The Wall Streets Journal dated December 4, 2000 reported that DaimlerChrysler hired investment bank J.P. Morgan & Co. to help in its defense (J.P. Morgan is said it is only one main investment bank which has no relation with the merger of Benz and Chrysler. It made no comments on this report.) Mr. Kirk Kerkorian, its third biggest shareholder, filed an 8 billion dollars lawsuit on November, 2000 against Mr. Juergen Shrempp and DaimlerChrysler. The New York Times dated November 30 reported that Mr. Ekkehard Wenger, a leading German shareholder, said he planned to call for the dismissal of Mr. Schrempp at the next annual shareholders meeting.
The Newsweek dated December 11, 2000 reported 12 billion dollars cash reserve of DaimlerChrysler suddenly decreased to 2 billion dollars. Standard & Poors downgraded its debt on DaimlerChrysler as early as today. Moody's Investor Service did too. Therefore DaimlerChrysler is said to be obliged to borrow money at high rate to cope with the situation.
Mr. Dieter Zetsche, a new president of Chrysler, who was sent to restore the company by Mr. Schrempp about a month ago from Stuttgart, Germany, unveiled a plan to cut material costs by $6 billion over the next two years on December 7, 2000.
The Chrysler asked its suppliers to reduce prices by 5 percent to cut costs from January 1, 2001. The move is part of a program to reduce supply material costs by 15 percent in two phases over the next two years. In the second phase, DaimlerChrysler will work closely with suppliers to find an additional 10 percent cost improvement over the two-year period, saving another $4 billion.
As emergency measure for reducing over inventory, Chrysler closed several plants and laid off many workers. But separately from these emergency moves, Chrysler plans to consolidate a few plants to one plant which can manufacture at least three kinds of vehicles and to reduce the manufacturing costs. They also said they want to reduce or cut sales incentive at the earliest occasion. They like to stop push production system which builds vehicles they think consumers want but to have a pull production system in which vehicles are built according to individual orders.
Some dealers said how to reduce the over inventory is the first thing. They think to sell as much as possible by offering sales incentive would be much profitable for both manufacturers and dealers. Some of news media reported that it would be very difficult to change traditional way of marketing to a different one which is applied to luxury car marketing in Germany. American consumers might be able to wait for a few days but not for months.
DaimlerChrysler will cooperate with suppliers to find means and ways for cutting costs. But it can be said that substantial number of suppliers will be cut from present 900 companies. U.S. auto parts manufacturers complained even today that Japanese market is not quite open to them. How are they trying to against DaimlerChrysler's new purchasing policy ?
Workers of UAW are guaranteed 90 percent income for coming three years even though they are laid off. How does UAW react to their consolidation plan? It took years for GM to make the union to understand the plant consolidation but still their talks are under way.
People of world auto industry is watching how Mr. Schrempp, a man of character, fights back from the present difficulties.