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Case Title:

Chrysler's Product-mix Challenges: Is Flexible Manufacturing the Answer?

Publication Year : 2006

Authors: Chiradeep Chatterjee, Sauvik Dhar

Industry: Automobiles


Case Code: OPM0008

Teaching Note: Available

Structured Assignment: Available

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American automobile industry represented by the Big Three - GM, Ford and Chrysler (DaimlerChrysler) had enjoyed a monopolistic environment in North America and their inclination to innovate had been rather limited because of lack of competition. These companies, therefore, maintained production facilities that were suitable for mass production of any single model, which ensured economies of scale and plant profitability. Absence of competition also meant that new model launches were few and far between ensuring full-scale utilisation of plant machinery. However, the Big Three were challenged not only across the product lines n their home turf, but also across the globe. The competition came in the form of formidable Asian players - Toyota, Honda, Nissan and Mitsubishi from Japan, and Hyundai from South Korea. As a result, the choice of car models available to the US consumers increased and the US manufacturers found their market share decreasing. Shorter longevity of car models made it imperative for the US manufacturers to repeatedly invest in expensive modification of their production facilities, decreasing the profitability of their products. Chrysler Corporation found an answer to address this problem in Flexible Manufacturing System (FMS). It is hoped that this system would help Chrysler to not only improve its profitability but also ensure market leadership.

Pedagogical Objectives:

  • To discuss the changing competitive dynamics of the US automobile industry
  • To discuss the reasons behind the decline in the market shares of the US car manufacturers
  • To discuss the concept of Flexible Manufacturing System
  • To discuss how Chrysler Corporation implemented Flexible Manufacturing System and improved its profitability
  • To discuss how Chrysler integrated its suppliers into its new system of production
  • To discuss human resource problems associated with the change in system of production.

Keywords : Flexible Manufacturing System (FMS); North America automobile industry; Overseas competition; Flexible robotics; Operating Strategies Case Study; The Big Three; Chrysler Corporation; Build-to-order; Automated guided vehicle; Plant profitability; Product mix challenges


  • The North American Automobile Industry
  • Chrysler's Product-mix Challenges
  • Is Flexible Manufacturing the Answer?

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