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02-18-2008, 11:22 PM
Nardelli's Overseas Push Aims to Curb Expenses, Cultivate New Markets
DETROIT -- Six months after taking the helm at Chrysler LLC, Chief Executive Officer Robert Nardelli is beginning to move forward with his first major
reorganization at the auto maker: a broad shake-up of its engineering operations.
In coming months, Chrysler will expand operations at engineering centers in China and Mexico and will prepare to open others in India and Eastern Europe as part of a push to internationalize a company heavily dependent on its home market in North America.
Mr. Nardelli is betting the overseas centers will help Chrysler cut engineering costs and move it forward in sourcing parts and selling vehicles in big developing markets.
Chrysler has been slow to move engineering work abroad, a cost-saving measure that other auto makers around the world are increasingly adopting.
"We're going to have this migration over this calendar year of beefing up and growing those international centers," said Frank Klegon, Chrysler's vice president of product development.
The effort -- which won't affect current U.S. engineering employment -- follows two other initiatives begun under Mr. Nardelli. One, called Project D, is aimed at developing a new generation of midsize sedans, which make up a huge chunk of the U.S. auto market but is a segment where Chrysler's current models are barely able to compete. The Sebring, one of the auto maker's current models in this segment, known as the "D segment" in industry jargon, has been a flop.
The second involves the formation of a new engineering group, called ENVI, that will focus on hybrids and electric vehicles -- which Mr. Nardelli and Vice Chairman Jim Press see as critical for Chrysler to thrive. In recent meetings with dealers, Mr. Press said Chrysler intends to sell hybrid versions of cars in its lineup, people familiar with his remarks said.
Chrysler has no hybrids now. Its first is due this year and will use a power train developed by General Motors (http://online.wsj.com/quotes/main.html?type=djn&symbol=gm) Corp.
The engineering moves are intended to meet Mr. Nardelli's goal to strengthen Chrysler's internal operations, or "enhancing the core" as the CEO has described it in meetings with employees, people familiar with his thinking said.
But beefing up Chrysler's engineering might require a tough balancing act from Mr. Nardelli. With Chrysler posting losses and its sales declining amid the slowdown in the U.S. economy, new majority shareholder Cerberus Capital Management LP is looking to Mr. Nardelli to cut costs. The company recently eliminated 1,000 salaried jobs, including many in engineering and design, and has let go a large number of contract workers, some of whom worked in development.
Many engineers in the company grumble that they lack enough people to make the many improvements to existing vehicles that Messrs. Nardelli and Press have ordered and to expand into hybrids and re-engineer the way Chrysler develops midsize sedans, people familiar with the matter said.
Amid the cutbacks, Chrysler recently hired two senior engineers from Ford Motor (http://online.wsj.com/quotes/main.html?type=djn&symbol=F) Co. and is trying to recruit others, especially with experience in hybrids.
Mr. Nardelli focused on Chrysler's engineering operations shortly after he arrived and noticed it lacked the full complement of resources of an independent company, people familiar with the matter said. During its time as part of DaimlerChrysler AG, the auto maker had trimmed its engineering capabilities and leaned on the company's German half and partners such as Mitsubishi Motors Corp. to develop vehicles and major components.
"Daimler was clearly in the driver's seat for advanced propulsions, particularly fuel cells," a person familiar with the matter said. "Chrysler was sort of developing a dependency where they focused on designing vehicles while propulsion technology trickled down from Daimler."
In talks with employees, Mr. Nardelli has emphasized the need for Chrysler to change from being "a division within a larger company" to being a "holistic," stand-alone organization, people who have attended these meetings said. "That's a major cultural change," he said in one meeting in December, according to people who were in the audience.
While rebuilding its engineering capabilities, Chrysler is planning to add development centers overseas in the hope this will help open big, developing markets for sales. In the December meeting, Mr. Nardelli said having operations in China, India and Russia will help Chrysler build business ties it needs to increase vehicle sales in those countries, these people said.
About 90% of Chrysler's vehicle sales come from North America. Last year it sold 238,218 vehicles in other regions, up 15% from 2006 but a small portion of its total sales of about 2.6 million cars and trucks.
