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Bob Nardelli’s speech to the journalists, 2008 New York Auto Show

nardelli introduction

Good morning, everyone. I’m honored to be here today to help kick off this outstanding auto show.

Chrysler has a connection with New York as old as the company itself. Walter P. Chrysler “launched” his first car here during the 1924 show. I say “during” because he couldn’t actually get the Chrysler Six into the show. Instead, he rented the lobby of the hotel where most of the journalists and many bankers were staying ... and put the car there for all to see.

The car was a hit! The company was funded. And thus began the rich 80-plus-year history of Chrysler.

On my flight in, I saw the Statue of Liberty, which reminded me of another connection between Chrysler and New York City. Lee Iacocca, while chairman of the Chrysler Corporation, headed up the Statue of Liberty – Ellis Island Foundation, which raised funds to renovate and preserve one of our country’s greatest symbols of freedom.

For generations of immigrants arriving in New York, the statue represented a new world, new freedom and a new start. In some ways, Chrysler is in the same situation today.

Newly independent, we are reinventing ourselves for success. And we come to work every day energized about the opportunities that lie ahead for us. It really is a New Day at Chrysler!

As you know, I’m a relative newcomer to the automotive industry. But I’m surrounded by people with exceptional intellect – men and women who really know the DNA of the auto industry – and, of course, Chrysler. These are dedicated employees with an average tenure of more than 20 years … who are passionately committed to helping the company succeed.

Equally, I share the Office of the Chairman with Tom LaSorda, who knows everything there is to know about building cars, as a result of his 30-plus years in the industry ... and Jim Press, who earned a reputation at Toyota for 37 years as one of the best executives around when it comes to working with dealers. In other words, we have world-class experts on both the supply and demand sides of our company. Along with my 38 years in business, Tom, Jim and I bring more than 100 years of experience to the Office of the Chairman.

bob nardelli smiles

Together, we have a strategy to return Chrysler to profitability as an independent company and we have all the tools we need to succeed — even in this challenging economy.

As the first major North American automaker to be privately operated in more than 50 years, we have an ideal structure for the work we have to do. Being private helps us be lean, agile, decisive and fast to act on market opportunities.

That means we can be highly responsive to our customers:

a quick yes
a quick no
but never a slow maybe

We also have the added advantage of an owner-operator mindset. In a sense, Chrysler is like a 60-billion-dollar start-up company with a rare opportunity to truly re-define its own company culture and path to success.

There’s no doubt that the leadership team has always been passionate about Chrysler. But now they’ve got some real skin in the game. Ask anyone who has a meaningful ownership stake in his or her company. It makes a huge difference in the way they approach their jobs ... and in their dedication to their work. When you adopt the attitude of an entrepreneur there are no “hours off.”

Throughout my career, I’ve been fortunate to have been involved in more than 100 acquisitions. But Chrysler’s situation is unique. We’ve gone from being a scrappy, underdog of a company with its own identity, culture and metrics ... to a division in a much larger company, which as any parent company would do, drove to create synergies and eliminate redundancies. Now, we’re moving aggressively to re-establish Chrysler as a profitable operating company once again! We’re sharply focused on the strategic needs – what’s right for our dealers, customers, employees, suppliers and investors.

I can assure you we don’t have or want a 100-page strategy. Ours fits on one page, and has three basic principles:

enhancing our core
extending our business
and expanding our markets

Today, I’d like to share some of the details of how we’re carrying forward this strategy to make the new Chrysler a success.

Enhancing the core means doing the fundamentals a lot better. It starts with listening to our customers, keeping in mind that our dealers are the primary interface with the end customer.

We have rededicated ourselves to our dealers and to increasing their profitability and franchise value. Simply put, we won’t succeed in this marketplace unless they succeed.

For example, our dealers were choking on inventory. So we acted fast to reduce it by more than 200,000 units at the end of 2007, when compared to July of 2006. This saved our dealers more than one million dollars per day in floor plan costs … and we'll continue to reduce inventory throughout the year.

We’re listening to our dealer council, and working with them to become easier to do business with. We’ve changed our dealer incentive program, and put dealers back in charge of the regional advertising associations, because they'll always know their local markets better than we ever will.

On the service side, we’ve made it faster and easier for dealers to order the parts and get the approvals they need for warranty work ... without a lot of red tape, including a new, dealer-friendly return policy.

