by Julie Candler
July 1, 2008
|Photo by Pat Chapman
It’s 10 a.m. and James E. Press has already had a morning swim and flown from Detroit to New York City. Now he’s ready to discuss the depressed auto industry and his role as vice chairman and co-president of Chrysler LLC.
Almost daily, news reports about Chrysler and its competitors among the Big 3 are alarming. Automotive expert Paul Eisenstein says the Big 3 - Chrysler, Ford and GM - are “in desperate trouble.” We ask Press that morning about the headline, “U.S. sales plummeting, Chrysler’s chief says.” It was the lead story in that day’s Detroit Free Press.
Press responds by looking at Chrysler’s situation, at least publicly, with his customary happy face. Asked about the newspaper headline’s dark implications, he makes a positive reply. The story, he says, was based on a memo from Chairman and CEO Bob Nardelli to the company’s employees. The company chief was responding to analysts’ predictions that Pentastar brands were going to have to make disastrous staff and production cuts to deal with an industry heading for the lowest sales level in 16 years.
“Nardelli wanted everyone to be aware that the management team is continuing to do what is needed to be sure that our company is successful,” says Press. “The automobile industry is just one part of our economy, it is being affected by a lot of economic factors externally, among them skyrocketing prices of materials such as steel. All of the car companies are dealt the same hand.”
The most recent hand dealt to Chrysler is a 36 percent drop in June sales.
The slump occurred despite incentive discounts that month averaging $3,427, according to the consumer information Web site, Edmunds.com. Asked about the tanking sales, Press insists the private corporation is exceeding all financial targets set by its new owners, the private equity firm Cerberus Capital Management LP, of New York.
Ever since Press joined Chrysler in September 2007 he has been busy as a spokesman for the company. His responsibilities also include North American and international sales, global marketing and product strategy. He had built a reputation for excellence after 37 years at Toyota Motors North America, departing as president and CEO. He is considered one of the nation’s best executives, with an easy leadership style.
On top of stories predicting their near-demise, Press and other Chrysler executives have been busy denying rumors that Cerberus is considering bankruptcy or plans to sell its Jeep Division. (“Ridiculous,” they respond, “Absolute hogwash.”)
Unfortunately, Chrysler makes a higher proportion of trucks than any other firm in the industry. Sales of pickup trucks and minivans, its bread-and-butter products, are tanking due to $4.50 gas prices and a sinking economy.
So Chrysler is forced to cut production schedules for its all-new version of the Dodge Ram pickup, due for introduction in September. On July 1, the company announced plans to close “indefinitely” one of two minivan plants in Fenton, Mo.
But Press describes the shutdowns as part of a good business strategy.
“We were able to eliminate some production capacity in the plants. That puts us in a much stronger position.”
As he told the Detroit Free Press: “I’d rather go into a tough market like this with a brand new Ram - that we’re going to be introducing this fall - than trying to compete with a warmed-over version or even a carry-over.”
The 2009 Ram pickup, Chrysler’s most popular vehicle, is expected to improve fuel economy over previous models by 10 to 20 percent. It will be equipped with a cylinder deactivation system on its V-8 Hemi engine that allows it to run at times on four cylinders. Plans for 2010 include a Hemi-hybrid version of the Ram, which should give the vehicle’s fuel economy a healthy boost.
As to whether Cerberus might be having second thoughts about purchasing Chrysler assets in 2007, just before high gas prices and a sinking economy struck, CEO Nardelli claims not. Replying to an Automotive News query, Nardelli said it was hard to say what the company might have done if it could have foreseen near-doomsday events such as the industry’s worst June sales figures in 15 years. But at this point, Nardelli says, no one is looking back or second-guessing the decision. Instead, Press, Nardelli and co-president Tom LaSorda say they are only feeling encouraged over what has been accomplished to date.
Jim Press scoffs at implications that the corporation’s campaign to offer $2.99 a gallon gas was intended to counteract a Chrysler image of high fuel consumption. “Certainly not,” he says. “We have vehicles that get 28 and more miles per gallon. At Dodge, you can buy the most fuel-efficient compact SUV, the crossover Caliber, that gets 29 highway miles per gallon.”
The “Let’s Fuel America” campaign offering gas for three years at $2.99-a-gallon, which began in May and ends July 31, has been getting excellent response. It provides a card that links with the participating buyer’s personal credit card. The buyer is charged only $2.99 at the gas pump; Chrysler pays the rest.
“What we are saying to our customers,” says Press, ” is we know a big area of uncertainty is the price of gas. We do this to give our customers peace of mind. The program is getting excellent response. Showroom traffic is up about 35 percent since we started the campaign. If the customers want to have peace of mind, they can get it this way. We are proud of the fact that our vehicles all have excellent mileage.”
Some of the vehicles the corporation is phasing out of its lineup since the fall takeover last year are among the less fuel-efficient; some duplicate other vehicles in the corporate stable. That leaves Chrysler with 2008 models that were revamped by adding more value.
