In a speech to the SAE Greenbrier conference in October, 2004, Tom LaSorda, chief operating officer of the Chrysler Group (and deputy member of the Board of Management, DaimlerChrysler AG), told the assembled, "Despite what you may read and hear—and, yes, despite even what you may believe and fear—there was never a better time than right now to be in the auto industry."
[A pause is in order here to let you assess and digest that comment from a man who doesn't seem to be given to pronouncements of fancy. He joined General Motors in 1977 and worked his way up through a number of positions in manufacturing, including stints at CAMI Automotive, the GM/Suzuki joint venture, as vice president of Production, and as president of Opel Eisenach GmbH in Germany, which has been regularly cited by GM executives as a place where the company's manufacturing system was implemented well; he joined Chrysler as senior vice president-Power Train Manufacturing in May, 2000, was named executive vice president-Manufacturing in January 2002, and took his position as COO on May 1, 2004. Guys with a resume like that tend to be significantly more pragmatic.]
He went on to tell the assembled leaders from both OEM and supplier companies at Greenbrier, "Because today, out of a relentless environment of change, we're truly emerging as one of the most dynamic and innovative industries on the planet."
Sorting Out the Cycles. So, some five months after he made that statement, I ask him if he still believes it. He laughs, and then goes on to explain, "I've been in the business 28 years now. I think it becomes more and more fascinating. There's something about competition and pressure that brings a lot of good things out of people." There's also something about competition and pressure that brings a lot of people to their literal or figurative knees. LaSorda is not one of them. In fact, it is a straightforward seriousness (not solemnity, however) about the business that is characteristic of the kind of success that Chrysler Group is achieving in the market. While its cross-town rivals are having their share of problems, Chrysler, with hot products like the 300, is doing very well, comparatively speaking. But LaSorda cautions: "You have to be careful, because if you'd asked us [about our performance] a few years ago, you'd have said, 'You're the worst in town; what are the other two doing right?' It is a cyclical business." One day you're up, and the next you're not. But LaSorda thinks that because of some hard choices that the company executives made back in 2001, which he describes as "the year we'll all remember here," there should be less in the way of a negative swing going forward. Headcount was reduced. Plants were closed. There were mandated cuts to supplier invoices. It was a trying time, to say the least. But now things have sorted themselves so that the company is working more efficiently and effectively.
He says that a word that will not be a part of the thinking of any members of the leadership team at Chrysler is complacent. That just won't cut it. Listen to LaSorda:
"We've got to get leaner and better and design content out."
"We've got to get leaner and have lower costs."
"We're not going to add staff."
"We don't know what's next. But we'd better be ready."
There's no room for letting things slip back, no easing up. It should not be assumed, however, that LaSorda is some sort of mechanical, humorless individual. For example, when talking about how some vehicle manufacturers (e.g., Hyundai and Toyota) are adding capacity, he notes that some other companies are working toward becoming "right sized." Speaking of right sizing, he says, "We did that." That was one of the results of the 2001 restructuring. He adds, "I hope the day will never come that I will have to close another assembly plant. I can't say that will never happen. But I think we've right sized ourselves." As for the sense of humor, in his speech at the University of Michigan-Center for Automotive Research Management Briefing Seminar in August, 2004, he opined, "The environment in which we compete—at times—may seem like it was lifted from the pages of a good disaster story. Of course, most of the time it seems more like it was lifted from the script of a really bad Hollywood disaster movie. Remember 'The Blob'—it creeps, it crawls, it eats you alive?" There aren't that many automotive execs who would come out with something clearly so amusing. (The movie reference, incidentally, was borne out of the title of the conference: "The Perfect Storm." LaSorda: "Rather than a Perfect Storm, I think our operating environment is more like a Perpetual Storm.")
Not only is LaSorda focused on doing things right today, this son and grandson (both sides of the family) of autoworkers states, "I think our obligation is to look at the business on behalf of not only our shareholders, but the employees, and the unions, and to protect it for the next generation." So decisions today have a ramification on what is to come.
