Background of Chrysler Group LLC - Term Paper Example

The Chrysler Group One of the most diverse areas of business is the automotive industry. This is important, as people require traveling from one place to another whether they are going to their work places or vacations. Very many companies and corporations major in the manufacture of motor vehicles. One of the most common companies known for this and its ever-elegant cars is the Chrysler Group LLC. This is a company located in Michigan, United States. The company has had very many developments over the years due to its diligence in the industry and decent workers. Formed in 2009, the group has been able to develop very many makes of vehicles that have been a major hit in the automotive industry (Breer, 2009. 34). These cars include the jeep, Fiat, the Dodge. However, among all the vehicles produced by the company, the Chrysler is the most reputable. The Chrysler from its initial years back was at a competitive level with other decent makes of cars from rival companies. The companies include General Motors known for its elegant Cadillac that has been able to survive market limitations and still performing well. The other rival company was Ford Motor Company (Rall, 2011). At that time, the company was known for its car, the Lincoln. Ever since the beginning of the competition, the companies have worked hard to outdo each other in the market. However, the Chrysler has always managed to come up on top. Witnessed from the 2009 season when the economy was trending down, the car was able to sustain its sales levels while Ford and General Motors decreased their performance at a 4.5 and 3 percent margin. On November 4, 2009, the Chrysler group set out a road map or rather a plan that would ensure that the Chrysler increased its sales in the industry by a possible triple. The company had planned to achieve a break-even result for the Chrysler by the end of the financial year 2010. The company had also decided to attain a $1 billion net profit for the Chrysler. The company decided to do this by diversification of its markets. The plan has been on the right track. This is from the results from the financial year ending 2011. The general net income of the company was 212 million dollars for the third quarter of the year. Of the total amount that the company makes in a specified amount of time, the Chrysler contributes up to 65% of the income. Thus, from their financial report produced around January of 2012 showed that the Chrysler made 138 million dollars in sales (Walter, 2011). Further scrutiny of the reports shows that the company had 56 million dollars in net loss by the end of the financial period. The net revenue obtained from the car was $7.5 billion that is an 18%raise from the third financial period of the previous years. One of the implementation plans for the optimization of market capitalization is ensuring that the car has a fast running engine. The company has ensured that it has replaced the V-6 engine with the V-6 Punster gas engine. The engine known to have optimal performance and increases the speed of the car by a very high margin while still maintaining or rather reducing the consumption of gas as compared to the original V-6 engine. The fact that the company has been able to change the engine and the capacity of fuel consumption has been integral in the positive turn over noted at the end of 2011. With the changes in the various aspects of the car, there have been complements that have led to the car having much more acclamation in the market. The customers who used to have the older make of the V-6 engine have streamed into the companies garages all over the country for an engine change. The company on the other hand has shown gratitude to its customers by ensuring that they change the engines at a discount price. However, having the broader view, the commission earned from the changes in engine is very important as when combined it leads to a noticeable increase for money that the company has been able to earn. This is due to the reputable economies of scale that have helped the country invest in other areas to improve the car (Hills, 2011). Through the major changes that made to the car, there have been increased requests and orders for the cars outside the United States than ever seen before. The company has also been able to improve the look of the Chrysler especially with the Chrysler 300c model. This has proved to be different from the other cars and thus the performance and the sleekness of the car has been influential in market capitalization. This noted from the financial results of the third quarter of the year 2011. The financial reports showed that the Chrysler had made 275400 cars all over the world. This was a 24% increase from the previous year. In the United States, the market share had seen an increase to 11.4% by the end of the year. This was a majorly noticed increase from 9.6% at the end of the financial year 2010. The second most competitive market for the purchase of the Chrysler to the United States is that of Canada. Canada is known to be a very innovative country that invests largely in the United States. The country’s market share for the financial year ending 2011 was 14.5%. This was an increase from the closure