Chrysler CEO Tells Of New Model In Interview

[Perian]

Link: wsj.com

The 04/11/06 edition of the Wall Street Journal had a fantastic front page article on the manufacturing process at Chrysler. They interviewed Thomas LaSorda, Chryslers Chief Executive Officer.

The story is about the rebirth of the Belvidere assembly plant, where the Dodge Caliber, Jeep Compass and Jeep Patriot are produced.

However, the last paragraph contained a surprise:

Quote:

"Later, pausing over a salad during a short flight on the company jet, the Chrysler CEO framed the advantage of flexible production in a different way. If the Caliber doesn't sell well, he said, the Jeep Compass and Patriot could take up capacity, and eventually a fourth model will be built, too. Flexible production, he said, "gives us a wider margin of error."

[Perian]

Chrysler compact vehicle anyone?

[saturnsteve]

Lame, who cares

[rmodys]

Originally Posted by saturnsteve

Lame, who cares

Yeah, it's not like he's promising anything or even hinting at what it would be.

[smk4565]

Sounds like Chrysler will rebadge the Caliber, or just a rednone PT cruiser. Everything Chrysler/Dodge make is rebaged. They are as bad as Ford/Mercury.

[Perian]

Originally Posted by saturnsteve

Lame, who cares

You are missing the point - Chrysler can now produce four different (to the consumer) models on the very same production line with almost no downtime between unit production.

Spend a minute with this, then think of the way GM currently makes small vehicles:

BELVIDERE, Ill. -- In the car industry, the Chrysler assembly plant here in the farmland west of Chicago is known for an infamous gaffe. In 2001, DaimlerChrysler AG's U.S. arm had a hot new model in the retro-styled PT Cruiser, built at a plant in Mexico. With orders pouring in, Chrysler hoped to boost output by assembling some in Belvidere, where it made the Dodge Neon, a small car that used many of the same parts.

But Belvidere could make only Neons. Chrysler engineers discovered that the PT Cruiser was an inch too tall to fit through the plant's paint shop. Chrysler, which was losing money at the time, ended up spending $300 million to expand the assembly line at the PT Cruiser plant in Toluca, Mexico.

Meanwhile, Chrysler took another hit at Belvidere: Because Neon sales were slow, it had to cut production there, leaving the Illinois plant's assembly line operating just eight hours a day. The rest of the time, hundreds of millions of dollars in equipment sat idle.

Determined not to make such a mistake again, Chrysler rethought how it assembles cars, looking at everything from the order in which door parts are welded together to whether it's cheaper to install windshields manually or by machine. The result is a new, flexible assembly system that Chrysler is betting can transform the company's economics. Its central feature is the ability to make more than one type of vehicle at a plant.

If the new system, which entails more robots, is successful, it should enable the Chrysler unit of DaimlerChrysler to increase profits despite a relatively high-cost unionized U.S. work force. Even as unionized rivals General Motors Corp. and Ford Motor Co. gush red ink in their North American operations and prepare to buy out or lay off a total of 60,000 workers, Chrysler is profitable and has been recalling some laid-off employees.

Belvidere ran at about half-capacity last year, with its fixed costs spread out over just 126,000 Neons, a car Chrysler stopped making last fall. With the new system, the plant makes two models, the Dodge Caliber and Jeep Compass, both new. Last month Belvidere added a second production shift. A third model will join the mix later this year, and Belvidere will be on course to produce twice as many vehicles as in 2005. That will slash each one's share of fixed costs.

Chrysler's move is part of a broad shift in thinking that has been rippling through the auto industry for years, but is now starting to bring big changes.

For decades, mainstream models such as the Ford Taurus sold in such large volumes they could keep a plant or two running at full capacity for years. Not only was the plant limited but so was its costly equipment, much of which had to be scrapped when the model was dropped.

But mega-selling cars now are rare, especially for Detroit's Big Three. Car companies are trying to tap into buyers' appetites by offering a wider array of models -- SUVs of all sizes and levels of luxury, sporty new roadsters and so forth. Ford replaced the Taurus not with one new model but three. The number of models of cars and light trucks in the U.S. market rose to 286 last year from 181 in 2000. Most passenger cars in the U.S. sell just 75,000 to 150,000 a year.
[From top: the 2007 Jeep Compass, Jeep Patriot, and the 2007 Dodge Caliber produced in Belvidere, Ill. ]
From top: the 2007 Jeep Compass is styled to resemble rally cars; the boxier, more traditional Jeep Patriot; and the 2007 Dodge Caliber, a rugged hatchback produced in Belvidere, Ill.

