At Chrysler, the hard work is just beginning

Allison Linn Senior writer • Profile • E-mail

By the time Chrysler filed for bankruptcy, it already had endured years of hard times. Now the real work begins.

To rescue the Chrysler brand, experts say the company must attack a laundry list of gargantuan tasks, starting with successfully emerging from bankruptcy and including everything from pruning its product line to improving its employees’ battered morale.

The challenges faced by Chrysler could derail even the strongest of companies at the best of economic times.

“Organizations, big ones and small ones, usually can do one major thing very well at a time,” said Gerald C. Meyers, a professor of management at the University of Michigan and the former chairman and chief executive of American Motors Corp. “What’s going on at Chrysler is that they’re going to have to do a multitude of major things at the same time, and that’s nearly impossible to do well.”

In fact, few companies in the same position have succeeded. About half the companies that emerge from bankruptcy are either back in bankruptcy or out of business completely within five years, said Lynn M. LoPucki, a law professor at the University of California, Los Angeles. Aside from Continental Airlines, he was hard-pressed to think of a large company that has filed bankruptcy since 1980 and come back strong.

“I don’t think their long-range chances are good,” LoPucki said.

Here are the biggest challenges and toughest choices Chrysler will face, according to experts surveyed by msnbc.com:

1. Getting out of bankruptcy
By the time Chrysler sought Chapter 11 bankruptcy protection earlier this month, it already had a detailed plan for emerging from bankruptcy on a lightning-fast timetable. The highly unusual undertaking includes the backing of the U.S. government, which has agreed to provide financing. It also plans to emerge with an alliance with Fiat, which will initially own 20 percent of the company. The company is hoping the process will take just a couple of months, rather than the usual years of wrangling.

LoPucki expects that Chrysler will be able to push its plan through, despite initial opposition from some creditors, in part because of the enormous pressure the bankruptcy judge is likely facing from all sides. That should pave the way for a quick exit.

“Everything else in this case has essentially been determined,” he said.

2. Pruning the product line
Chrysler also must take a hard look at the many vehicles it currently produces and aggressively pare back its lineup to get rid of cars that are unpopular, unprofitable or too similar to other models out there.

Experts say the company’s beloved Jeep product line, popular Dodge pickup trucks and iconic minivans will likely make the cut. But, Meyers said, virtually all of the other Chrysler models could be on the chopping block, especially given plans to introduce a line of Fiat cars to the American public.

3. Selling Americans on Fiats
Even as it pares back its existing product line, experts say Chrysler needs to bulk up on fresh offerings.

“You need new models to get customers into the showroom,” said Robert M. Wiseman, a professor at Michigan State University’s Eli Broad College of Business.

The proposed deal with Fiat will bring in those new models at a much lower cost than if Chrysler created the cars themselves. Still, it remains to be seen whether Americans will embrace Fiat’s line of small, fuel-efficient cars, especially if gas prices remain relatively low.

The company also must deal with a host of administrative and design issues in bringing the Fiat products to the United States, Meyers said, including the meeting U.S. safety and emissions requirements.

4. Melding corporate cultures
When Chrysler merged with German automaker Daimler-Benz in the 1990s, Wiseman said the running joke in Michigan was that the correct pronunciation of “DaimlerChrysler” was to keep the “Chrysler” silent. It was a telling sign of cultural problems between the two companies, and one reason the partnership unraveled.

With Chrysler’s current chief executive, Bob Nardelli, scheduled to step down at the end of the bankruptcy process, and Fiat expected to play a key role in the new company, Wiseman predicts that Chrysler will again face the difficult task of adapting to a new corporate culture.

While transoceanic partnerships can work, Meyers said the cultural differences can be a key stumbling block.

“It’s one thing to have a partner. It’s a second thing to have a partner who speaks a different language. And it’s a third thing to have a partner who speaks a different language and is an ocean away from you,” Meyers said.

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