Proposal for the Financial Improvements of Chrysler LLC

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Introduction

Chrysler LLC is one of the most developed automobile producers in the world market. It is a US-based company whose sphere of interest includes the productions and sales of cars and their spare parts around the world. The recent events in the global economy, namely the financial recession and the economic crisis, have affected numerous companies, small, middle, and large enterprises all over the globe, and the Chrysler LLC Company is not an exception. Despite numerous brave statements about the overcoming of the crisis shortly, the actual financial data of the Company evidence the recession and losses that it suffers in 2008 and 2009.

Thus, the issue in the Chrysler LLC is that the financial losses for the year 2008 amounted to, according to various sources, either $8 billion (Gopwani, 2009) or $16 billion (Langlois, 2009). In any case, the financial statements of the company showing such figures in the losses box cannot be called a successful and developing one. Thus, it is obvious that the financial policy of the company needs facilitation in both the poor economic respect and the practical car production respect (Morath, 2007).

The 2009 financial statement by Chrysler LLC displays the plan of the company to cut the losses in 2009 for them to match the level of only $1.1 billion. Although rather optimistic, such plans do not seem to be realizable and need backing up.

Currently, the backup of the losses cutting plan consists of two main ideas. First of all, the company is about to match the levels of its viability for 2008 and 2009 to make them amount to $29.2 billion (Langlois, 2009). The second point is the non-cash payments to the companys retirees carried out jointly with UAW-negotiated Voluntary Employee Beneficiary Association (Gopwani, 2009). However, both points are not secure and do not assure the success of the plan. Accordingly, the losses forecasted might amount to quite higher figures in 2009 (Morath, 2007). Based on this, my plan of financial facilitation can be viewed as the only one to work in the situation.

Proposed Solution

So, to ensure the overcoming of the current financial difficulties by Chrysler LLC and to support its forecasts for the loss cuttings for almost 82% in 2009 as compared to 2008 (Gopwani, 2009), I propose the following steps to be taken by the companys Board of Directors and other officials:

  1. Implement the per-shift work in the Chrysler LLC production facilities;
  2. Avoid personnel cutting by temporary reducing the production capacities;
  3. Carry out the price reduction for the models in the worst demand in the market;
  4. Preserve markets and acquire new customer bases through discount systems;

The plan currently developed for losses cutting is the firing or temporary dismissal of numbers of employees and closing several production facilities around the globe. Instead of facilitating the anti-crisis measures by Chrysler LLC, such a step would create lots of those protesting against the companys policies and would not effectively solve the issue of losses (Morath, 2007).

Per-shift work at plants and car-assembly facilities of Chrysler LLC would allow preserving the jobs for thousands of people without any additional expenses from the companys side. At the same time, the closing of the plants and facilities would not be necessary. Although the reduction of capacities of those plants and car-assembly facilities is necessary to avoid the staff cuttings and the complete closing of those facilities, this step is not disastrous and is easy to overcome after the financial recovery of the company.

At the same time, the reason for the recent financial losses of Chrysler LLC might be not only the global recession in the economy but also the wrong market strategies implemented. To fight this, reduction of prices for the models of cars in the worst demand would be necessary to preserve the customer base and avoid the loss of whole amounts of money by, instead, losing their parts. Finally, the discount system implemented will allow the development of the customer base of Chrysler LLC even during the recession and might facilitate loss cutting in the coming years. Although connected with certain expenses for staff training, production facility re-equipment, etc., the proposed steps will prove to be more effective and less costly for Chrysler LLC.

Schedule

To ensure the timely and proper carrying out of the plan proposed, the following timeframe for it should be kept to. In more detail, this timeframe encompasses four major phases that include the approval of the decisions proposed at the official and the employee levels, the training of the staff, the re-equipment of the car-assembly facilities, and the testing period during which the results of the innovations proposed should be monitored, measured, and reported for further considerations. The first stage of the plan will be its consideration and the subsequent approval by the Board of Directors of Chrysler LLC. The step is eternally significant as without the high-ranking consent for the plan implementation there would be no opportunity to put the solutions proposed in practice.