That's too few to keep a plant running full steam, and an argument for giving plants flexibility. Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. were early in equipping many U.S. plants to build more than one model. But Ford and GM have been slow to do so. GM has four plants making small cars for its Chevrolet, Saturn and Pontiac brands, about 410,000 vehicles a year in all. It could conceivably produce that many with a single flexible plant.

The Detroit companies produce fewer than half their vehicles on flexible lines. The lowest level among the three big Japanese firms is Honda's 69%, says a report by Prudential Equity Group. Of Detroit's Big Three, Chrysler now is moving the fastest to adopt the Japanese approach.

Chrysler can use the cost edge it thus gains to be more competitive on price. The base price of its new Jeep Compass, a small sport-utility vehicle, will be $15,985, about $3,000 less than the competing Toyota RAV4. For the Dodge Caliber, a small hatchback that uses some of the same parts as the Compass, the starting price is $13,985. That's about $200 less than the Neon was even though the Caliber is more advanced, offering features such as side airbags and a beverage cooler in the glove compartment.

Chrysler, which went through its own profitability crisis in 2000 and 2001 and pulled out of it, still faces big challenges. It has had to offer big discounts on some slow-selling models this year. Its Jeep Commander, a seven-passenger SUV, had such a slow start that Chrysler had to store unsold ones at Detroit's airport.

The Caliber is selling well, but Detroit traditionally finds profits scarce in small vehicles such as this one, classed as a hatchback or compact wagon. With sales of full-size SUVs falling as a result of high fuel prices and shifting tastes, Chrysler needs to find a way to make money on small cars.

It will add another small Jeep, the just-unveiled Patriot, to the mix at Belvidere later this year. If any of the three models made there becomes a hit, Belvidere may go to round-the-clock production and generate substantial profits. "If we only did one of those three models, Belvidere wouldn't be here today," says Chrysler chief Thomas LaSorda.

Besides Belvidere, Chrysler plans a makeover later this year in a plant in Sterling Heights, Mich., that builds midsize cars. Its eventual goal is to be able to shift production back and forth between Belvidere and Sterling Heights to keep both at near capacity. When both have been retooled, Chrysler will have 78% of its capacity on flexible lines, more than Toyota and Honda and trailing only Nissan's 88%, according to Prudential.

The most noticeable elements at Belvidere are hundreds of bright orange robots. They look nothing like the humanoid machines of Hollywood films, nor are they much like the big house-sized mechanisms seen in auto plants a decade or more ago. About 15 feet tall, each robot is essentially a large mechanical arm attached to a base. Each arm has a kind of hand, a grid of metal bars designed to hold the parts.

The robots can quickly exchange one of these devices, or "end effectors," for another, the way a human being would put down a wrench and pick up a hammer. By switching end effectors, the robots can produce a different car.

The robots are a third less expensive than old-style tooling. And since they aren't designed to build a single vehicle, and discarded when it's dropped, the robots can be expected to stay in use about twice as long, perhaps 10 to 12 years.

"Watch," said Frank Faga, the executive in charge of setting up the system in Belvidere, shouting over the whir of a dozen robots assembling doors on a recent day. He pointed to a pole with four colored lights that told workers which car was being produced. A blue light came on. "That means Caliber," he shouted, and a worker set a reinforcing beam for the hatchback in a rack.

A robot picked up the beam, turned and held it against the inner panel of a door held by a second robot. A third robot leaned in and welded them together in a shower of sparks. Other robots brought in the outer panel, and more sparks flew. In 42 seconds, the door was done.

A yellow light came on. "Now we're doing Compass," Mr. Faga yelled. Each robot turned and hung up the Caliber "hand" on a stand and picked up a tool engineered to fit the creases and contours of Compass doors. Sparks flew again and a Compass door was produced.

"We just went from making one model to another," Mr. Faga said. "No changing the tools, no downtime."

