Turn Around

“Chrysler LLC is laying out a turnaround plan based on a radical idea: Offering a smaller number of models will lead to bigger profits.

“Over the next three years or so, the closely held auto maker plans to drop as many as half of the roughly 30 models it now produces, a move likely to cut sales at least for a while...

“‘We're going to be the best little car company in America,’ Chrysler Vice Chairman Jim Press said in an interview here.

“The plan defies conventional wisdom in the auto industry and in Detroit. For almost a century, auto makers have been fixated on building greater economies of scale. The notion that bigger is better has driven each of Detroit's Big Three auto makers and most of their rivals for decades. It inspired several mergers and provided the foundation for just about every turnaround effort the industry has seen.

“But the new management team at Chrysler and its advisers at private-equity firm Cerberus Capital Management LP, its majority owner, are convinced ‘the old rules in this industry no longer apply,’ Mr. Press said.

“The U.S. has become a mature, slow-growth market, and competition is so fierce that no auto maker can count on rapid increases in sales, which were a key component of the previous turnaround effort at Chrysler and are still a goal of many auto makers.

“‘There's no huge [increase in sales] volume around the corner,’ Mr. Press said. ‘We need to give up that dream and face reality.’ …

“GM is taking a more conventional path with its restructuring effort. While slashing costs, the company has been developing more attractive vehicles in hopes they will lift sales. An increase in retail sales is supposed to push its U.S. market share a bit higher and offset declines in low-margin sales to rental fleets.

“The company believes it can be more profitable if it spends money producing fewer, but better, vehicles, Mr. Press said.”

(“Chrysler's Turnaround Plan: Less Is More.” Neal E. Boudette and Terry Kosdrosky. The Wall Street Journal. February 11, 2008. pg. A3)

CONVENTIONAL WISDOM has gotten the American auto industry how far... ?

There is great hope to the degree that they / we actually can give up old dreams, and become focused in the face of new realities.

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