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Q & A

Chrysler exec looks at road ahead

September 04, 2008|Ken Bensinger and Martin Zimmerman | Times Staff Writers

After 37 years at Toyota Motor Corp., during which time he rose to the top job in North America, James E. Press shocked the car world by jumping to Chrysler last year.

It was a dramatic transition, from being the only American on the board of the world's most successful car company to co-president and vice chairman of the smallest, and most troubled, of the Big Three U.S. auto manufacturers.

Newly private Chrysler made Press its key industry hire. Since then, Chrysler has signed a cost-cutting contract with the United Auto Workers and announced plans to cease production of four vehicles, cut production by more than 1 million vehicles and shrink its pool of dealerships.

The company also signed a pact with Nissan Motor Co. to produce trucks in exchange for small cars that it will sell in South America and, eventually, the U.S., and inked a deal with Chinese carmaker Chery Automobile Co. to make small cars that could make Chrysler the first company to bring Chinese autos to the U.S.

Meanwhile, Chrysler has fallen to No. 5 in U.S. vehicle sales and, according to Press, has no hopes to turn a profit until 2010 at the earliest.

A California native and an avid swimmer (he calls swimming his job and cars his hobby), Press has lived in Japan and New York but now calls Detroit home. He visited the Los Angeles Times this week to discuss the rebuilding of Walter P. Chrysler's auto company. The interview was edited for length and clarity.

Chrysler has had some pretty significant decreases in the volume of vehicles it sells. You've described that as a good thing. Can you explain?

Volume is vanity; gross profit is sanity. In an attempt to try and maintain a bigger market share and a higher sales volume, we were making decisions that economically weren't in the best interest of the company. Fleet sales are an example of that. There's no economic benefit, because the long-term effect of fleet is to deteriorate your residual values. That's a case where we could actually sell fewer cars but financially be in better shape.

The old metric of volume doesn't really work anymore, because the more some companies sell, the more they lose.

What's the ideal number you want to get to in terms of U.S. sales volume?

We're closer to 2 million or 2.5 million per year as a car company (as opposed to a goal of 4.5 million previously). The market is going to recover in 2010, 2011 or 2012, and we've got some good new products coming and that growth should be attainable.

Do you see getting smaller not just by cutting back on fleet sales but also by trimming back the lineup?

Exactly. Our product portfolio has been brought down to where we're focusing more on profitable models.

The really profitable segments of trucks and SUVs aren't going to be there in the future. The profitable cars of the future are going to be environmentally friendly vehicles, socially responsible products. They're going to have smaller margins.

Making cars that are fuel efficient is not what Chrysler is perceived as being strong at. Is Chrysler in a strong enough financial position to bring those products to market?

Absolutely. The small car has been an entry-level, low-equipment, low-margin vehicle. This transition of customers into smaller, more fuel-efficient vehicles doesn't mean they're giving up their desire to have comforts and luxuries. If you can maintain the margins, you could make money on those vehicles.

We have accelerated our alliance partnership program to be able to introduce those platforms much faster. An example of that is our partnership with Nissan. We don't have a lot of low-cost, entry-level sedans. But it's a segment we'll be in by 2010.

What do you see as your biggest challenge in helping the company through these turbulent times?

Our biggest issue is credit. Getting people financed that could have been financed before is difficult and the cost of that credit is substantially higher. A lot more people are being turned away. That's why we switched our financing to allow our customers to buy a car rather than lease it.

Why are carmakers asking for $50 billion in loan guarantees from the government?

This wasn't the auto industry's request. It was in the energy bill that was passed last year. When they cranked up fuel economy requirements, in that bill they provided $25 billion worth of loan guarantees to help auto manufacturers and suppliers retool to produce vehicles that could achieve those levels. When you take a look at the broader section of potential customers that might draw on that line of credit, it becomes apparent that maybe $50 billion might be an appropriate number. It accelerates the introduction of technology in the market to help reduce our dependence on foreign oil and improve greenhouse gas emissions. It's not a loan bailout, and it's not because the U.S. car companies are distressed.

What are your plans for the product line?

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