of $2.4 billion
Chrysler takes over the American Motors Corporation, getting the prized Jeep line along with it
Cab-Forward Design, for greater stability and handling, debuts
Chrysler proposes merger with Daimler-Benz
HEMI RULES NASCAR CIRCUIT
With the 1964 introduction of the 426 Hemi motor at the Daytona 500, Chrysler proved itself as an automobile producer that could dominate the NASCAR circuit. Initially, this engine's singular purpose was to put Chrysler ahead of the pack on the nation's stock car tracks, as the 426 was produced strictly as a racing engine, but eventually the Hemi dominated the streets of America as well.
In its first year of production, Hemis powered four Mopars to sweeping victories at Daytona, with these stock cars finishing in the top four. This single event caused NASCAR officials to eventually impose tighter production rules on Chrysler. As a result of such rules, Chrysler began producing Hemi engines for not only the stock cars, but for normal production cars as well.
With 426 cubic inches producing 425 horsepower and 490 foot-pounds of torque, the slightly lower-powered street version of the Hemi was not for the weak of heart. Produced by Chrysler from 1966 to 1971, 426 Hemi-powered street cars ruled many back-road drag races before emissions laws and high production costs, among other factors, caused them to be phased out. At the same time, their race version counterparts were reigning on the NASCAR circuit. Today, nearly 30 years after the last 426 Hemi came off the assembly line, car enthusiasts still regard this engine a classic. Bringing astronomical prices for restored versions, the Hemi-powered cars are considered among the most legendary of the muscle car era.
Chrysler invests heavily in the people and communities that surround its corporate facilities and plants. The Chrysler Fund has spent $177 million through 1996 for cultural, educational, and community improvement initiatives. An example of this was when Chrysler and the UAW donated a total of $25,000 to the American Red Cross Disaster Relief Fund to help the Orlando, Florida, area when it was hit by tornadoes. Chrysler encourages employee and dealer involvement in charitable projects as well.
While North America accounts for the majority of Chrysler's sales, the company sells its cars, minivans, and trucks in more than 140 countries. In 1997 the United States accounted for 80 percent of vehicle unit sales; Canada for 9 percent; Asia, Taiwan, Brazil, Australia, and the Middle East for 5 percent; Europe for 4 percent; and Latin America for 2 percent. Chrysler has assumed distribution in several countries around the world, including Japan, Taiwan, Korea, Argentina, Brazil, Austria, France, Italy, Germany, the Netherlands, and Belgium. In 1997 Chrysler Asia Pacific established its new headquarters in Singapore. Chrysler also assembles vehicles in Austria, Venezuela, Argentina, Egypt, China, Thailand, Indonesia, and Malaysia.
SOURCES OF INFORMATION
"chrysler corporation." hoover's online, 28 july 1998. available at http://www.hoovers.com.
chrysler corporation times, 12 march 1998.
chrysler corporation times, 14 may 1998.
chrysler home page, 22 april 1998. available at http://www.chrysler.com.
covell, jeffrey l. "chrysler corporation." international directory of company histories, vol. 11. detroit, mi: st. james press, 1995.
ryckebusch, michele. chrysler through the years. auburn hills, mi: chrysler communication programs department, 1996.
For an annual report:
on the internet at: http://www.investor-rel.com/chrysleror write investor relations, chrysler motors corp., 1000 chrysler dr., auburn hills, mi 48326-2766
For additional industry research:
investigate companies by their standard industrial classification codes, also known as sics. chrysler's primary sics are:
3679 electronic components, nec
3711 motor vehicles and car bodies
3714 motor vehicles parts and accessories
6159 miscellaneous business credit institutions
6399 insurance carriers