Teamwork & Creative Friction. LaSorda says a fundamental principle of a successful career is predicated on working with good people. He says that at the Chrysler Group the executive committee is an organization that is full of people who have a thorough understanding of the business, from CEO Dieter Zetsche, through to the rest of the members. "This doesn't mean we always agree with one another," LaSorda says. "You want an open environment where you're going to argue with the other person. This isn't about being polite. This is about being focused on the business and doing what's right." He explains that there is an open exchange, then the creation of a consensus. "Then you've got to go out like a team in battle. You've got the mission. Everybody agrees on the path you're going to take. And then you go for it."
The debate, however, is one that includes an assessment of prevailing conditions and the possibilities of what may happen. But he admits, "You always anticipate as much bad news in your planning as you can. But sometimes it goes beyond what you've planned." He cites the rise in steel prices as an example of something that goes beyond what was expected. LaSorda goes on to say that given such a change it is necessary to deal with it, not to proclaim woe-is-me about it. "We're going to take cost out of other areas in materials and offset it. We're not going to miss our numbers. That's the disciplined side of the company. We're not going to lay over. We need to find new creative ideas to fight this stuff."
Changing Business Models. New creative ideas are part and parcel of what seems to be LaSorda's approach to vehicle manufacturing. He thinks that the business models of the past are just that—of the past. So there are transformations underway. For example, next to the Toledo [Ohio] North Assembly Plant, three suppliers are building a facility to produce the body, paint the body, and provide the rolling chassis for a forthcoming Jeep Wrangler. While that doesn't sound necessarily different in and of itself—there are, after all, supplier parks—but what is exceedingly different is that ordinarily Kuka Group, Haden International,, and Hyundai Mobis are providers of capital equipment, and in this case they're that, but then something entirely different, as well. Kuka, for example, typically provides robots, tooling and associated gear for a body shop. In this case, Kuka will actually own and operate the equipment. Instead of providing equipment, they'll be supplying bodies. Haden will be running the paint shop that it has designed, engineered and built. Hyundai Mobis will be in charge of putting together the rolling chassis.
LaSorda explains that each of these companies would otherwise be working within a Chrysler-owned facility to install, setup, tune, and aid with the equipment they've designed, engineered and built. LaSorda says that he knows, for example, what the layout for a body shop should be, what it would cost, and the number of people that are necessary to operate in it. So does the supplier of the equipment. But LaSorda says that to get the body shop, Chrysler pays a premium to the supplier. By having the supplier own and operate the equipment, Chrysler doesn't pay that premium—in fact, it doesn't pay for the equipment at all. It is, instead, buying bodies, not machines. This is in line with something that he's learned in the business: "A customer will not pay for machinery and equipment." A customer in a dealership wants a Chrysler, Dodge or Jeep product, not to have to offset the cost of a robot or a paint booth or a weld line. Overall, Chrysler will be saving about $300 million in this undertaking, which LaSorda points out is enough money to put another product on the road, which will potentially make more money for the corporation.
"It's a great business model, and we'll prove that it works," he states with no equivocation. He acknowledges that there are doubters in the industry, and that doesn't bother him. He's certain that this will be a competitive advantage for Chrysler, so he's not disturbed by their doubt. It may work to Chrysler's advantage.
Does this mean that there will be a pattern of equipment vendors turning into module manufacturers going forward? LaSorda says that the conditions in Toledo were ideal for this sort of undertaking. Because of the age of Toledo South Assembly-Stickney Avenue and Parkway Annex—the first building was opened in 1910—it was clear that something needed to be done for Wrangler production. They could locate it at the Toledo North site, which began production of the Jeep Liberty in April, 2001, or go somewhere else. Chrysler management engaged in discussions with the people at UAW Local 12; "The International UAW was great about this," LaSorda says.
