Carper's Corner
Questions about DaimlerChrysler
October 30, 2006
Wilmington, DE -- DaimlerChrysler has been all over the news lately, at least in Delaware. The future of the company as well as the future of its Newark assembly plant have been the subject of considerable speculation. Ironically, barely a year ago, DaimlerChrysler was the toast of the town. After launching a series of new vehicles, including the Chrysler 300 series, the company’s monthly sales grew steadily, and its market share rose while that of Ford and GM continued to shrink.
That was then. This is now. Chrysler reported losses of $1.5 billion in the third quarter of this year on its North American operations. While Ford continues to lose ground, a lot of analysts and critics who were lambasting GM for its ineptitude less than a year ago are beginning to herald a turnaround in that company’s operations and fortunes.
So what gives? Let’s set GM aside for now except to note that there are three shifts working flat out at the company’s Boxwood Road assembly plant near Wilmington, Delaware, building all of the Pontiac Solstices and Saturn Skys in the world. Customers snap both of them up almost as soon as they roll off the assembly plant floor. Exports of the Sky to Europe begin this fall.
Meanwhile, 15 miles down I-95 in Newark, the DaimlerChrysler plant is struggling. Down to one shift, sales of the Dodge Durango built there plummeted earlier this year as gasoline prices rose. Those sales have yet to recover despite the recent drop in gasoline prices and some of the most generous incentives lavished on the Dodge SUV of any vehicle built anywhere. Fortunately for us and for the plant’s 2,100 employees, last month DaimlerChrysler launched an upscale version of the Durango called the Chrysler Aspen. Built in Newark, initial sales of the Aspen are a bit stronger than anticipated. So instead of building Durangos one week and being idle the next, workers there are now building more Aspens while the company whittles down an almost 100-day inventory of unsold Durangos on dealer lots across America.
Earlier this month, Daimler Chrysler shook things up by announcing it was going to examine all of its assembly and parts plants, along with its upcoming vehicle from top to bottom. Why? To find efficiencies that will enable the company to save $1,000 a car under a plan called Project Refocus. Vice President of Manufacturing Frank Ewasyshyn told me earlier this summer of DaimlerChrysler’s plans to undertake this kind of comprehensive analysis by this fall. Now, they’re doing it. He also told me that he believed the Newark plant would continue to play an important role in DaimlerChrysler’s long-term plans for years to come. A similar view was shared with me in late spring by DaimlerChrysler’s North American CEO Tom LaSorda.
So should we be worried about our Newark plant? I believe that we should be concerned. All states that have DaimlerChrysler plants, along with provinces in Canada and states in Mexico where DaimlerChrysler assembly plants are located, should be concerned. Having said that, neither Delaware nor its DaimlerChrysler employees should be in a panic right now. Rather, all of us here in the First State should turn our concern into constructive action that will better ensure that once DaimlerChrysler has completed its cost-cutting moves over the next year or so, the Newark plant will be alive and well and the home of as many as three or four models to be assembled. It’s important to note that we have been in this situation before. In 1980, as state treasurer, I negotiated a state loan at a time when the company was about to collapse. I’ve been working to keep this plant open and to save these jobs for the past 26 years and I have no intention of giving up now.
Former Newark plant manager Jim Wolfe, now president of the Delaware Chamber of Commerce, has suggested at least two steps that might help. Delaware’s cost of workers’ compensation is out of line with the rest of our region. Efforts in the General Assembly this year to address this problem resulted in a stalemate. When the legislature reconvenes in January, this matter should be addressed right away and a solution expeditiously reached by all sides that will better enable Delaware to compete for jobs, particularly manufacturing jobs.
A second helpful step would be for DaimlerChrysler management and labor at our Newark plant to redouble their efforts to reach agreement on a new plant-wide labor contract, something they have been without for many months. It would be even better if that contract provided a nurturing environment for flexible manufacturing.
Several years ago, Toyota adopted an approach to manufacturing that is known as “flexible manufacturing.” This approach calls for assembling as many as four different models at the same assembly plant (something that Chrysler once did at its Newark plant more than a decade ago). At Toyota, if models A and C are hot, while models B and D are not, the plant builds more of A and C and less of B and D. If sales of model D pick up and sales of model C drop off, that plant builds more of D and less of C. Toyota calls this flexible manufacturing. I call it common sense. Whatever you call it, DaimlerChrysler, GM and Ford need to master it.
Speaking of common sense, another obvious thing that the “Big Three” need to do is build vehicles that people want to buy. In 2002, DaimlerChrysler scrapped plans, adopted a year earlier, to begin offering Durangos with a hybrid option starting in 2004. If the company had continued with this plan, it is unlikely that they would be reporting close to 100 days of unsold Durangos in dealer inventories across America today.
But all is not lost at DaimlerChrysler. Half of the vehicles sold in Europe last year were powered by highly-energy-efficient, clean-burning diesel engines. By the end of this year, DaimlerChrysler will introduce its latest diesel technology, called “Bluetec,” in one of its larger Mercedes sedans here. Next year, DaimlerChrysler will likely begin offering the new diesel technology in light trucks and SUVs it will build in North America. A year later, Bluetec should also be available in some DaimlerChrysler automobiles for sale in America. That same year, 2008, should see DaimlerChrysler introducing its brand-new hybrid propulsion system in several of its models in America. That new hybrid will be the first fruit of a partnership that DaimlerChrysler entered into more than a year ago with GM and BMW. Who knows? By then, gasoline might be selling again for $3 or $4 dollars per gallon, and DaimlerChrysler plans to reduce its reliance on gas-guzzling light trucks and SUVs will bear fruit. That would a good thing for the company, its employees and shareholders, for Delaware and for America.
