1998 is when Daimler-Benz acquired Chrysler. Many people thought that Chrysler would break away from Ford and GM and join Japanese automobile makers. The planned strategy at Daimler-Benz for Chrysler in 1998 was to emphasize bold design, better product quality, and higher productivity by sharing designs and parts between the two companies.
This strategic plan however, proved to be disastrous for Chrysler. Looking back, I’m sure the company’s CEO’s can see the poor decisions they made. They may have overlooked the present condition of the economy, or did not take into consideration where the economy was headed.
Also, they may have made the decision without really researching, or using test markets somehow to see how and if their strategic plan would be successful. Even though Chrysler dealt with a lot financial struggle in the 90’s, by 2004 things seemed to be turning around for the company. In 2005, Chrysler had some good opportunities.
They made really good money in ’05 and even managed to gain market share. The CEO at this time, Dieter Zetsche, was hopeful that he would be able to make profit with the introduction of a new SUV—the seven seat Jeep Commander. The new introduction was thought to be just what the company needed. The timing, however, could not have been worse.
In 2005, oil prices rose, and supplies became very tight due to Hurricane Katrina. By 2006, the price of oil drastically rose to an astounding $70.00 a barrel up from about $35.00 a barrel just 18 months prior. Gas prices also hit an astonishing $3.00 a gallon. Despite all the hardships they faced between 2005 and 2006, Chrysler definitely had some strengths. Not only did the company manage to turn itself around, but they gained market share, and in my opinion, they most likely started to gain back the loyalty of their customers. The CEO also started to come up with ideas for new vehicles, such as the Jeep Commander.
To go along with their strengths, however, they did have some weaknesses. Again, I feel that the research was not as strong and in depth as it should have been. If they would have really looked at the present conditions and state of the economy, they would have seen that introducing a new SUV at that particular time was not a very good decision. SUV’s are not very fuel and cost efficient, and with prices rising to $3.00 a gallon, I can’t imagine how many people would invest in an SUV. So, in my opinion, this product strategy did not make sense.
I believe that Chrysler got its forecasts for product sales and earnings so badly wrong in 2006 because they may have forecasted those sales prior to gas prices rising to the amounts they went up to. Therefore, their productivity and profitability resulted in a massive build-up of inventory because they were not able to sell their “non-fuel efficient vehicles.” Something really needed to happen to Chrysler in order for them to gain profitability again.
This really shows the utmost importance of strategic planning: research, research, research. I really truly believe that research is of crucial importance for companies like Chrysler. You have to plan, and then you have to revise your plan; plan again, and revise some more.
Make sure you know what the economy is doing, and what the people need. Then, you can research what it will take to provide that need. All in all, Chrysler has definitely had some good times, and bad. In my opinion, it seems like the bad outweighs the good. However, some of the greatest successes come from the worst possible failures. I believe that if Chrysler can really focus on the present, they could do wonders for their company.
Right now, hybrids and low interest rates seem to be the “need” I guess you could say. If Chrysler can introduce vehicles that provide great gas mileage at an affordable price—for the “average Joe,” then I really believe that they can regain their footing in the automotive industry.