Chrysler might close its plant in Newark, Del.

Move said to be part of plan for closer ties between automaker and German parent

February 06, 2007|By The Detroit News

Chrysler's plant in Newark, Del., would likely close under a secret DaimlerChrysler restructuring plan dubbed "Project X.

The plan, to be unveiled Feb. 14, is focused on transforming Chrysler into a smaller, more efficient automaker with closer ties than ever to its German parent company and the Mercedes-Benz luxury division. It calls for unprecedented sharing of vehicle architectures and parts between Chrysler and Mercedes, including developing small cars and SUVs together.

The plan also details deep cost cuts similar to those at General Motors Corp. and Ford Motor Co.: plant closings, a reduction of factory shifts and employee buyouts aimed at slashing more than 10,000 blue-collar jobs. Sources said the likely closures will include the Newark assembly plant and an engine plant in Detroit.

Overall, the success of Project X is critical to the future of Chrysler, which lost a projected $1.2 billion in 2006 and saw its U.S. market share slide to 13 percent at year's end.

In Germany, anxious investors are putting pressure on DaimlerChrysler Chairman Dieter Zetsche to sell all or part of Chrysler.

But Zetsche has steadfastly refused to consider a sale and has now staked his career on pushing for greater levels of integration between mass-market Chrysler and the upscale Mercedes-Benz brand.

"We need to go deeper and faster, or else what's the point?" Zetsche is said to have told Chrysler officials recently.

Details of the restructuring plan have been closely guarded, and Chrysler executives have declined to comment on its content. But behind the scenes, the pace of discussions has been intense.

Teams from Mercedes and the consulting firm McKinsey & Co. have become fixtures at Chrysler's headquarters in Auburn Hills, Mich. Company officials say that a 48-seat Airbus corporate jet has been jammed with staffers shuttling to and from DaimlerChrysler's offices in Stuttgart, Germany.

Late last month, DaimlerChrysler's global management board reviewed Project X in final preparation for submitting it to the company's supervisory board.

The most stunning piece of the plan concerns the joint development of vehicle architectures and parts for future Chrysler and Mercedes models.

According to people familiar with the situation, Chrysler and Mercedes will collaborate on their next generation of small cars built in the U.S. and Germany. Also, work is under way on a common SUV architecture for the Mercedes M-Class and Chrysler's Jeep Grand Cherokee and Dodge Durango.

Sharing integral underbody parts - such as the basic chassis and suspension systems - would mark a milestone in the turbulent evolution of DaimlerChrysler, which was formed when Daimler-Benz AG bought Chrysler in 1998.

It's also the key to reducing costs and improving vehicle quality at Chrysler, which is still struggling nine years after its was bought by the German automaker.

Besides developing vehicles together, Project X calls for Chrysler and Mercedes to expand purchasing of common parts such as steering columns and to obtain more components from low-wage nations in Asia.

"It makes sense to do this," said Jurgen Pieper, the chief auto analyst at Metzler Bank in Germany. "If they go forward together, they have to go closer together."

But bringing Chrysler and Mercedes closer is sure to court some controversy.

Mercedes executives have argued over the years that the brand's reputation could be damaged by sharing structural parts with less expensive Chrysler, Jeep and Dodge models.

Even with shared architectures, Mercedes and Chrysler models will remain highly differentiated by their engines, styling and interiors. The brand identities of the Grand Cherokee and M-Class, for example, will be kept totally separate.

One analyst said there is little risk in sharing platforms if the overall designs and features remain distinct. "Most consumers don't care if the architecture is similar or the same," said Art Spinella of CNW Marketing Research.

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