It added an average of $1,200 in improvements per model without raising prices. With his usual positive outlook, Press calls the move a price reduction. It eventually was offset in June by an average price raise of two percent. That, Press, says “will catch Chrysler up to the increases taken by other manufacturers so far this model year. We have had a lot of pressure on costs, raw material costs such as steel are skyrocketing, so we have had to make this small price adjustment in price.”
The move ties in with Chrysler’s program to build sales by adding to the quality image of its lineup. “We may not have high volume, but the main thing you do is make sure you are building cars that are competitive. We want to give more quality and satisfaction to customers. You do that over the long term and you begin to create a reputation. It’s a never-ending effort. We will always be searching for ways to give quality to our customers.
“To that end,” Press adds, “we have a customer advisory panel to communicate through the Internet and get feedback on customer satisfaction. We also have our executives contacting customers on a regular basis, learning what issues our dealers are facing.”
Reducing an excessive number of dealers is among Press’s goals. He hopes to achieve that partially by encouraging dealers who will be franchised to handle all three of their brands - Jeep, Dodge and Chrysler. “Nobody has better dealers than we do,” he says. “Our dealers are a vital connection to their communities. We have to make sure dealers are satisfied. If they are, they will convey that satisfaction to their customers.”
Chrysler and the rest of the Big 3 look toward a more competitive position against overseas rivals after 2010, when a collective agreement with the UAW on health care takes effect. It shifts retiree health care obligations to a trust under the auspices of the union. It also creates a two-tier pay system, with new hires to some jobs making half as much as core workers.
At the same time, Chrysler and its competitors are struggling to ramp up production of energy-efficient, smaller vehicles. Asked about combating the high price of gas in the future with more fuel-efficient alternatives to the internal combustion engine, Press says, “There will be no replacement for cars that run on gas, and there shouldn’t be. What we have to do is make the internal combustion engine more efficient. We can do it with measures such as hybrid technology, combining electric drive with an internal combustion engine. But in the future you might perhaps see fuel cells, but none of the alternatives have an eco-structure that’s doable. Even a fuel cell drive requires a lot of energy to break out the hydrogen. At present there is no superstructure for supplying fuel to fuel cell vehicles.”
In the future, he agrees with predictions that nearly every vehicle will be a hybrid. “Even the fuel cell is a hybrid. There will be diesel hybrids as well as range extenders, which extend the range of an internal combustion engine with electricity.” He adds, “We are checking all of those.”
Press’s concern over the need to fight climate change was expressed in his testimony before a committee of the U.S. House of Representatives March 14, 2007. At the time, he spoke as president of Toyota Motors North America, outlining Toyota’s efforts to combat greenhouse gases with efforts such as the Prius and five other hybrid vehicles. The motor vehicle industry has a responsibility to be part of the solution, he told the committee, but “these issues cannot be addressed by industry alone.”
Asked about the $2 billion option from DaimlerChrysler exercised recently, Chrysler executives emphasized that the firm was obligated to take the option by August 2008, or lose it under terms of the final settlement with DaimlerChrysler.
Regarding Chrysler’s program to unload excess production with volume sales to rental and other fleets, Press says that now they are making sure that they are in the right perspective. “There are three aspects to fleet sales,” he points out. “First, they provide much less profit; second, they drive down the residual value of our cars on the used car market. Third, if you depend too much on fleet sales, if you are using them just to generate numbers, it’s not very positive. At the same tine, rental car reservations have been reduced and the companies are holding cars longer.
“But we need to have the right ratio of fleet sales to new vehicles. We don’t want to cause residual values to deteriorate, so the percentage that goes to fleet sales will vary from month to month,” he says.
For the future, Chrysler is joining other U.S. automakers in counting on overseas trade. A company goal stated back in January 2008 is to double overseas sales in four years. For part of that they’re looking to Nissan, on target to build a small rebadged subcompact, the Versa, which Chrysler will market overseas. Under another arrangement, China’s automaker, Chery, will produce a small Dodge brand car for sale in North America.
Chrysler signed a memorandum of understanding in July 2008 with China’s Great Wall Motor Company. The agreement allows the two companies to explore “long-term business opportunities.” They will share distribution channels, technology and components to achieve economies of scale.
At the age of 62, Press stays in shape with daily swims. A competitive swimmer, he was awarded a Gold Medallion by the International Swimming Hall of Fame in 2006. His other activities include membership on the board of the Association of International Automobile Manufacturers, board chairman of Automotive Youth Educational Systems and the Detroit Area Council of the Boy Scouts of America. He is a member of the advisory board for his alma mater, Pittsburgh State University (formerly Kansas State College).
Following graduation, he had a brief association with Ford Motor Company. He started at Toyota in 1970, moving to positions in advertising, product planning, market representation and distribution.
Even before he made his job shift to Chrysler, Press was optimistic. On commenting in April 2007 about the potential sale of the money-losing DaimlerChrysler, he said the bidding process was healthy for the industry. “It would write a new chapter for all of us on how our companies can prosper in the future.”
Now the question is, can Chrysler produce enough small, fuel-efficient cars to keep the company afloat before the money runs out? Ask positive-thinking Jim Press, and he’ll say “yes.” He predicts that Chrysler will become “the best little car company in America.”