Business_Failure_of_Chrysler,_Llc.

The Business Failure of Chrysler, LLC. Juqita D. McClure LDR/531 17 May 2010 In 2008 Chrysler approached the Federal Reserve Bank for help. If help was not provided then Chrysler would be forced to file for bankruptcy (Szczesny, 2010). According to Szczesny, the effect on the economy might have been more traumatic then the aftermath of the collapse of a large bank no one had ever heard. The Midwest would effectively be the sight of the largest economic collapse in U.S. history. Chrysler did file for bankruptcy and to avoid an economic meltdown did receive Federal assistance. This document will discuss how old Chrysler Corporation associate decisions led up to bankruptcy and the request for Federal assistance, and what adjustments did Chrysler make throughout their reorganization into the new Chrysler, LLC. that may have temporarily saved the company. Chrysler Management Decisions It was only 30 years ago when the last government bailout occurred for the Daimler Chrysler Corporation. In June 1993 Daimler Chrysler Corporation reorganized its service operation by creating a Customer Satisfaction and Vehicle Quality group. Thomas Sidlik was made the VP to handle customer problems and dealer concerns. Sidlik’s team would be made up of 1,100 personnel (John, n.d.). The new department’s budget was not anticipated beyond the immediate requirement for customer satisfaction. With mismanagement of expenditure and rising costs of logistics, Chrysler’s executives and management teams failed effectively manage the organization and its resources. Chrysler executives were not motivated to resolve the issue and looked at bankruptcy as a way out compounding debt (Anonymous, 2009). After announcing that Chrysler would be filing for bankruptcy, the organization hired the global law firm Jones Day to analyze bankruptcy as a viable option. The firm determined that the “impact to the overall domestic automotive industry would be devastating” (Wernle, 2008) and Chrysler once again set out to look for more options. Bankruptcy was the only solution to adjust corporate overhead to reduce a continuous increasing debt. As no other options were available and the potential devastating impact on the U.S. economy, the federal government agreed to bailout the auto industry. Request for Government Assistance “On April 30, 2008, Chrysler Corporation and its creditors went to court to begin proceeding for the first-ever bankruptcy filing by a major U.S. auto corporation” (Anonymous, 2009). Even before the announcement several top executives were aware of the pending high margin of debt several months prior to the announcement. There are no records to indicate that any changes in the organizations structure or spending were made to correct the problems prior to the bankruptcy announcement. Chrysler Corporation was granted bankruptcy and released of nearly $30 million in debt. The government agreed to sink $50 billion into the new Chrysler, LLC. to keep operations running smoothly and that proved to be an effective stimulus package for the organization. Not only did Chrysler, LLC. receive over $50 billion in government bailout, but the government now owned 70 percent of the corporate stock. The government instructed Chrysler to reorganize its operations as part of the bailout. Now managers would have to effectively diagnose the organizational behavior and evaluate the corporate structure, processes, and culture. New Chrysler, LLC. Reorganization Chrysler continued to reorganize its staff to reduce costs and shed widely shared criticism amongst suppliers of poor business practices and payment disparities. According to Automotive News, Scott Garberding, Head of Manufacturing/World Class Manufacturing, reorganized Chrysler Group’s purchasing department, but kept its current managers (Anonymous, n.d.). Garberding also appointed new department heads for mechanical components, metallic, chemical, and electrical, but failed to restructure the operations. Also as part of the reorganization, a new position was created for technical solutions to reduce product costs. Ironically, the same failed management personnel remain, but in various newly created positions. These actions demonstrates Chrysler leadership’s inability to the shed dead weight of senior leaders incapable of recognizing problems of declining profits and develop viable solutions for future growth. Each of these problems is an example of Chrysler’s continued inability to adjust its organizational behavior for the past 30 years. Chrysler predicted that sale would continue to decline over the next year following the reorganization of Chrysler, LLC, but it did not take as great a hit in sales as predicted and sale points remained on target similar to the previous year, and Chrysler even added an additional 1,000 new jobs in 2009. The reorganization established new jobs, but reduced or eliminated non-union retirement benefits. The newly formed leadership maintained the same ideology and the new Chrysler, LLC. continues to perform like the old Chrysler Corporation. Conclusion The bailout dollars provided to Chrysler is little more than a temporary band-aid over a festering wound. The new Chrysler, LLC. failed to correct shortfalls from the old Chrysler Corporation with continued distribution of executive and shareholder golden parachutes, and mismanaged spending. The government taxpayers only delayed the inevitable and if Chrysler is to survive beyond the next 30 years then the organizations behavior will have to change. The Reinforcement Theory states that “behavior is a function of its consequences” (Anonymous, n.d.). The unchanged environment and lack of controlling consequences will cause another repeat of past failures for the new Chrysler, LLC. Unless stricter guidelines are placed on the automobile industry to find new ways of requisitioning, spending, and expansion then history is doomed to repeat itself for the third time. Reference Anonymous. (2009, May). Chrysler Bankruptcy Another Taxpayer Bailout. The New American, 25(11), 7.  Retrieved May 16, 2010, from Research Library. (Document ID: 1738086131). Anonymous. (n.d). Chrysler purchasing gets slightly new look; Garberding retains many managers from Campiera.(NEWS). Automotive News, 83(6371), 6. Retrieved from Gale: CPI.Q (PowerSearch) database. Anonymous. (n.d.) Organizational Behavior Theory. University of Utah. Retreived from www.business.utah.edu/~mgtab/OB-06.ppt John, B. (n.d). Chrysler overhauls service organization. (Chrysler Corp.). Automotive News, 8. Retrieved from Gale: Academic OneFile (PowerSearch) database. Szczesny, J., May 14, 2010. The Oakland Press. Chrysler has shot to prove skeptics wrong. Retrieved from http://www.theoaklandpress.com/articles/2010/05/14/business/doc4beb6059c6332024097027.txt Wernle, B. (2008). Chrysler: Bankruptcy counsel supports its stance. Automotive News, 83(6337), 3. Retrieved from MasterFILE Premier database.