1.

CASE SUMMARY
Chryslers future may be uncertain, but its past is full of notable moment.

Since Chryslers start in early 1900s, they have held a substantial amount of
respect and leverage within the automobile industry. After long journey in the
automotive industry passing by highlights of failure and others of success they
encountered a tricky financial situation. Chryslers has been caught up by some
bad decision while they are struggling for survival.

A few changes in

management also influence the decision making of Chrysler especially after

merging with Daimler where there are a lot of problem arises.

Chrysler have introduce several car model design in 1934 where it

introduce aerodynamic automobile but it does not get much response during that
period of time. In 1950, Chrysler has become popular by introducing the HEMI
engine, power steering, power window, fuel injection and other product. In 1973
Lee Iococca has become the CEO of Chrysler where he introduce Dodge Caravan
and Plymouth that gives a huge success to Chryslers sales.

In 1998, Chrysler forms merger of equal with Daimler which is a German

automaker.

These merge does not found to be successful and Daimler

eventually take over Chrysler.

Upon taking over Chrysler, the Daimler

management which emphasize on bureaucratic have cause come cultural

difference problem within the organization.

Furthermore, Daimler runs the

Chrysler separately from its luxury Mercedes Benz.

On May 2007, Daimler sells 80.1% stake of Chrysler to Cerberus and

Crysler has become Chrysler Motor LLC. Nardelli was appointed as the CEO of
Chrysler. In 2008 Chrysler have asked for financial aids the company is facing

Global Crisis 2008. Chrysler also have done major restructuring to cut cost in
2009. Nardelli have request for US$9 billion in order to restructure and achieving
long term viability of its operations.

U.S government have agreed to give

Chrysler the loan with one condition that is Chrysler must merge with Fiat. On
May 2009, Chrysler has filed for bankruptcy and reach a global strategic alliance
with Fiat.

Sergio Marchionne has become the new CEO of the alliance and

remain positives that he will be able to run both Fiat and Chrysler.

2.0

SWOT ANALYSIS

2.1

Internal environment analysis (Strength)

Financial Support from the Government

.In January 2009, Chrysler has obtained US$4 billion from the US government after
Chrysler has request for US$7 billion during its struggling period. On April 2009, the
US government also has make a deal with Chrysler to make an alliance with Fiat in
order to get additional loan as Chrysler has requested an extra US$2 billion above
US$7 billion for long term restructuring. In the past also Chrysler has been helped for
financial aid by former U.S. President Jimmy Carter in 1979.

This indicates that

Chrysler has a strong relationship with the U.S. government.

Efficient in Managing Cost
Major restructuring plan of Chrysler such as discontinued four vehicles models,
eliminate 12 production shifts have improves the cost competitive.
Form Alliance with Fiat
According to Nardelli, by forming alliances with Fiat Chrysler can enhance more global
strategic alliances. Furthermore, alliance with Fiat also make Chrysler the availability
of powertrain technology, worldwide distribution capabilities.
Established Brand Name
Chrysler is one of the most popular automotive manufacturer in the industry. Chrysler
developed the Firepower, the first hemispherical-head V8 engine which later become

popularly known as HEMI engine. Furthermore, Chrysler become more popular with
the introduction of power steering, power window, electronic fuel injections and others
to the market. Even the U.S. president Barrack Obama have acknowledge the alliance
of Chrysler and Fiat is a good thing.
Good Negotiation Skill
Chrysler top management has a very good negotiation skill where they has negotiate
successfully with UAW and CAW to reduce cost..
2.2 Internal Environment Analysis (Weakness)
Lack of Innovation
Chrysler remained focus on SUV and trucks only and come out very little innovation
in producing new car. This cause Asian manufacturer to be in leading as they focus
more on consumer preference.

Lack of innovation also due to the Chrysler poor

investment in Research and Development as Chrysler focus more on cost cutting.