Another factor is the product, the Wrangler, which LaSorda describes as "one of the best, stable products in the auto industry." He explains: "In good times or bad, the volumes are stable." (In 2004, 77,550 Wranglers were sold.) And because this is not a high-volume product, the rate at which the three suppliers will be building products is one that is manageable: "We didn't set up a 60-jobs-per-hour plant," he says, then adds, "Can it grow? Yes." Production is to begin there in 2006.
Driving Flexibility. LaSorda is looking for other types of flexibility within the Chrysler system. This flexibility is meant to do a number of things, with reducing investment costs and providing the means to get desired product to market key among them. For example, LaSorda cites the Belvidere Assembly Plant (Belvidere, IL) and the Sterling Heights Assembly Plant (SHAP) and Sterling Stamping Plant (both in Sterling Heights, MI). The company announced in January, 2005, a $419-million investment in Belvidere and in March, 2005, an investment of $506 million in the Sterling Heights plants. Belvidere is where the Neon is made; the investment is for the Neon replacement. SHAP is where the Chrysler Sebring and Dodge Stratus are made; the investment is for their replacements.
While that is all pretty straightforward, there is more. LaSorda explains that while Belvidere is running a C-segment car, and will continue to, and while SHAP is running D-segment, and will continue to, in the case of both there will be the flexibility to make either: a C and D in Belvidere and D and C at SHAP. This will allow them to be responsive to the market with comparatively minimal investment. Going forward, he says, "We will always make sure that there is flexibility." And he points out, "We put in our flexibility money only when there is a new vehicle."
But there are various definitions of flexibility. LaSorda explains that through planning they'll determine what they're likely to need in the way of product and capacitize their facilities accordingly. So looking at the cases of Belivdere and SHAP, here is a case where there is a defined set of vehicles that can be produced at both. "Some people will say, 'Why don't you do 8 or 10 different models?' Why would I ever spend the money when I know that it is impossible to do that in the plant?" In other words, there is flexibility within reason, not flexibility with no bounds—and no likelihood of being used.
No pause. As previously noted, LaSorda is an expert on lean. In his mind, lean is a whole lot more than kanbans and andons. He considers it to be a managerial approach that looks at keeping costs low—variable, fixed and operating costs. It's about reducing waste not merely on the factory floor, but in all aspects of the organization. It's about doing more with less. It is about being rational yet creative. It is about facing up to problems and finding solutions.
"I believe the next frontier could be more demanding than what we're seeing today," he says, explaining, "There will be Chinese vehicles entering this market in a couple of years. That's a scary thought. So what are you going to do: Get scared, or do something about it?" The answer in Chrysler's case is evidentially to do something about it. (What? LaSorda first posits that it is about product, and he is appropriately bullish on that score. He admits, "Our wages are more than theirs. I understand that. However, our people can compete on quality and productivity." He further points out, "They have to ship their vehicles over here. That's a cost that I don't have. Now I have to get my material cost to be competitive with them.")
Credibility is a key concern of Dan Knott. He's the director of Chrysler Group's Street and Racing Technology (SRT), which he describes as "a very autonomous organization" that's "across the I-75 ditch from the Auburn Hills HQ. Close enough to be in contact with a board of directors (Joe Eberhardt, Chrysler Group executive vice president-Global Sales and Marketing, and Eric Ridenour, executive vice president-Product), far enough away so that his collection of hard-core automotive enthusiasts ("all of my people are basically cowboys. I've got land-speed record holders, motorcyclists, motocrossers, Pro Rally Series drivers—people who have the passion and walk the talk") are able to engineer cars that have street cred. Knott says that the SRT organization, which consists of about 150 people, is not a skunkworks, but actually "part of the day-to-day business. We used to be a skunkworks," he admits, and adds, "But we do have a skunkworks within us." That skunkworks is responsible for the remarkable ME Four-Twelve concept, the mid-engined car with a carbon fiber body and a 6-liter V12 that can go from 0 to 100 mph in 6.2 seconds (having been thrown back in the passenger seat feeling like I was undergoing astronaut training, I can attest to the fact that this "concept" is the real deal).