[tntwit]

It's good to see the US auto industry finally taking the right steps to improve efficiency. More importantly, they are doing it in US plants. It is obvious that it can be profitable to make cars in the US. If it wasn't, the Japanese and Koreans wouldn't be building plants here.

I would think Chrysler should be more worried about the Compass not selling well as opposed to the Caliber. I have little faith the Compass will be a success unless they build a performance model to compete with the WRX and actually race it to prove its worth.

[DropShadow]

Originally Posted by Perian

A yellow light came on. "Now we're doing Compass," Mr. Faga yelled. Each robot turned and hung up the Caliber "hand" on a stand and picked up a tool engineered to fit the creases and contours of Compass doors. Sparks flew again and a Compass door was produced.

"We just went from making one model to another," Mr. Faga said. "No changing the tools, no downtime."

That, my friends, is a wonder to behold. Yes, it's "them" and not "us", but relish the fact that it's an American plant showing how good we can be if we make the investment and put our minds to it.

[kenman923]

I think the fourth model is the PT Cruiser.

[VibenPontiac]

This is evidence of what will happen in the future. It is generally best to build your product close to the market you sell it in, especially so with cars. When this kind of flexibility is standard, the high tech manufacturing will return to those areas that have been decimated from recent outsourcing - granted the manufacturing facilities will be higher tech and employ less people but manufacturing like this is the wave of the future.

Oh and btw, congrats to Chrylser, no we just need to get the General on board.

[camaro_freak]

Originally Posted by kenman923

I think the fourth model is the PT Cruiser.

possible next genereation PT Cruiser? interesting ...

[Buick61]

Originally Posted by smk4565

Sounds like Chrysler will rebadge the Caliber, or just a rednone PT cruiser. Everything Chrysler/Dodge make is rebaged. They are as bad as Ford/Mercury.

What? The only rebadges are the minivans and the Durango/Aspen. Even the new Sebring/Avenger won't be badge jobs, or so we've been led to believe.

[bobojay]

Remember though, any models made this way still have to be on the same or nearly identical platform. Their might be enough commonality of platform(s) for the PT Cruiser to be built there. I would think though that it would be the next PT. '08 maybe??

[paul8488]

Why not a 3rd car-based Jeep? I already don't understand how either, forget both, of the Patriot and Compass are relevant.

[nadepalma]

Originally Posted by Perian

However, the last paragraph contained a surprise:

Quote:

"Later, pausing over a salad during a short flight on the company jet, the Chrysler CEO framed the advantage of flexible production in a different way. If the Caliber doesn't sell well, he said, the Jeep Compass and Patriot could take up capacity, and eventually a fourth model will be built, too. Flexible production, he said, "gives us a wider margin of error."

I'm wondering if this could possibly be the Caliber Sedan that was hinted at awhile back but never confirmed (From the link: A sedan version is planned and will be implemented in the same vein the Dodge Charger and Dodge Magnum mirror each other.)

The only other vehicle it could be, is the eventual replacement for the PT Cruiser. Chrysler has already said they were committed to the PT Cruiser (there were rumors it would be axed) and since the Neon on which it's based is gone, it only makes sense to base the next one on the Caliber.

When you think about it, a Caliber Sedan makes a great deal of sense. We all know that Americans really prefer sedans over hatcbacks unless they're niche products like the Mini, PT Cruiser, etc. Otherwise, Americans typically prefer sedans. Even great looking hatchbacks like the Mazda3 sell only make up about 1/3rd the volume of total Mazda3 sales.

Point is that Dodge and Chrysler aren't really stupid and must have this figured out. The main reason -- as far as I can figure out -- that the Caliber was made in a 5-door configuration is b/c DCX is hell bent on expanding Chrysler Group products abroad. And that means that Dodge MUST have a vehicle that will sell well in the UK and the rest of the Continent. Since this is obviously a big priority, it makes sense for the hatch to come out first.

But if sales start to plummet or if they need to make up more production capacity at the plant, then they can add the Sedan variant.

And of course, assuming that the PT Cruiser will be moved from Toluca, Mexico to the States, it makes sense since they seem to be consolidating any number of facilities.

So either way -- next PT or Caliber Sedan -- it makese a great deal of sense. I don't suspect it could be anything other than these two possibilities.