'Project X' Marks Chrysler Restructuring Bid

DaimlerChrysler Chairman Dieter Zetsche (right) talks to Chief Financial Officer Bodo Uebber at the auto company's annual board of directors' press conference in Auburn Hills, Mich., Feb. 14, 2007.

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Chrysler announced its second major restructuring of the decade Wednesday, saying it will lay off about 13,000 people, close a plant in Delaware and a distribution center outside Cleveland, Ohio.

It lost more than $1.3 billion on operations last year and dragged down the profits of its parent company, DaimlerChrysler.

In seeking to downsize quickly, the Chrysler division is following in the footsteps of General Motors and Ford.

Even before details of the latest restructuring began dribbling out, it was clear that Chrysler was on track to become a smaller company.

Shawn McAlinden is with the Center for Automotive Research. He says there's been a lot of gallows humor from workers about the timing of Wednesday's announcement.

"It's called the St. Valentine's Day massacre," he said. "It's the third shoe dropping here. After GM and Ford, we knew that Chrysler would have to do it as well."

Like GM and Ford, Chrysler relied heavily on pickup trucks and sport-utility vehicles for its profits. A spike in gas prices last year sent sales of those vehicles plummeting and forced all three to start looking for a way out of a growing crisis.

Auto dealer Jack Fitzgerald thinks he knows what the domestic automakers need to do. He opened his first franchise, a Dodge dealership, back in 1966, and he believes many of Detroit's current wounds are self-inflicted.

"(If) we don't take care of our customers, we don't stay in business, and the problem with Detroit is they are insulated from that," he said. "The union leaders don't have to take care of a customer with a complaint, and management doesn't have to take care of a customer with a complaint, they leave that to people like me and the people that work in my dealerships."

Standing on the floor of his dealership in Kensington, Md., Fitzgerald said he is not holding out much hope the latest restructuring will do much to avert Detroit's two-decade-long slide.

"It's heart-breaking to me. I have a huge investment in the domestic industry, and as you can tell I'm not very happy about it," he said. "And they're not very happy with me. If I could afford to, I guess we would part company, but I have an investment.

"I have lots of customers who have bought these brands, and I'm hopeful that somebody will get control out of these companies and make real cars out of them," he added. "Just like Toyota and Honda do. It's inexcusable for them not to."

One way Chrysler hopes to turn things around is by doing more to share parts and platforms with its German parent company, DaimlerBenz. But auto industry experts remain skeptical. It's been nearly 10 years since Daimler acquired Chrysler, and the two companies have never integrated operations very well.

Automotive writer Brock Yates says consumers have a lot to choose from in the U.S. market, and may not be willing to wait for yet another turnaround attempt at Chrysler. He said it's not just the Japanese competitors, but Korean automakers, and soon, the Chinese will enter the market.

Chrysler is expected to use attrition and buyout incentives similar to those used by GM and Ford. With Wednesday's announcement the big three automakers — GM, Ford and Chrysler — will be eliminating more than 80,000 production jobs.

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