Chrysler Learns a Lesson

Yesterday's front page Wall Street Journal article on the big cuts at DaimlerChrysler was filled with the usual doom and gloom from what we're now calling the Detroit Big Three automakers.  But unlike similar articles from Ford and especially GM, the Chrysler chiefs seem to have learned a bit of a lesson.  Up until recently they were following the GM philosophy that "inventory isn't a problem."

Although dealers were jammed with unsold cars, Chrysler kept its plants running.

Then the pain set in.

"We lost money building inventory and then we lost money trying to get rid of it.  It was a tough lesson, " Mr. LaSorda said in an interview earlier this month. 

So they learned a lesson and decided to change operating philosophy.

In a conference call, [Mr. Zetsche] warned that Chrysler would suffer a $1.5 billion operating loss in the third quarter and slash production for the remainder of the year.  Chrysler Group Chief Executive Tom LaSorda says he's willing to accept lower sales as long as dealers and the company are making money.

Good for them.  I don't necessarily agree with whacking a bunch of knowledge, but at least they are trying to match production with demand.  GM, on the other hand, hasn't learned that lesson yet.

In a sign that GM has yet to throw its past aside, it announced yesterday that it will bring back 0% financing deals, a fire-sale tactic executives had hoped to avoid after rolling out a new pricing strategy last year. 

What is it going to take for GM to realize that being number one in sales is meaningless?  Instead they are focused on acquiring an unprofitable Malaysian automaker to keep the unit sales ahead of Toyota.

Comments

[Mark Graban]

To say that building way too much inventory of "frankestein" vehicles that nobody wanted to buy is an opportunity learn is a bit of stretch.

Do you REALLY have to make a mistake yourself to learn? The Chrysler people couldn't have figured that the waste of overproduction was a problem through some other source, or, ahem, one of the three hundred lean books that says overproduction is bad???