Chrysler plans global expansion after Daimler split

Chrysler plans global expansion after Daimler split
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First Published: Fri, Aug 10 2007. 04 42 PM IST
Updated: Fri, Aug 10 2007. 04 42 PM IST
Traverse City, Michigan: Chrysler LLC is working on a significant global expansion following its split from Daimler AG, a senior executive said on 10 August.
That expansion will include forging new international partnerships and could involve renewing past alliances with Mitsubishi and Hyundai, said Frank Klegon, vice president of Chrysler’s product development.
“We want to grow as a global enterprise,” Klegon said at an automotive conference in Traverse City, Michigan.
The announcement comes as Chrysler flexes its muscles under new owner Cerberus, a private equity group which bought an 80.1% stake in the historic US car company for $7.4 billion on 3 August.
Plans are in the works for new engineering and procurement centres in China and Poland to supplement facilities already established in Mexico and India, Klegon said.
These centres will also help locate suppliers for various components, negotiate with local governments on regulations and fine-tune vehicles to regional consumer demands, he said.
“We look to have three development centres that will look from a global perspective for lower-cost sourcing,” he said.
The aim would be to design and develop lower-cost vehicles with a local partner that could be exported to other regions.
Chinese-made cars will be the first off the block for both local production and export, he said.
“I don’t see us producing cars in India for quite some time... it’s more of a technology hub for us,” he said. “Eastern Europe, I don’t know yet. We’d have to have a partner.”
There are no immediate plans to expand operations in Latin American because of concerns about the stability of local currencies, he said.
“We think that’s a growing market and we have to figure out ways to manage those sides of the risk because the benefits are large,” he said.
Renewing an alliance with Mitsubishi or Hyundai could also help Chrysler expand its global reach, he said, adding that the decision to drop an equity stake in Hyundai created “part of the internal conflict” between Daimler and Chrysler executives.
“There’s no commitment at this point,” he said. “They’re both interesting companies, particularly Hyundai. We’ll see if we can creation some future opportunities with them.”
Chrysler’s new chief, former head of home-improvement chain Home Depot Robert Nardelli, will bring valuable skills to help drive the expansion, Klegon said.
“He has a track record of international expansion, increases in sales and operational efficiencies,” he explained.
“He’s a high-energy guy that loves cars.”
While there has been some loss in terms of economies of scale following the split with Daimler, Chrysler has gained flexibility in its global expansion plans, Klegon said.
It took Cerberus just three days to approve nine projects, a process that would have taken “weeks” with Daimler.
Chrysler also will not lose access to Daimler’s research and technology even though the companies are no longer formally merged, he added.
“We’ll have to agree on price and investment... but at the end of the day we’re not exactly overlapping products,” he said, noting that Daimler has retained a 19.9 percent stake in Chrysler and is invested in its success.
“So we get that opportunity to be a pretty fast follower in a lot of technology.”
Klegon acknowledged that it could take some work to get American consumers ready to buy a vehicle made in China, particularly given the recent distribution on YouTube of a video showing how Chrysler’s partner, Chery, failed a crash test.
“There’s a lot of China things going on right now with issues with dog food and toothpaste and a lot of things that have got people’s concerns about whether the controls are in place to ensure that consumers are protected,” he said.
“That’s another awareness issue we’ll have to manage as we go forward to show that the vehicle we’ll be involved with is a better performer.”
One of the things Chrysler can offer Chery is some technical expertise on designing safer vehicles, he added.
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First Published: Fri, Aug 10 2007. 04 42 PM IST