Next, our customer satisfaction isn’t where we’d like it to be. So, we established the first-ever Chief Customer Officer in the automotive industry to help get our entire organization aligned on satisfying customers. For example, the Office of the Chairman attends the monthly Quality review where we make resource allocation and key product enhancement decisions.

And we’re moving faster every day to deliver more quality and value than ever. During The New Chrysler’s first 60 days, our team approved 260 line item product enhancements, representing an investment of half a billion dollars in better interiors, better materials, less noise and vibration ... all improvements that really matter to our customers. And that was just the beginning. Since August, we’ve approved nearly 500 total changes – and we’re not stopping there!

Previously, we offered too many options and option packages along with our products. That resulted in too much complexity in the plants that build them ... too much confusion for the dealers who order them ... and no added-value to the customers who buy them.

We’ve changed that, too. We’re eliminating the “low-take” options and, instead, packaging the popular ones ... and adding tremendous value and excitement in our “New Day” vehicles. The result: between 2006 and 2007, we’ve reduced ordering complexity by 93 percent.

Our company is facing the realities of both the economy and the market, and moving quickly to right-size our business activities on all fronts, including our product plans and our distribution system – two key components of our strategy to enhance the core of our business.

In February, we talked to our dealers about Genesis – our plan to simplify our product portfolio and dealer network in a way that will enhance our dealers’ profitability and, in turn, support our mutual success.

We’ve already taken a major step toward that end with the elimination of the Pacifica, Crossfire, Magnum and PT Cruiser convertible.

Our brands will get stronger as they become more highly differentiated and build on their traditional strengths. Our product portfolio will get stronger as we reduce overlapping products and add products to fill new segments and bring our customers the new technologies and innovation they’re asking for.

The all-new Dodge Journey – a youthful, sporty crossover – was designed from the start to appeal to global customers in a segment that represents 6 million units worldwide. Journey hits the mark for buyers who want more style and performance ... and buyers who need more space and versatility. Later this year, we’ll introduce our all-new, game-changing 2009 Dodge Ram pickup with more than 35 new innovations – true Dodge to the bones! It features first-in-class innovations like:

a coil spring
multi-link rear suspension
and a unique new cargo management system we call “RamBox”
It has more than 30 safety features, including:

side-curtain air bags
standard four-wheel ABS
and standard ESP with Hill Start Assist and Trailer Sway Control
We’re especially proud of the loaded premium interior appointments we put into Ram. Those include:

MyGIG with a 30-gig hard drive
Dodge’s first-ever heated steering wheel
a rear-seat DVD entertainment system
and even an available, first-in-segment, SIRIUS Backseat TV

And in a few hours, we’ll take the wraps off of our full Dodge Challenger lineup for 2009.

The Challenger proves that Chrysler really understands the visceral and motional appeal of automobiles!

In a challenging economy, we need to capitalize on adjacent opportunities, so the second part of our strategy is extending our business ... and we’re doing that on a number of fronts.

To begin with, we’re aggressively moving to capture more of the customer service and parts business by focusing on what dealers need to increase their profitability. We currently get just over 20 percent of our potential aftermarket service and parts business.

That means we have a huge opportunity for growth in this area. Our Mopar brand has long been a part of our muscle-car heritage, but we’re reaching out now to the off-road enthusiasts who live the Jeep lifestyle. Starting with the Wrangler – the icon of the brand – we’re giving our dealers a chance to get deeper into the aftermarket game with items like:

a special off-road navigation system
chrome grille
heavy-duty bumper
and a special sound system
Another way we’re extending our business is by investing in new products that give us coverage in segments that we’re close to, but not competing in today.

For example, last year we returned to the Class 3 truck market and quickly achieved a 29 percent share. This year, we extended into the Class 4 and 5 medium-duty markets with Dodge Ram 4500 and 5500 Chassis Cabs, which offer best-in-class fuel economy.

Here’s another example. This year we’ll launch our first hybrids: the Classic Chrysler Aspen and, the Bold Dodge Durango. Both of these vehicles deliver a 25 percent overall improvement in fuel economy without sacrificing performance or the towing capabilities our customers have come to expect. The Aspen and Durango incorporate the same two-mode technology as the vehicle voted Green Car of the Year. We will continue to extend our two-mode hybrid program to other vehicles, including the Dodge Ram truck that we announced in January.