At the same time, the approval by the managers and employees of Chrysler LLC is also crucial as they are the people to be affected by the changes to the greatest extent. After this, the simultaneous process of employee training and the facilities re-equipment should be carried out to both adjust the facilities to reduced capacities regime and introduce the employees to the basics of work with the new equipment and according to the new timeframes.

The next three months should be the testing period during which the efficiency of the plan implemented should be checked through monitoring the production rates and the levels of the employees satisfaction with their position. Needless to say, that the most important factor of testing will be the actual reported losses of the company for this very period (August  October 2009). The outcome of the plan proposed is supposed to be the actual cutting of Chrysler LLCs losses to $1.1 billion in 2009 (Gopwani, 2009).

Table 1.

Activity Completion Date
Consideration of the plan proposed by the Board of Directors May 2009
Approval by the Board of Directors May 2009
Approval by the Chrysler LLC managers and employees May 2009
Training of the staff. The employees will sometimes have to acquire new specialties to operate the new equipment and adjust to the per-shift working schedule. May  August 2009
The re-equipment of the car-assembly facilities and the companys plants. May  August 2009
Introduction of the new equipment to the employees August 2009
Testing period August  October 2009

Cost

Accordingly, if the plan proposed is carried out properly, the approximate cost of its implementation will amount to $1.837 billion. This sum includes the costs for staff training, the purchase of the new equipment, its installation and refinement; as well, the costs for the plan efficiency measurement by an independent audit agency are included in the sum mentioned. The most expensive activity, not surprisingly, will be the purchase of the new equipment. Even taking into consideration that overall prices are on the decrease to the lack of demand in the market, the costs of the equipment that allows companies spare their assets and make the production process more effective increase in this context.

In a contrast, the expenses for the staff training, new equipment installation, and testing of the whole plan efficiency during the specified time are the less expensive but also costly activities. The special point in the list of costs that the plan proposed involves is the funding of an independent agency that should check and audit both the efficiency of the plan implemented and the objectivity of its measurement. Finally, the contingency is assessed as 10% of the total sum of the plan implementation.

Table 2.

Activity Costs
Staff training $2 million
New equipment purchase $1.5 billion
New equipment installation and refinement $98 million
Testing and efficiency measurement $53 million
Auditing by an independent agency $17 million
Contingency, 10% $167 million

Coordination

The coordination of the activities of officials and employees at all levels is required to ensure the proper implementation of the plan proposed and its effective operation. Thus, the Board of Directors is responsible for the approval of the plan and monitoring its effective implementation. The managers of the middle level are to control the staff training at their specific department with the special emphasis put on the HRM managers of Chrysler LLC. Finally, the employees need to treat their training responsibly and approach the new duties and working schedules as the necessity for the survival and the subsequent development of the company and their own opportunities in it.

Benefit

The major positive outcome of the plan I propose is the possibility to cut the losses of Chrysler LLC to the desired level of $1.1 billion by the end of the year 2009. As one of the world leaders in the sphere of car production, Chrysler LLC has to stand the harsh reality of the current financial crisis and fight for its position in the market. The reduction of losses with the simultaneous development of the customer base and new market will allow the company to become more advanced and stronger after overcoming the current recession.

Conclusion

The recent events in the global economy, namely the financial recession and the economic crisis, have affected numerous companies, small, middle, and large enterprises all over the globe, and the Chrysler LLC Company is not an exception. Despite numerous brave statements about the overcoming of the crisis shortly, the actual financial data of the Chrysler LLC Company evidence the recession and losses that it suffers in 2008 and 2009. The plan of action I propose in this paper is the effective way to solve the companys financial issues and assure the reduction of its losses to $1.1 billion by the end of 2009.

Works Cited

Gopwani, J. Chrysler Loss to Shrink This Year. Freep. 2009. Free Press Business Writer. Web.

Langlois, Shawn. Chrysler Forecasts Loss of $4.7 billion in 2009. Marketwatch. 2009. Market Watch. Web.

Morath, Eric and Christine Tierney. Chrysler Puts 1Q Loss at $515M. Detnews. 2007. Detroit News Online. Web.

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