Chrysler was once perceived as a good innovator because they have come up with a
lot of innovation such as power steering and power window.
High Debt Burden
Chrysler has a very high debt burden until Chrysler have to fail for bankruptcy
protection. Although Chrysler has done major restructuring yet it still suffers from
poor sales and debt burden. Previously, Chrysler also face some high burden under
Iacocca but manage to overcome the debt by emphasizing on manufacturing Dodge
Caravan and Plymouth Voyage.
Poor Decision Making
Some analyst criticize the decision of Chrysler to merge with Daimler because they
perceived that Chrysler was generating more profit and doing well at that time.
Furthermore, Chrysler have an opportunity to buy Daimler but instead they form a
merger of equal and then eventually sold it.
Tarnished Reputation
Due to major revamp and restructuring, Chrysler have produced low quality cars

whereas Asian car like Toyota and Honda produced a high quality and good
performance car. This have created a negative impression on Chrysler.
Employee Demotivated
Frequent change in management has given impact to the employee as they need to
frequently adapt to the new change that has been brought up by new management.
For example, when Daimler take over the management, the employee have to adapt
to the Germans style management culture that is more bureaucratic compared to
American culture that values efficiency, empowerment, creativity and informal
relationship among employee.
2.3

External Environment Analysis (Threat)

New Advance Technology

Chrysler have an outdated technology as compared to the Asian manufacturer.
Asian manufacturer can come up with small and efficient car along with the
customer preference for these design of car.
Global Financial Crisis
Chrysler has survived the period of Great Depression and 2008 Financial Crisis but
the impact on the crisis still can be seen by the manufacturer. The Global Financial
Crisis 2008 have affected the automotive industry with great impact because the
crisis initiated from U.S. With the high debt and fail for bankruptcy protection, it is
still a doubt that Chrysler can survive another Financial Crisis.
Bargaining Power of Consumers
There are a lot of car manufacturer with high level of competition in automotive
market that creates more option for the customer. This will cause the customer have
high bargaining power. Automotive manufacturer that produce vehicle according to
the customer preference will generate more profit and increase in sales.
Threats of Substitute Products
Automotive industry has wide range of substitute product in the market. During the
fuel price hike the customer prefer a small and fuel-efficient car. Chrysler have only

big cars and not fuel efficient meanwhile Asian car manufacturer has these kind of
car. Thus, the Asian manufacturer car has become a substitute to the Chryslers car.
Threats from Competitor
Chrysler have a lot of internal and foreign competitor like Chevrolet, Nissan, Toyota,
Honda and Volkswagen. Different automotive manufacturer have different strategy
to market their product and manage cost efficiently.

2.4

External Environment Analysis (Opportunity)

Demand for New car Model

The demand for new car model is always preferred by the customer.

A new car

model that satisfy the customer need is important in order remain in the market.
Customer desire and preference change according to the current change of the
environment..
Environmental Pollution Awareness
Severe environmental effect on global warming and other environment destructive
event has been opposed by the consumer.

Increase awareness in preserving the

environment has led to new opportunity to the entrepreneur to come up with product
that is environmentally friendly.
New Global Market
Alliance with Fiat creates an opportunity to Chrysler to expand their market globally
and come up with new global strategic alliances.
Bargaining Power of the Supplier
Chrysler has previously initiates dialogues with the suppliers to reduce substantial
cost during their cost restructuring period. This can be an advantage of Chrysler to
manufacture a vehicle with lower cost.
Limited New Entrant
High competitive automotive market often demotivate the new entrant from entering
the market.
2.5

EFE Matrix and IFE Matrix

2.5.1

Internal Factor Evaluation Analysis (IFE Analysis)

Strength

Weight

Rating

Weighted
Score

Financial Support from Government

Efficient Cost Management
Form Alliance with FIAT
Established Brand Name
Good Negotiation Skills

0.10(15%)
0.10(10%)
0.10 (10%)
0.08 (8%)
0.08 (8%)

3
2
2
2
3

0.30
0.20
0.20
0.16
0.24

Weakness
Lack of Innovations
Employee Demotivated
Poor Decision Making
Tarnished Reputation
High Burden Debt
Total Weighted Score

0.15 (15%)
0.07 (7%)
0.10 (10%)
0.10 (10%)
0.12(12%)
1.0(100%)

2
2
3
3
2

0.20
0.14
0.30
0.30
0.24
2.28

The ratings in IFE matrix refer to how strong or weak each factor is in a
firm. The numbers range from 4 to 1, where 4 means a excellent strength and 1
is major weakness. According to the analaysis, the total weighted score is 2.28
which is below 2.5. It means that Chrysler has some weakness internally and
worse than other rivals. They must improve their internals if they expose to
competitors in future.

