In Tough Economy Chrysler Looks to IT to Trim Expenses, Improve Business
At the struggling automaker, private-equity ownership drives IT to slash costs through outsourcing and retool to compete globally.
CIO — No one thought it would get this bad.
But this summer, the U.S. auto market officially hit the skids, putting car manufacturers on track to rack up the worst sales year in a decade.
As gas rose to more than $4 a gallon, commodity prices hit the roof and consumers rejected gas-guzzling SUVs and minivans—or, crippled by the housing crisis and credit crunch, put off new vehicle purchases indefinitely—June's U.S. car sales numbers were a clear sign that things had gone from bad to worse for an industry that was already suffering. General Motor's sales fell 18 percent. Ford's slid 28 percent. Even Toyota, which analysts predict could soon overtake GM as the U.S. auto sales leader, hit a serious speed bump, with its sales dropping 21 percent.
And there, at the bottom of the heap, was Chrysler.
The Auburn Hills, Mich., automaker's June sales fell 36 percent compared with 2007 sales. In North America, where Chrysler does 91 percent of its business, its market share shrank to less than 10 percent for the first time in years. July provided little relief, with U.S. vehicle sales falling to 16-year lows and Chrysler announcing a 29 percent decrease in sales compared to last year. And that was after Chrysler had announced plans to lay off nearly 30 percent of its employees, reduce its product portfolio and shut down its plants for two weeks this summer.
This can't be been what Cerberus Capital Management, the New York-based private-equity firm, which bought a majority stake in Chrysler last August, was hoping the headlines would be, leading up to its one-year anniversary. This year was to be one of painful cuts, to be sure, but one resulting in a return to profitability in 2009, a notion Cerberus and Chrysler executives have since abandoned.
A turnaround was always going to be challenging for Chrysler given today's auto industry focus on global markets, fuel-efficient vehicles and onboard technological innovation. Unlike Ford and GM, which have large foreign operations, Chrysler does little business abroad. It remains dependent on heavy vehicles, like large pickups, sport utilities and minivans. And its vehicles' technical bells and whistles don't match up to the competition, says David Cole, chairman of the nonprofit Center for Automotive Research (CAR). Chrysler has nothing like GM's OnStar system, Toyota's hybrid power-train technology, Ford's Sync communications and entertainment system developed in conjunction with Microsoft, or BMW's onboard computing.