of the 2010 financial year and was at an increase from 12.8% then. With respect to the Chrysler model, the Chrysler group closed the 2011 financial year with 9.5 billion in cash. In the plan that the company had set out in the year 2009, they had decided to invest around 23 billion dollars over the coming 5years to improve the engineering and general product portfolio for the company as a whole. This meant that there would be allocation of around 4.5 billion dollars per year for the optimization of this plan. Of this amount of money that the company was to allocate to the company, around 50% was going to improve the quality and the physique of the Chrysler car (Adams, 2011). In the last two years, the car has increased the amount of interest that it brings into the income by two different manners. One of the ways that the Chrysler has been able to do this is by quality check and management. Moreover, the company has directed more of its resources towards the perfection of the model. With this, the amount of money that the company has brought back after calculations have led to the conclusion that the Chrysler should continue being used as the display make of the company. The United States has one of the largest markets in the world. However, the levels of unemployment have been found to increase due to the harsh financial periods that the globe is going through. The Chrysler Company at the end of the year 2009 while it was setting the 5-year plan did not mention the sector of the low income making communities (Walter, 2010). However, the company at the end of the financial year 2010 realized that it had not made as much money as it had expected. After review, the financial managers and accountants realized that, the amount of sales made by the Chryslers was only to the elite and high classes in society. After the realization of the high amount of losses that it had gone through in the market decided to work on that by ensuring, it came up with a short-term plan of manufacturing a much affordable Chrysler model. However, the realization of the plan was going to be in two years. However, to avoid any further losses to the company, it decided to major in market diversification and awareness. This is the reason as to why the year 2011 was found to have many advertisements of the Chrysler model. By the end of the year 2012, the company has set to have increased its market capitalization and shares by a large margin after the introduction of the much cheaper model. Sergio Marchionne, the Chief Executive Officer of the Chrysler group however announced that the model would only be affordable to the middle class and would not be exceedingly cheap to avoid the loss of repute for the company. The market shareholders came up with this unanimous decision at the end of the 2011 board meeting. The company has received scrutiny from the public due to majoring on the marketing of only one of their brands of cars. Financial analysts have criticized the move by the company and stated that this will lead to the decrease in market value of the other types of cars. The company has also been advised that this is a move that will be taken advantage of by its competitors to overtake (Stephens, 2011, 167 ). The rival companies ensure that they market their cars at an equal and optimal level. The shareholders of the company receive repeated financial advice from other parties stating that they should invest in different areas of the business. However, they ignore this and only look at the short-term investment returns that are sure to come from the Chrysler only. However, the ones that invest in the other models of cars created by the company will be sure to succeed in the future as the cars may reach the level of the Chrysler. The Chrysler group has had many successes over the last two years that it has been in the automotive industry. Most of its successes attribute to the Chrysler model of the cars. With the prevailing market situations, the company through the car has gone far and has beaten the competitors in very many sectors in the automotive field. With a diligent force of financial investors, the company is due to perform better in the future. Referencing Breer, Carl. 2009. The Birth of Chrysler Corporation and its Engineering Legacy. New York: Cengage Learning. Walter, P. 2010. Chrysler Group LLC Report: Chrysler. Retrieved on 10th March 2012 from http://media.chrysler.com/newsrelease.do;jsessionid=49F5BA21049CE498E9DF8AABA BFCAF38?&id=10216&mid=2 Rall, P. 2011. Chrysler Posts $13.1 Billion Revenue In Q3, $212 Million Profit: Torque News. Retrieved on 10th March 2012 from http://www.torquenews.com/106/chrysler-posts-131-billion-revenue-q3-212-million- profit Stephens, P. 2011. The Perquisites of the Automotive Industry and the Giants Involved. New York: McGraw Hill Publishers. Adams, B. 2011. Chrysler Group’s Annual Financials. Retrieved on 10th March 2012 from http://www.chryslergroupllc.com/Investor/PressReleases/financial/ChryslerDocuments/Q 4_%202011_PressRelease.pdf Hills, A. 2011. Chrysler Group Reports Third Quarter 2011 Net Income of $212 Million. Retrieved on 10th March 2012 from http://www.prnewswire.com/news-releases/chrysler-group-reports-third-quarter-2011- net-income-of-212-million-132695213.html Read More