Life in the Breakdown Lane.(Chrysler Group)(Brief Article)

The job isn't getting any easier for Dieter Zetsche. Ever since November, when Stuttgart-based DaimlerChrysler sent him to Detroit as the Chrysler Group's new CEO, the former Mercedes executive has had his hands full. The U.S. unit lost $1.7 billion in the last half of 2000 alone, and industry analysts say the worst isn't over yet. Wall Street expects losses to exceed $2 billion this year. In an interview last week, Zetsche acknowledged that the company is facing a major overhaul. "This cannot be fixed in one month," he said, with massive understatement.

In fact, Chrysler is about to open another barrel of red ink: company sources have told NEWSWEEK the automaker is planning to declare a writeoff of between $2 billion and $3 billion in restructuring costs for plant closings, early retirements and severance packages for laid- off workers. Zetsche declined to confirm the figure, but he admits Chrysler's problems are even worse than he had guessed at first. He told NEWSWEEK: "There were quite some surprises for all of us when we finally got the total clear picture."

That picture is one big jigsaw puzzle. Zetsche's assignment is to figure out how to put the pieces back together, not only lining up new car buyers, but reconstructing the company's shattered image among stock analysts, parts suppliers and its own employees. And the connections just keep getting trickier.

Can the old Chrysler ever come back? Car for car, it was the world's most profitable automaker when Daimler acquired it in 1998. Investors saw the $35 billion merger as the perfect marriage of mass and class. But American managers allowed the product line to age while costs and rebates spun out of control. And now the U.S. unit, which once had the best supplier relations in Detroit, is confronting a revolt by its independent parts makers. They are infuriated by Zetsche's demand that they cut their prices by 5 percent immediately and an additional 10 percent by 1993. Chrysler's U.S. work force, upset when Stuttgart replaced their American bosses with Germans led by Zetsche, had been calming down lately. Many said they didn't care where the boss came from, as long as their jobs survived. Last week the company announced plans to eliminate 26,000 of those jobs--20 percent of the payroll.

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