Chrysler Group LLC SWOT Analysis

Chrysler Group LLC SWOT Analysis

The intent of this analysis is to evaluate the strengths, weaknesses, opportunities and threats (SWOT) facing the new Chrysler Group LLC. With the announcement on June 10, 2009 that Fiat would assume a managerial role of the company and share ownership with the UAW, the need for Chrysler Group LLC to turn around its financial performance is urgent.

Strengths

Chrysler continues to have an exceptionally strong presence in the minivan market which is a source of recurring revenue from dealer service and aftermarket products. The Dodge and Jeep brands have a core group of customers who are exceptionally brand loyal, and this also translates into reasonably predictable revenue streams. For example Dodge sold 1.3 million vehicles in 2007 primarily as a result of the exceptional levels of customer loyalty the brand has been able to attain over time. Chrysler also has operations in 125 different countries which have given it further strength in creating loyalty in its Dodge brand (Welch, 2007). Chrysler is also considered one of the global leaders in research to alleviate the impact of heavy auto frames on fuel consumption, designing aluminum frames with Daimler Chrysler during the period of their merger (Valenti, 2002). Another strength the company has is the ability to retain their consistent 7 -- 8% market share in the U.S. Auto and Truck Manufacturing Market despite the rapid pace of mergers and acquisitions it has been associated with. The following graphic illustrates the company's market share projected for 2009 based on analysis by the Wall Street Journal (Bennett, 2009) corroborated by an analysis of industry ratio analysis completed and shown in Appendices a, B and C. Of this analysis.

Weaknesses

Despite having operating offices in 125 nations Chrysler is dependent on the North American Free Trade Agreement (NAFTA) nations for the majority of its revenue. According to the last financial analysis completed, this accounted for nearly 90% of their global product and services revenue in FY2007, the last year they reported results in (Campbell, 2007). Chrysler is as a result holding onto market share through price incentives and by increasingly relying on the government bail-out in order to stay solvent. This is makes the second major weakness become apparent, and that is the inability to keep its single source suppliers captive on core new technologies including ATVM technology (Campbell, 2007). As a result of this domino effect of not being able to retain the best suppliers and losing it supply-based advantage for ATVM technology, the future development efforts for environmentally-friendly cars for the company could also be impacted. Finally as the supplier relationships Chrysler has continue to deteriorate over time, suppliers are stopping their supplies of key subassemblies, components and trim assemblies. The situation became so severe that Chrysler successfully lobbied for the government to provide $5B in aid to the top 430 suppliers so they could continue to support Chrysler with products (Roland, 2009). What was so significant about this occurrence was the fact that to this point the majority of automotive suppliers to the Big Three would extend terms to keep their manufacturing partners solvent and capable of keeping factories open. Chrysler and the U.S. government faced the prospect of the lack of suppliers' products being a major factor in shutting down four Chrysler production plants for lack of materials to produce cars (Roland, 2009). In short, the weaknesses nearly caused the company to implode early in the 2009 timeframe.

Opportunities

The case study sets an aggressive pace of growth of new vehicle introductions in the ENVI market. Clearly with new car purchasers voting with their dollars for hybrid cars, as evidenced by the popularity of the Honda and Toyota models in this category, Chrysler is behind the market in this area. It is arguable if an aggressive launch cycle of a fully-functional electric-drive model in 2010 and plans for three additional models in 2013 is a prudent decision however. The company's supply chain is already struggling to stay solvent. The EVMI initiative will push the supply chain even more rigorously, requiring even greater financial investment. EVMI as a technology is an opportunity; the challenge for Chrysler is to transform their supply chain into a support infrastructure that can fully make this opportunity realizable. Additional opportunities for the company include the continual improvement of their quality management and compliance systems so they will be able to exceed CAFE requirement and create alliances with the NTSA, EPA and California emissions boards (Campbell, 2007). For the EVMI project to gain any momentum it would need to have the support of these three governing bodies. For Chrysler to realize the potential of the EVMI initiative it must also seek to transform its new product introduction process into one that can capitalize on low costs (Ibusuki, 2005) while also embracing innovation. This organizationally will be a very significant challenge for the company yet one that when completed will yield significant results.

Threats

Clearly the global recession is the greatest threat to Chrysler from a strategic perspective, yet it becomes clear just how badly this industry is doing when the quarterly revenue and growth figures are analysed as shown in the following table. This is clearly a contracting, cost-challenged industry today.

U.S. Auto Industry Quarterly Revenue Growth

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10