Chrysler in Trouble - Admission/Application Essay Example

? Chrysler in Trouble of the of the of the Question Chrysler Motors LLC is an automobile company in the United States. In the year 1998 Chrysler decided to merge its company and enter into a partnership with Daimler Benz AG. Daimler Benz AG was a German company. At the time of the merger, it was decided that it will be a merger of equals. The plan was that Chrysler would use the architecture of Daimler in order to bring a control in its cost structure and on the other hand Daimler had a wish that Chrysler would promote its position in the automobile industry of the US market. However, the German company was found to be more dominant (Ghuman 628). The Americans started feeling that they were being deceived. The culture of the two countries was different and this was one of the main reasons for their collision (Ahlstorm, and Bruton 57). The executives of Chrysler felt that the Germans were proceeding in their own way and there was no scene of cooperation with the Americans from their side. According to the employees of Chrysler if they were aware of the fact that the Germans would be dominating in such a manner then they would never had made any deal with the Germans. The employees of Chrysler were being demoralized by the behaviour of the Germans. The nine years of mergence of the two big companies failed mainly due to the holding of 80.1 per cent of the stake of Chrysler by Cerberus Capital Management. However, it was promised to Chrysler that its first rank in the US market and the global industry would be restored. It was also decided that Daimler will keep 19.9 per cent of the stake. Question 2 Chrysler LLC was trying hard to restructure its financial conditions and repay the debts of its creditors. The performance of the company and its sales revenue showed a decreasing trend and thus the company failed to stabilize its financial conditions. When Chrysler filed for bankruptcy, it requested for a federal loan of $2 billion along with $7 billion of loan demanded previously. This request was accepted but with a condition that the company would have to merge with Fiat within April 2009. Before making an alliance with Fiat, Chrysler tried to restructure its debt position. Most of the creditors cooperated with Chrysler but some of them refused to reduce the amount of debts. Thus the company had no other option other than filing for bankruptcy in order to find a solution to its huge debt (McEachern 288). The decision of filing for bankruptcy was not a reason for its failure but it gave another chance to the company to revive. If Chrysler would have tried to stand alone instead of combining with Fiat, then its inability to repay the debt to its creditors would have forced the company to become insolvent. It was impossible for the company to continue its business with the decreasing sales revenue of the company. Moreover the loan requested by Chrysler would not have been accepted by the Federal Government if the company would have refused to combine with Fiat. Thus this decision was taken so that Chrysler could continue its operations remaining in the business. Question 3 Chrysler did not follow the automobile makers of Japan. It adapted new strategies and advance technologies of its own (Shimokawa 84). It focussed on the new segments in the market. It mainly focussed on the light trucks and SUVs. The market for light trucks and SUVs is bigger as compared to that of the passenger cars. The trucks had a market expansion from 20 percent to 50 percent gradually. The factory of Chrysler was built in such a way so that it could allow mass production. This favoured the production of trucks and SUVs. Moreover, the production of trucks helped in the reduction of costs of manufacture. A large number of trucks were manufactured out of the same frame and as a result it involved low cost for each vehicle and decreased the total cost of manufacture. Chrysler thought that this strategy will help them to earn a good amount of revenue and also increase the cash flow. Thus this model strategy was chosen by Chrysler in order to reduce the cost structure and increase the profitability of the company. Question 4 The majority of stake holders of Chrysler LLC had taken a decision to merge with Italy’s automobile company Fiat in order to establish a global alliance. Thus Chrysler’s access in the Italian market will help it to achieve competitive advantage in the automobile industry (Menipaz, and A. Menipaz 370). Its alliance with Fiat will help it to access fuel efficient automobile platforms and the power train technology. The distribution capabilities of Fiat will help Chrysler to use its distribution channels for the vehicles manufactured. This deal included sharing of both product and platform between each other; this will help Chrysler in its product expansion. It also included sharing of technologies which will enable Chrysler to advance its own technology. It will allow access and expansion to other markets like distributing the products of Chrysler outside the United States. The partnership will allow Chrysler to provide an extensive product line to its customers and also provide a good return on the investment of the tax payers of America. This will help the company to gain its reputation in the American as well as the European market. The agreement or the deal will be advantageous for both the companies. It will provide opportunities to access the automobile industry with new and innovative technologies. Fiat is a world leader in the automobile industry. It has a number of alliances with leading car making companies and Chrysler will also get benefitted by such alliances. Thus the potential strength of the company will be increased and it will allow Chrysler to lead in the global market. Question 5 The partnership with Chrysler helped Fiat to make an access in the American Market. Fiat took 35 percent equity of Chrysler initially. Both the companies were benefitted by the partnership. The operations of Fiat in the American market had been absent for a long period of time. So this agreement allowed the company to again start its operations in America (Shapiro 229). During this partnership agreement Chrysler had huge debt and it was impossible for the company to repay the debt to its creditors due to the poor financial performance of the company. As a result, it requested for a loan of an amount of $2 billion to the Federal Government. This loan was decided to be sanctioned by the Government only on the condition of partnership of the company with Fiat. As there was a huge capital investment made by Fiat during the merger, even if the agreement appeared to be a joint venture, Fiat had a better control over the new company along with the higher rate of risk. Fiat exported 40 to 50 percent of its total production. It had its business running broadly in the Italian market. This deal allowed its expansion in the American market as well. Question 6 The US Government should allow Chrysler to continue its business. According to the employees of Chrysler, the failure of the company will also affect the economy of the country (Hernandez 49). Moreover, the company has been the third largest automobile company in the world. Thus it should be given an opportunity to regain its position in the market. Chrysler is a resource driven organization, but due to its continuous losses it failed to maintain its position in the market. Its huge debt in the market forced the company to file for bankruptcy. However, the company has been given a chance to revive and should not be allowed to die. Its partnership with the Italian automobile company will help the company to expand its products, its market and as well as adapt to the new and innovative technologies. As a result, there is a hope that the company will improve its position in the market and will not only lead in the American market but also lead globally. Thus it should be allowed to continue its business and given the time required to come back to the leading position in the automobile industry. Question 7 Chrysler was the third largest automobile company in the world before its merger with the Daimler AG. Due to the collision between the employees of both the companies, the merger failed. After this, the company gradually started losing its position in the market and was under a huge burden of the creditors. It tried to restructure the position of its debt but failed as some of the creditors were not interested to reduce the debt amount. As a result the company filed for bankruptcy. However, Chrysler had been a big company and had provided its customers with trucks and SUVs of innovative model strategies. Thus in future if Chrysler fails to regain its position in the automobile industry and it ceases to exist, it would be missed due to its past performance and records. Works Cited Ahlstorm, David, and Garry D. Bruton. International Management: Strategy and Culture in the Emerging World. Connecticut: Cengage Learning, 2009. Print. Ghuman, Karminder. Management: Concepts, Practice & Cases. Noida: Tata McGraw-Hill Education, 2010. Print. Hernandez, Louis. Saving the American Dream: Main Street's Last Stand. Indiana: AuthorHouse, 2012. Print. McEachern, William A. Economics: A Contemporary Introduction. Connecticut: Cengage Learning, 2011. Print. Menipaz, Ehud, and Amit Menipaz. International Business: Theory and Practice. California: SAGE, 2011. Print. Shapiro, Helen. Engines of Growth: The State and Transnational Auto Companies in Brazil. New York: Cambridge University Press, 2006. Print. Shimokawa, Koichi. Japan and the Global Automotive Industry. New York: Cambridge University Press, 2010. Print. Read More