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http://online.wsj.com/article/SB120338689676876059.html?mod=googlenews_wsj
DETROIT -- Six months after taking the helm at Chrysler LLC, Chief Executive Officer Robert Nardelli is beginning to move forward with his first major
reorganization at the auto maker: a broad shake-up of its engineering operations.
In coming months, Chrysler will expand operations at engineering centers in China and Mexico and will prepare to open others in India and Eastern Europe as part of a push to internationalize a company heavily dependent on its home market in North America.
Mr. Nardelli is betting the overseas centers will help Chrysler cut engineering costs and move it forward in sourcing parts and selling vehicles in big developing markets.
Chrysler has been slow to move engineering work abroad, a cost-saving measure that other auto makers around the world are increasingly adopting.
"We're going to have this migration over this calendar year of beefing up and growing those international centers," said Frank Klegon, Chrysler's vice president of product development.
The effort -- which won't affect current U.S. engineering employment -- follows two other initiatives begun under Mr. Nardelli. One, called Project D, is aimed at developing a new generation of midsize sedans, which make up a huge chunk of the U.S. auto market but is a segment where Chrysler's current models are barely able to compete. The Sebring, one of the auto maker's current models in this segment, known as the "D segment" in industry jargon, has been a flop.
The second involves the formation of a new engineering group, called ENVI, that will focus on hybrids and electric vehicles -- which Mr. Nardelli and Vice Chairman Jim Press see as critical for Chrysler to thrive. In recent meetings with dealers, Mr. Press said Chrysler intends to sell hybrid versions of cars in its lineup, people familiar with his remarks said.
Chrysler has no hybrids now. Its first is due this year and will use a power train developed by General Motors (http://online.wsj.com/quotes/main.html?type=djn&symbol=gm) Corp.
The engineering moves are intended to meet Mr. Nardelli's goal to strengthen Chrysler's internal operations, or "enhancing the core" as the CEO has described it in meetings with employees, people familiar with his thinking said.
But beefing up Chrysler's engineering might require a tough balancing act from Mr. Nardelli. With Chrysler posting losses and its sales declining amid the slowdown in the U.S. economy, new majority shareholder Cerberus Capital Management LP is looking to Mr. Nardelli to cut costs. The company recently eliminated 1,000 salaried jobs, including many in engineering and design, and has let go a large number of contract workers, some of whom worked in development.
Many engineers in the company grumble that they lack enough people to make the many improvements to existing vehicles that Messrs. Nardelli and Press have ordered and to expand into hybrids and re-engineer the way Chrysler develops midsize sedans, people familiar with the matter said.
Amid the cutbacks, Chrysler recently hired two senior engineers from Ford Motor (http://online.wsj.com/quotes/main.html?type=djn&symbol=F) Co. and is trying to recruit others, especially with experience in hybrids.
Mr. Nardelli focused on Chrysler's engineering operations shortly after he arrived and noticed it lacked the full complement of resources of an independent company, people familiar with the matter said. During its time as part of DaimlerChrysler AG, the auto maker had trimmed its engineering capabilities and leaned on the company's German half and partners such as Mitsubishi Motors Corp. to develop vehicles and major components.
"Daimler was clearly in the driver's seat for advanced propulsions, particularly fuel cells," a person familiar with the matter said. "Chrysler was sort of developing a dependency where they focused on designing vehicles while propulsion technology trickled down from Daimler."
In talks with employees, Mr. Nardelli has emphasized the need for Chrysler to change from being "a division within a larger company" to being a "holistic," stand-alone organization, people who have attended these meetings said. "That's a major cultural change," he said in one meeting in December, according to people who were in the audience.
While rebuilding its engineering capabilities, Chrysler is planning to add development centers overseas in the hope this will help open big, developing markets for sales. In the December meeting, Mr. Nardelli said having operations in China, India and Russia will help Chrysler build business ties it needs to increase vehicle sales in those countries, these people said.
About 90% of Chrysler's vehicle sales come from North America. Last year it sold 238,218 vehicles in other regions, up 15% from 2006 but a small portion of its total sales of about 2.6 million cars and trucks.
http://s.wsj.net/public/resources/images/NA-AP463_CHRYSL_20080218194815.gif
http://online.wsj.com/article/SB120338689676876059.html?mod=googlenews_wsj