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News > Companies
In Focus: DCX woes
December 1, 2000: 12:45 p.m. ET

Merrill Lynch's Stephen Reitman reviews DaimlerChrysler's ongoing problems
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NEW YORK (CNNfn) - DaimlerChrysler is recalling 769,000 of its 1993-94 Dodge, Plymouth and Chrysler Minivans; the company is also easing off on production at some U.S. and Canadian vehicle assembly plants. Stephen Reitman, auto analyst, Merrill Lynch, discusses the impact of these moves on the auto company, and where the company is headed, even as some stockholders levy lawsuits against the current management team.

In Focus airs daily on CNNfn's network at 12:10 p.m. The following includes comments made both during the show and in the pre-show interview.

CNNfn: Chrysler's November U.S. sales were down 5 percent compared to same time last year, with cars and minivans dropping 15 percent and 16 percent, respectively. What's causing the declines?

Reitman: The cars were very weak. We haven't seen the full analysis of light truck sales yet but the SUVs helped moderate the decline -- that's why the overall number was only down 5 percent while cars and minivans had double-digit declines.

They did a massive push to clear inventory of old the minivans and introduced incentives on the new minivans in early November. We'll have to wait and see if the declines were a supply constraint due to them gearing up production on new minivans or if it was due to demand being satiated by the incentives on the old minivans.

We were expecting sales to be down -- sales are weak for the entire industry. We're looking for 3 percent-4 percent decline for the whole market. Chrysler is among the poor performers.

CNNfn: DaimlerChrysler is recalling 769,000 of its 1993-94 Dodge, Plymouth and Chrysler Minivans. How badly will that affect the bottom line?

Reitman: Everyone has recalls. It's bad timing, but recalls happen constantly. This one adds to Chrysler's catalog of woes, but they have much bigger problems to deal with.

CNNfn: The company said it's cutting production in its US and Canadian vehicle assembly plants, following shutdowns in October and November. Did this surprise you?

Reitman: The shutdowns are much greater than we were anticipating. We had been anticipating a reduction of 100,000 units in the 4th quarter, and it's about 46,000 units worse than we anticipated. Chrysler was caught between a rock and hard place.

They had to choose between ramping up incentives, which was the reason they lost over $500 million in the 3rd quarter, or cutting production, which is also costly because they have to pay 95 percent of worker wages, but at least it stops dealerships from  being jammed with unwanted vehicles, which causes longer term damage to the brand.

CNNfn: DCX (DCX: Research, Estimates) is up almost a point today -- why is that?

Reitman: The stock price is up today reflecting relief that the company is doing something proactive -- taking an active step to deal with their problems.

CNNfn: Are Chrysler's problems due to a slowing economy or poor management?

Reitman: It's mistakes made by Chrysler management, competitive pressures that weren't anticipated and the slowing pace of auto sales.

CNNfn: Daimler Chrysler shareholders are suing the company, claiming Daimler misled them into believing that it would be a merger of equals yet by the end of this month almost all former Chrysler executives have been ousted from top posts. Are they justified?

Reitman: It became very clear it was a takeover when Bob Eaton, the co-chairman, announced he was going to stay for another three years. He immediately became a lame duck and it was clear the reins were in Juergen Schrempp's hands.

CNNfn: What's your favorite stock in the European auto sector?

Reitman: BMW.

- reported by Carmina Perez graphic

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