Strengths, weaknesses, opportunities and threats in Chrysler Group LLC

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.

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

Quarterly Revenue $m

22825.0

21023.1

21124.8

21526.1

21857.6

22057.4

22101.5

22472.0

Real Revenue Growth

-15.7

-7.9

0.5

1.9

1.5

0.9

0.2

1.7

Source: (Ford Investor Relations, 2009, 10K & 10Q documents)

Additional weaknesses include the systematic failure at partnerships, especially in the EVMI area and the risk of the triad of partnerships so critical for the company to succeed not approving this new technology. There is also the risk of Fiat itself being acquired by Tata Motors or another Asian manufacturer who due to the robustness of those economies have liquidity today.

Recommendation

Given the contraction in the market and the long-shot risk of EVMI as a marketable technology given the current state of the company's supply chain, it makes the most sense for the New Chrysler LCC to continue rapid process re-engineering and cost reduction strategies (Welch, 2007) while collaborating with Fiat on small, entry-level fuel effiiceint cars for Asian nations including India and China, and other smaller economies in that region of the world. The failed partnership Chrysler had with Cherry, the Chinese auto manufacturer could be more attributed to cultural differences (Bennett, 2009). What Chrysler must do is cost-reduce its processes and seek to create more of an entry-level auto for 3rd world nations, using these sales to bolster development of the EVMI technology. It supply chain needs to recuperate and strengthen before any massive new electrical vehicle program is developed and launched.