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In the negatives though, Chrysler is in shambles at the moment. The company has been losing money like no body’s business and a quick remedy looks bleak. The third largest Detroit behemoth lost 30-35% of its sales in the entire 2008 and according to news reports, lost a whopping 55% in January 2009 alone! 62,159 units were sold in the first month of the year 2009 as compared to 137,400 units sold same time last year. A substantially lower demand from fleet customers and sports- car buyers (order-book for the Dodge Viper were 4 units in the month of January) is the cited reason for this terrible shortfall, as per the company. Recently, President of the company, Jim Press, had called a conference for Chrysler’s 3,300 dealers nationwide; and only about 2,400 turned up. Chrysler staff had requested its dealers to pump up their orders to save the company and themselves; “You have two options, either you help us now or burn us all down,” said Press as per reports. According to sources, Chrysler apparently wants its dealers to increase their monthly demand to 87,360 units from the current 78,000. The extra 12% are necessary for the company to prove its future viability in order to qualify for the bailout package; failing which will be catastrophic for Chrysler and thousands of American workers.

As an anomaly, the sales of petrol powered Jeep Wrangler and Jeep Grand Cherokee improved by an insignificant but impressive 4%! This is totally against the logic of a growing temptation for fuel friendly cars and more in line with Fritz Henderson (GM’s President), who once told 4Ps B&M, “The crises for the automotive industry was not started by the SUVs, they are still large contributors in US auto sales; the bursting of the housing bubble is the main cause of this mess.” As double entendre’ are making a sound analysis difficult, it may be concluded that Chrysler is in a fix. On one side it wants to make it big on the back of imported technology and technical know-how and on the other, it does not wants to quit its image as a manufacturer of class friendly cars like the Cherokee and Viper. It is in the best interest for Chrysler to change its brand perception and be known more as a manufacturer of fuel efficient, value added cars, for the portal leading to revival is closing very fast indeed.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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In order to get the better of eachother, these player have crafted very different strategies with their new planes. While Boeing’s (B787) strategy revolves around jets which can be easily accommodated and can fly to any destination, Airbus (A380) bets on transportation between two large centres with maximum load and focuses on a maximum inventory utilisation strategy. Boeing is betting big on the Dream liner 787 and hopes that it will turn the table in its favour. The manufacturing for the 787 was started after signing a deal worth $6 billion for 50 firm orders from All Nippon Airways of Japan. With an estimated cost of $8 to $10 billion per piece, the 787 is targeted at the twin engine, medium to long-range market segment, with a capacity of 200-300 passengers. The good news for Boeing is that with the increasing demand for the Dreamliner, its production line is now fully booked until 2015! “Our assumption is that demand for the newly launched aircraft models, such as the Dreamliner, will exceed supply for the foreseeable future,” supports Englund. With the A380, Airbus is already meeting its expectation. The aircraft has already been introduced with the Singapore Airways and Emirates among others. As per latest news, Airbus has 198 orders for the A380 from 16 customers. Apart from the A380, Airbus on its part also unveiled the blue-print of the smaller A350, which will compete with Boeing’s 787 directly. The planned A350 is being developed as an upgraded and more advance derivative of the existing A330-40. With an enhanced new wing, more fuel-efficient engines coupled with other new technologies, the A350 is ready to take the game forward. The development cost for the prototype is estimated to be $5.3 billion. In 2008, Airbus added 163 net orders and 16 customers to its already high launch customer base, culminating in a total of 478 net orders from 29 customers. As per an Airbus report with 4Ps B&M, in 2008, the A350 enjoyed a majority 64% orders, compared to rivals (read: Boeing).

“Looking at the order backlog at the end of 2008, Airbus and Boeing are equal (3,715 aircraft in backlog versus 3,714). If one looked at the dollar value of the backlog, I would estimate that Boeing is in the lead given the large number of orders it has for the 787,” explains Fraser putting a new argument. But Airbus has been able to register a 7% rise in deliveries to a record 483 planes during 2008, while Boeing - hit by a machinists’ strike - saw its deliveries fall by 15% to 375 planes. In terms of market share, Airbus is definitely leading at this time, but discounting Boeing would be a mistake. “In prior years, Airbus beat Boeing in terms of deliveries, but by modest amounts. We forecast that Airbus will edge Boeing in deliveries by only 5-10 aircraft,” predicts Fraser.

It is clear that apart from each other, these players also need to be cautious about emerging market dynamics. In these difficult times, both are facing major cancellations of orders from various airlines in the wake of the global liquidity crisis. Airbus has already recorded a sales fall of 42%, Boeing has had a fall of an even larger 53%. Looking at the scenario, one thing is for sure, the Samurai who makes the first and most feasible move to counter the ‘crisis of confidence’ will emerge as the reckoning force in the long run. Now could be the time to look for another Saiga Takamori!

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM set to beat economic slowdown
IIPM Admission Detail
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
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