We’re also committed to mild-hybrid technology, which provides some of the benefits, with less of the cost/weight penalty of a full hybrid powertrain. Within the next few years, we will offer mild-hybrid technology on other Chrysler vehicles.

We are also extending our business through innovative new technologies. You may have already heard about our first-to-market innovations like:

Stow ’n Go® seating
MyGig entertainment system
Flip and Fold second row seating
and the industry’s first factory-installed in-car satellite TV.

We’ll soon be following those up with our next generation of innovations, including:

Chrysler has always been known for engineering innovation. The New Chrysler will get that innovation to market faster than anyone in the business!

The third part of our strategy involves expanding the market, increasing our participation in vehicle segments and global market where there is significant growth.

We sold a record 238,000 vehicles in international markets in 2007 and we’re off to a good start in 2008. Our year-to-date international sales are up 10 percent through February, as we reported our 33rd consecutive month of sales growth outside of North America.

By 2012, we plan to increase our international sales to more than 400,000 units. There are four ways we intend to foster this expansion.

First, we’re “regionalizing” our business operations ... moving closer to our markets, our dealers and our customers.

We’ve accomplished that in Latin America, having centralized our operations in Mexico.

We’re also doing that in Asia. Last fall, we brought on board Phil Murtaugh, one of the most highly regarded businessmen in the region, to head up our Asian operations.

And, beginning this summer, Chrysler will also expand its sales, marketing and services operations in Europe.

We’re also establishing Global Centers of Excellence to support our long-term growth. Working with strategic partners, we are expanding our presence in China, India, Mexico and Russia.

Our Centers of Excellence will support design, engineering, sourcing, manufacturing and distribution activities for local and regional markets. The Global Centers will optimize our products that are uniquely suited for local customer requirements while improving operational efficiency for speed and value.

Second, we continue to add new dealers to our international network. Between 2004 and 2007, the number of dealer outlets and independent distributors outside North America increased by 17 percent.

Third, we’re relentlessly improving our existing products.

And, fourth, we’re developing new vehicles — the kind of cars our customers around the globe are dreaming about.

We launched seven great products in major international markets during 2007. And this year, we’ll keep up the pace with the introduction of three more – the all-new Chrysler Grand Voyager with its Swivel ‘n Go seating, Jeep Cherokee with its unique Sky Slider roof and Dodge Journey, our crossover that was designed from the start for the global passenger car market.

We’re expanding our market reach by adding new B-segment or subcompact offerings. With oil prices now more than $100 a barrel, this segment is growing in importance in North America, as well as in international markets.

We recently signed a deal with Nissan to supply us with a version of its B-segment sedan, the Versa, for limited distribution in South American markets beginning in 2009. We also have a landmark deal with Chery to build small cars in China that we will market globally.

But there’s one more “E” and it’s the most important one of all. Execute – we must be flawless in the execution of our strategy, and committed to improve everything we touch. We are aligning our metrics around our integrated strategies rather than individual functions to ensure flawless execution.

Enhance our core …

Extend our business …

Expand our markets …

And, execute flawlessly.

One of the most important roles of the Office of the Chairman is resource allocation. And if you believe – as we do – in customer first and quality period, then you put these resources into designing and building aspirational vehicles with true competitive advantage that can be proudly displayed in showrooms around the world.

You do not try to be all things to all people. You segment. You focus. You strategically and sufficiently resource. And you expect flawless execution.

From our employees, our dealer organization, through our supply base, there are more than one million families whose livelihood depends on our company’s success … and there are thousands of communities and tens of millions of customers counting on Chrysler.

Our return is critical for Detroit, for the auto industry and for America. The job of bringing Chrysler back to its historic place is the opportunity of a lifetime, and a mission we take most seriously. The founding fathers of our company ...

Walter P. Chrysler
The Dodge Brothers
and John North Willys

... all brought innovation and passion to the auto industry, and left us a unique heritage to draw upon today. I began by talking about Chrysler’s connection to one famous New York landmark, the Statue of Liberty. And I’ll close by referencing another one … the Chrysler Building.

I’ve always been impressed by it, but today I understand how this majestic structure expresses the very soul of Chrysler in its deep respect for engineering ... and its celebration of design. It refuses to be ordinary. As one observer said: It “not merely scrapes the sky but positively pierces it.” The Chrysler Building makes a statement about bold dreams and confidence in the future.

