European Journal of Business and Management                                                               www.iiste.orgISS...
European Journal of Business and Management                                                             www.iiste.orgISSN ...
European Journal of Business and Management                                                        www.iiste.orgISSN 2222-...
This academic article was published by The International Institute for Science,Technology and Education (IISTE). The IISTE...
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Strategic analysis of chrysler in the 2008 crisis

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Strategic analysis of chrysler in the 2008 crisis

  1. 1. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol 4, No.18, 2012 Strategic Analysis of Chrysler in the 2008 Crisis Yara Hamdan E-mail:eng.yhamdan@hotmail.comAbstractThis research studies the strategies followed by Chrysler Corporation before and during the 2008 economic crisis, andanalyses the gaps that led it to get into bankruptcy. At the beginning, a brief demonstration of Chrysler’s structure andculture is discussed, and then the strategic factors analysis starts showing what policies were implemented and thesuccess or failure of them.Keywords: Chrysler, Economic crisis, Strategic factors, Bankruptcy, Restructuring.1. IntroductionChrysler Motors LLC is the third largest automobile manufacturer in the USA. It started in 1920s, and acquired othersmaller auto manufacturer and brands. Now it is manufacturing the Chrysler, Jeep, and Dodge brands.2. Chrysler’s trouble in the 2008 crisisIn 2008 crisis, auto demand decreased. Chrysler got in financial trouble (high debt), so it was forced to file forbankruptcy on April 2009.The bankruptcy restructuring was as follows: a) Alliance with Fiat (Italian auto manufacturer) b) Shares divided among Fiat, US government & others.3. Internal Strategic Analysis for Chrysler:3.1 Chrysler’s StructureThe company produces multi products (brands & classes), so the structure it has is the SBU structure as follows: a) 24 subsidiaries in the USA b) Mexican subsidiaries c) Canadian subsidiaries3.2 Chrysler’s CultureChrysler had an American culture, which is considered as strength. The main features of this culture are as follows:a) Efficiencyb) Empowermentc) Creativityd) Informal relationshipse) Pay structure: High incentives & salaries for top managementf) Working styles: Less time on meetings & discussionsg) Experimenting by trial and error4. External Strategic AnalysisThis analysis focuses of the Identification of Strategic Factors, analyzing them and how Chrysler’s managementresponded to with, what strategies they followed for each, and their results.4.1 Identification of Strategic Factors a) Fuel prices. (Threat) 18
  2. 2. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol 4, No.18, 2012 b) Customers Preferences. (Opportunity) c) Innovation. (Opportunity) d) Competitors. (Threat) e) Global Financial Crisis. (Threat)4.1.1 Fuel PricesFuel prices increased in 2008, & previously in the 70’s, so demand shifted into fuel efficient cars.Chrysler’s Strategy was that it continued producing large fuel consuming trucks, & ignoring fuel prices increase. Thiswas a failed strategy that resulted in getting Chrysler in trouble.4.1.2 Customers PreferencesThis is related to the high prices of fuel, where consumers turned to fuel efficient cars.Chrysler’s Strategy was that it continued producing large trucks, & didn’t live up to consumers’ preferences.Also, this strategy resulted in failure.4.1.3 InnovationThis was an opportunity on producing fuel efficient cars.Chrysler’s Strategy was that it didn’t focus neither invest in R&D, it ignored energy alternatives, and also ignoredglobal warming & environment protection.Result: Failure.4.1.4 CompetitorsJapanese Competitors; TOYOTA & HONDA, entered US market in late 70’s & dominated a very large marketsegment.Chrysler’s Strategy was that it ignored them & didn’t consider them as a threat, and let them dominate the middle classmarket segment.Result: Failure.4.1.5 Global Financial CrisisGlobal economy declined causing very low demand in auto industry, leaving Chrysler in high debt from creditors, andwith no reserves.Chrysler’s Strategy was as the following: a) Asked for US$ 7 Billion federal loan, & got US$ 4Billion, so this was not successful. b) Asked for another 2 Billion (above 7 B).This was not approved till they submit a viability plan with specific terms & actions to be done. c) Submit Viability Plan with the following terms: Finalize alliance with Fiat. This was successful. Negotiate with UAW & CAW. This was successful. Restructure debt from creditors. This was not successful. Result: Viability plan was not successful. d) Filing for Bankruptcy and restructuring as follows: Changing the CEO Finalize Strategic alliance with Fiat. Produce Fuel-efficient cars. Shares are divided among Fiat, Employees Association (VEBA), US government, & Canadian Government. 19
  3. 3. European Journal of Business and Management www.iiste.orgISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)Vol 4, No.18, 2012 Result: Restructuring was Successful.ConclusionMarket is always unstable & changing, so keeping close monitor on these changes & adapting & responding to them isvery important to stay within it.So, it very important to always keep up with the market trend & shifts in preferences & demand.ReferencesThomas Wheelen, J. David Hunger, Pearson, 2010. “Strategic Management and Business Policy toward GlobalSustainability”, 13th Edition. 20
  4. 4. This academic article was published by The International Institute for Science,Technology and Education (IISTE). The IISTE is a pioneer in the Open AccessPublishing service based in the U.S. and Europe. The aim of the institute isAccelerating Global Knowledge Sharing.More information about the publisher can be found in the IISTE’s homepage:http://www.iiste.org CALL FOR PAPERSThe IISTE is currently hosting more than 30 peer-reviewed academic journals andcollaborating with academic institutions around the world. There’s no deadline forsubmission. Prospective authors of IISTE journals can find the submissioninstruction on the following page: http://www.iiste.org/Journals/The IISTE editorial team promises to the review and publish all the qualifiedsubmissions in a fast manner. All the journals articles are available online to thereaders all over the world without financial, legal, or technical barriers other thanthose inseparable from gaining access to the internet itself. Printed version of thejournals is also available upon request of readers and authors.IISTE Knowledge Sharing PartnersEBSCO, Index Copernicus, Ulrichs Periodicals Directory, JournalTOCS, PKP OpenArchives Harvester, Bielefeld Academic Search Engine, ElektronischeZeitschriftenbibliothek EZB, Open J-Gate, OCLC WorldCat, Universe DigtialLibrary , NewJour, Google Scholar

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