But what really makes the SRT team notable is the array of high-performance cars and trucks that it is putting in showrooms for regular people to buy. OK. Regular people who are interested in getting performance versions of what are sometimes comparatively pedestrian (e.g., Neon) or already comparatively hot (300C) products. But this isn't a matter of them just dropping a hot engine under the hood (e.g., a 2.4-liter, 230-hp turbocharged four for the Neon—a.k.a., Dodge SRT-4—or a 6.1-liter, 425-hp hemi for the 300C SRT8).
There are a few considerations that must be addressed. Knott says that they look at the market segment for the vehicle. They then consider the volume that the vehicle in the SRT raiment would sell. Then they consider such things as tooling costs and variable costs. "Performance parts can be expensive," Knott says, with what those who have purchased those parts knows is to put the case mildly. He says that they look at what can be leveraged from the base product, as well as from the world-wide volume of the DaimlerChrysler organization. Speaking of what can be leveraged from the existing car, Knott says, for example, that he'll talk with the seating supplier and say that they essentially want the base seat but want different foam and different trim. So instead of having the costs associated with creating an entirely new product, this seat is far more economical. Once those determinations are made, he meets with the guys on the other side of I-75 and they decide whether to go ahead with the SRT version of the product. And a large part of Knott's consideration is based on achievable credibility. As an example—and one he hopes won't annoy some of his colleagues on the other side of the ditch—he cites the Durango: "I will never do a Durango. It's too big, too heavy for me." But big and heavy aren't the only concerns. "We aren't doing a Stratus."
Most importantly: "We're not going to do cars that lose money."
One remarkable aspect of the SRT formula is that, comparatively speaking, the cars are remarkably economical. Consider, for example, the 300C SRT8, which starts at $39,995 (including destination).
There five elements of transforming a vehicle into an SRT vehicle: 1. Powertrain: Something beyond the norm. For example, the HEMI in the SRT8 has 25% more horsepower than the one found in the standard 300C. 2. Ride and handling: Differently tuned dampers, specific spring rates, and different wheels and tires are among the modifications. Even a vehicle like the Dodge Ram SRT10—yes, a pickup truck—is run through paces on a slalom course. 3. Braking: Performance is not only a matter of going fast, but stopping as well. So, for example, the 300C SRT8 has Brembo calipers on all four wheels (360 x 32-mm vented rotors up front, 350 x 28-mm vented rotors in the rear). 4. Interior appointments: From modified gauges to seats with suede inserts that keep you planted in place when the accelerator is stabbed. 5. Exterior appointments: Comparatively stealthy, not the total boy-racer appointments. Changes typically include front fascias with functional openings for brake cooling and rear spoilers that increase downforce. Yes, there is SRT signage.
Knott says that the approach they're taking at SRT is to maintain exclusivity as a means to bolster credibility in the market. "Look at Harley-Davidson," he observes. "There is a two-year waiting list for some of its motorcycles. You don't think that builds credibility?" One of the things they've done is to set a ceiling on the number of SRT models that will be built during any given year. "We want to make sure demand is higher than supply," Knott says.
"It's not easy to start a brand, and this is a brand within a brand," Knott says.
"It's not easy to build that heritage. But it's pretty damn easy to break it.
"So our collective job at the corporation is to make sure that we don't screw it up."
The HEMI engine that's found in the 300C provides 340 hp @ 5,000 rpm and 390 lb-ft of torque @ 4,000 rpm. Which is certainly sufficient for most drives. However, people who are drawn toward something a little more, ah, robust, may opt for the '05 300C SRT8 from the tuning and racing wizards at Chrysler Group's Street and Racing Technology (SRT) group, a gang who, when it comes to performance, don't leave well enough alone. Here's the recipe for transforming the typical HEMI into an extraordinary HEMI, one that provides 425 hp @ 6,000 rpm and 420 lb-ft of torque @ 4,800 rpm.
Don't try this at home.