2.5.2

External Factor Evaluation (EFE Matrix)

Opportunities

Rating

Weighted

0.15 (15%)

Score
0.30

Environmental Pollution Awareness

New Global Market

0.08 (8%)
0.09 (9%)

2
2

0.16
0.18

Bargaining Power of the Supplier

Limited New Entrant

0.06(6%)
0.06 (6%)

3
2

0.18
0.12

0.12 (12%)
0.05 (5%)

2
2

0.24
0.10

Demand for New Car Model

Threats
New Advance Technology
Global Financial Crisis

Weight

Bargaining power of consumer

0.15 (15%)

0.30

Threats of Substitute Products

Threats from competitors
Total Weighted Score

0.12 (12%)
0.12 (12%)
1.0(100%)

2
2

0.24
0.24
2.04

It should be noted that the highest possible total weighted score of a firm
is 4 whereas the lowest possible total weighted score is 1. If a company get the
highest weighted score, it means the company is effectively taking advantage of
the existing opportunity as well as has the capacity to minimize the risk. In the
contrast, if the total weighted score is 1, it means that the company is not able
to take good advantage of current opportunity and avoid risks. In the case of
Chrysler, the total weighted score is below average 2.5 which means that the
company is not performing well, the company strategy is not really effective.
Thus the ability of Chrysler to take advantage of current opportunity and avoid
potential risks is weak.

2.7

Competitive Profile Matrix (CPM)

Chrysler
Critical
factors

sucess

Toyota

Weighted

Rating

Weighted
Scores

Weighted

Rating

Weighted
Scores

Research
and
Developmen
t

0.25

0.50

0.25

1.00

Competent
Employee

0.15

0.45

0.15

0.45

Organizatio
nal
Efficiency
Product
Quality
Financial
Strength

0.15

0.45

0.15

0.45

0.25

0.50

0.1

1.00

0.20

0.20

0.20

0.80

4
5

2.10

3.70

The CPM matrix shows how the competitive advantage of a company

compare to other competitors is. It is obvious that the highest weighted score
get, the stronger the competitive advantage is. In the case of Chrysler, the
weighted score is much lower than Toyota and KFC which means that Chrysler
has weak competitiveness.

3.0

LIST OF PROBLEMS AND PROBLEM STATEMENT

3.1

List of Problems

3.1.1

Lack of Innovation

Chrysler having a very high debt that it cannot focus on the development
of new product. The world is changing and lack of new model can become an
advantage for the competitors.

Chrysler only focus on the SUV and trucks

whereas their competitor have come with new models that satisfies the customer
needs. During the oil price hike, the demand is for the small and fuel efficient
car. Asian manufacturer like Toyota and Honda have come up the new model but
Chrysler unable to come up with the new model because lack of investment in
the R&D.

3.1.2

High Debt Burden

Chrysler is facing a very high debt from the U.S government loan.

Chrysler also have file bankruptcy protection under Chapter 11 as the amount of
debt is hike up. Chrysler have survive a few crisis before like the Global Financial
Crisis but the impact is still very high. It is still doubtful if Chrysler could survive
another similar crisis in the future if the situation remains the same. According
to Karl Brauer Fiat taking over Chrysler is a huge gamble because Chrysler have
been losing money for years.
3.1.3

Poor Decision Making

Analyst believe that Chrysler have been made a few fault decision such as
merging with Daimler.

Chrysler was doing very well on the time they form a

merger of equals with Daimler. Furthermore, Chrysler can buy Daimler that time
rather than for a merge that eventually cause Daimler to take over Chrysler. The
consequences of this decision is employee become more demotivated because
they need to adapt to the new management with different culture. Analyst also
criticise the decision made by Daimler to separately run Chrysler from its luxury
Mercedes Benz.

By doing this Daimler does not take advantage working

together with Chrysler to produce vehicles.

3.1.4

High Competitive Market

Automotive industry is a very high competitive industry where new entrant

unable to enter into this market.

High competition between the automotive

manufacturers cause the customer to have more variety of choice that can be a
substitute.

This has create the bargaining power of the customer and the

automotive industry has to satisfy the customer needs in order to stay

competitive in the market.

Chrysler has many competitor in U.S and from

foreign country like Toyota, Honda and Nissan.

3.2

Main Problem Statement

The Fundamental for all the problem can be deduce to inability to react to

customer demands and industry changes. The cause of all the problem that has
been listed above is mainly due to Chrysler fails to meet customer preference.
Furthermore, Chrysler also become a victim of fast changing automotive industry.
The problem for Chrysler is a going around a cycle.

The design and certain

model that has been produced by Chrysler does not meet the preference of the
customer. This causes the sales of the product decreases and Chrysler in high
debt.

Competitor has fulfilled the customer preference and give them a high

bargaining power. For example, Asian manufacturer come up with small and fuel
efficient car whereas Chryslers stick to large cars due to lack of allocation for
Research and Development.