Our headquarters in Michigan is where we work every day to bring those dreams to life. Ladies and gentlemen, we at Chrysler are determined to turn the vision of a great future into reality for this historic company.

Thank you very much, I enjoyed being with you today.

Questions from the press

Assuming there's a recession... do you accept that there is one... what if anything would you be doing differently?

It's a great question, and let me just set a backdrop. Jim, Tom, and I got together towards the end of last year, and as I said in my comments, we really faced reality... as a result of that, we groped with somewhat of a traditional view on both sides, and we identified a very aggressive, conservative plan for 2008. We kind of pegged the industry at about 15.5 [million] long before the rest of the industry got there. As a result of that, we were able to do a number of things. Tom LaSorda was able to resize the footprint. We went through some agonizing and tough decisions, any time you have to downsize and affect loyal, dedicated employees. But we did that, really taking a realistic look at what the economy might bring. We were quick to move on reducing some of our products, Jim went out and talked and did a fireside chat with all of our dealers, I think in eight cities, talking about the importance of — so in our plan, we did not build in a second half recovery. If it happens, we couldn't be happier to chase the volume up. ... if we were wrong and weren't conservative enough, we will be quick to adjust as we did, towards the end of the fourth quarter, facing 2008.

I think that the economy, some of the consumer confidence and so forth, is out there and permeates throughout everything we do. Our job is to continue to make our dealerships the attraction in the community. Our job is to make sure that our product differentiates from the competition and represents all of the aspirational desires a consumer wants ... we think that we're as well positioned as one could be. ... [ignoring some private equity talk]

[Rambling question regarding design and cutting the Pacifica studio]

Just as we faced the reality of the economy, we have faced the reality of our consumer feedback. That's why we were first in the industry to have a chief customer officer, and we meet regularly and repetiively on that feedback. So we are not in denial, we are not arguing that some of the customer feedback we have. I think in my experience, my 38 years, you're usually never as bad as people write about, and you're sure never as good as people write about. So I think what I would say is that our quality in some of those vehicles isn't where we want it to be, and I assure you we will be a lot better in our future, as evidenced in our commitment and our resolve to make line-item improvements.

Point number two, I couldn't agree with you more, I mean, the most exciting part of this opportunity for me is to be able to work with really high-intellect engineers who really are on the leading edge of innovation and advances in our vehicles and then to take that engineering and wrap it artistically in a design. I can tell you, it's certainly a lot more fun; when I was building powerplants, high technology was not too appealing but very functional. So the opportunity to work here with these brilliant people has been exciting for me.

Your question about the [Pacifica] design center goes right to the heart of my comment about globalization and bringing globality to Chrysler. It is certainly not a result of the excellent work that the men and women have done there, and we are working to make sure they continue to have gainful employment and challenging excitements. I think the challenge for us on a much broader scale is how do we seach the world, looking at our global centers of excellence, and look for more globality in our designs. I think if you look right here at home in North America and you look at how consumers are voting with their dollars relative to international design, international features, international fit and finish, we need to make sure that our view is as broad as the customer and the market base. So it isn't about abandoning design, it is about reaching and extending our design views on a more global basis.

Why is it so hard to find a car from a US carmaker where you can get a manual gearbox? Why is the Dodge Challenger marketed without one?

Now, the audience is going to think that we planted that question with you, so if you'll join Jim Press at the reveal, we'll put you first in line to sign up for one. I don't want to steal any of Jim's thunder, but be sure to have your pen and checkbook ready.

What's your target for when Chrysler becomes profitable?

I can't tell you that, but I will give you some pretty clear direction. I think it's public knowledge that the Chrysler team met or exceeded every one of the performance numbers that was presented to our investors for 2007. We also ended the year with a billion dollars more in liquidity than the turnaround plan identified. We are in our 2008 plan continuing to move in the direction of returning to profitability. Just as we delivered last year, we are on plan for the first two months. That plan, again, continues to drive the company to profitability, and so we are very pleased with the progress we've made. I couldn't be prouder of the team racing the initiatives that we've had from a market-focused, customer-centric... we're working very hard on driving efficiencies in our business, we are allowing are engineers to again demonstrate their inspiration and our design team to again demonstrate their aspirational capabilities, and I would say, again, within the not too distant future, Chrysler will return to profitability.

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