Chrysler in Trouble
Chrysler Motors, LLC was the third largest automobile manufacturer in the United States filed for bankruptcy protection April 30th, 2009, under section 363 of chapter 11of the United States bankruptcy code. The company included its 24 subsidiary in the filing. In order to remain viable and as a condition of its bankruptcy filing Chrysler announce that it would form an alliance with Fiat spA. Fiat was scheduled to receive a 20% stake in the company which would increase to 35% over time. The Voluntary employees benefit association would secure a 55% stake in the company once it emerged from bankruptcy. The United States Treasury would also participate in this restructuring since they considered Chrysler an integral part of the U.S economy and for their concern would receive an 8% stake in the company. The Canadian and Ontario governments would also receive a 2% stake. Analyst surmise that the major reason for Chryslers financial problems result from their poor business strategy, lack of innovation and the global financial crisis. Chrysler failed marketing strategy failed to produce vehicles that met the needs of the American consumers. Chrysler unlike its competitors Honda and Toyota did not produce fuel efficient cars. The company continued to produce large Trucks and Suv’s, with the increase in fuel prices consumers could no longer afford their products. Chrysler’s lack of innovation and inability to market to market fuel efficient vehicles led to their demise. Product quality was also an issue at Chrysler; quality related issues tarnished their brand image. Chrysler’s products historically have been of substandard quality per the U.S. auto task force. In 2008, the U.S. The U.S. economy experienced down turn. Banks ceased lending. They were problems in the U.S. real estate markets. There was a rise in unemployment and a decrease in personal spending hampered consumer spending. Consumers who wished to purchase Chrysler vehicles were unable to because they could not get loans or they were simply too expensive. In 2008 Chryslers the U.S auto industry sales decreased by 18% from 2007 levels. Chrysler’s largest market was the U.S in 2008 73%, of its sales were derived from purchases made in the United States. Chrysler produced 61% of its vehicles and contained 78% of its materials from suppliers in the domestic U.S. market. The Global financial crisis severely impacted Chrysler’s ability to continue operations. The company reported a 48% declined in vehicle sales in 2009. Management could no longer run the company profitably and sought financial assistance once again from the U.S. Government and the U.S. Bankruptcy court. Chrysler’s merger with Daimler Benz also failed and the company once again sought a new partner who would allow it access to capital, foreign markets and innovative production processes. Analysis
Chrysler did not properly conduct an environmental scan. Management was also weak and unable to design and implement strategic plans. It appears they didn’t recognize the American consumer’s preference for smaller full efficient cars. While there competitors met this need, Chrysler continued to manufacture large vehicles and lose market share. Its product market was limited. Chrysler was restricted to the U.S. market alone and was unable to generate revenue in any other market. Chrysler management failed to anticipate the economic downturn and prepare accordingly. When the U.S economy faltered the company was unable to sell its vehicles and as a result lost half of their sales and revenue leaving the company bankrupt. Strategy formulation prior to the bankruptcy was ill conceived. Chrysler was unable to fulfill its mission due to its inability to properly set objectives. Their strategy was deficient to the extent that it provided no alternative product market and if it did it would most likely take years to implement and would be of non-effect during their current...
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