scourge
10-09-2003, 06:48 AM
http://www.forbes.com/2003/10/07/cx_jf_1007flint.html
Backseat Driver
Sell Chrysler Back
Jerry Flint, 10.07.03, 11:00 AM ET
Everyone is writing about Chrysler, but the message is pretty much the same: Chrysler is in trouble, and the German masters will soon be thinking of a way to get rid of the American unit.
The managers in Stuttgart don't like the ups and downs in the American mass market. In August Toyota (nyse: TM - news - people )--as a company--outsold Chrysler's cars and trucks in the U.S. So what? I remember a short period when Chrysler's market share was down near 7% and little American Motors outsold Chrysler. And I can remember when all of Chrysler's divisions outsold all of Ford Motor's divisions.
Yet I believe that someday Chrysler will again become an independent American-controlled company.
The present German managers in Detroit haven't done a bad job--at least in my opinion. Their new products, the Crossfire sports car, the Pacifica wagon and the coming rear-wheel-drive sedans and wagons are innovative and good. So what are the problems?
It isn't a universal view, but some auto writers say the new cars aren't home runs or even ground-rule doubles. Some say that the Pacifica wagon is too pricey, the Crossfire two-seater isn't special enough, that the coming rear-drive cars look too bulky and that U.S. buyers will be unwilling to spend $35,000 to $40,000 for these cars. I don't buy into those arguments. I say these new vehicles are good, but they won't change Chrysler's fate.
First, understand that Chrysler is largely a truck company today--77% of its business comes from pickups, minivans and sport utilities. Chrysler's trucks are successful. Its minivan, despite ever-growing competition, is still the world's best-selling minivan. The big Ram pickup is a huge success. The Jeep Liberty is also a success.
The Dodge Durango SUV has been weak, but a new model is out. OK, the critics say the dealers have to give away Grand Cherokees in order to move them. Maybe, but it's a tough, overcrowded market now.
What about Chrysler's passenger cars? They are mainly split among the new rear-wheel-drive models coming out next year and the smaller front-wheel-drive models. The rear-wheel-drive cars are to be built in one plant in Canada that has the capacity for 220,000 cars per year on two shifts and 300,000 on three shifts. But the new models will have higher prices than the old ones.
High prices and fierce competition in the U.S. today could hold sales to around 150,000 a year. If that happens, this new platform would be a serious moneyloser.
Chrysler's front-wheel-drive cars aren't much help. I think it's possible that DaimlerChrysler (nyse: DCX - news - people ) will give up on Chrysler and Dodge cars and try to survive on trucks.
I don't think that would work.
A good part of the problem is the market strategy--the killing of Plymouth, the merging of big Dodge and Chrysler and Jeep dealers under one roof, and the move upscale. Making better and pricier cars isn't a bad strategy, but it takes years to accomplish. And I don't think the executives in Germany have the patience to see through their own strategy.
The old Chrysler succeeded on speed and daring. The Germans are more methodical than fast. Look at the PT Cruiser, which was an instant hit but is losing traction. Why? The Germans waited too long before adding new models, and they still haven't expanded the line to its full potential. Management failed to add a third row of seats to the Grand Cherokee, which would have given the line a new burst of life.
I believe the 1998 merger between Daimler and Chrysler could have worked only if it was a genuine "merger of equals," which was the way the deal was originally announced. Instead, the Germans planned from the beginning to mislead the Americans. (Daimler boss Jurgen Schrempp even admitted this on tape.)
I am particularly bitter toward Schrempp and Daimler management for the lies and the way that they treated the American executives. I've got a grudge and I'm not ashamed of it.
The loss potential is enormous: billions of dollars in a single year. If there isn't drastic improvement--and soon--the German board of supervisors is bound to consider divestiture. They are well aware of how BMW prospered once it got rid of Rover.
Some have suggested a spinoff to Daimler stockholders. The company's biggest stockholder, Deutsche Bank (nyse: DB - news - people ), has a 12% share, and it wants out of Daimler. I don't think Deutsche Bank wants to end up owning a large chunk of a damaged Chrysler.
Others have suggested that Daimler might sell off Jeep and its other trucks. But potential buyers, such as General Motors, Ford, Toyota and Nissan, make competitive trucks and don't need all that old capacity or union contracts. Jeep is another story; it could be sold, but I'll get to that later.
The best solution: sell all of Chrysler back to Americans. Don't worry. There will be buyers. The terms will be easy--BMW actually paid the Brits to take back Rover in 2000.
The tough part is that American buyers will insist that Jeep be part of the deal. Maybe Daimler will retain a 20% interest in the new American company in exchange for making Jeep part of the sale.
Don't you remember what happened the other times Chrysler got into trouble? How leaders with imagination, charisma, spirit and vision appealed to American patriotism and support for the underdog? Remember all the rabbits they pulled from the hat--the minivan, the rebirth of the convertible, turbo cars, five-year warrantees and even the rebate?
I doubt if the American public feels the same degree of loyalty or enthusiasm for a foreign-owned company. Unless the Germans quickly figure out a way to get things back on track, the $1 billion loss in the second quarter will be the prelude to an endless nightmare.
I hope I live to see the day that Chrysler once again becomes an American company with American management.
I would say his assesment is spot on. The merger was a mistake to start with and everyone on the outside knew it (AOL-Time/Warner comes to mind as well). Chrysler does not add anything to Daimler Benz and the sooner they divent themselves of Chrysler the better.
Backseat Driver
Sell Chrysler Back
Jerry Flint, 10.07.03, 11:00 AM ET
Everyone is writing about Chrysler, but the message is pretty much the same: Chrysler is in trouble, and the German masters will soon be thinking of a way to get rid of the American unit.
The managers in Stuttgart don't like the ups and downs in the American mass market. In August Toyota (nyse: TM - news - people )--as a company--outsold Chrysler's cars and trucks in the U.S. So what? I remember a short period when Chrysler's market share was down near 7% and little American Motors outsold Chrysler. And I can remember when all of Chrysler's divisions outsold all of Ford Motor's divisions.
Yet I believe that someday Chrysler will again become an independent American-controlled company.
The present German managers in Detroit haven't done a bad job--at least in my opinion. Their new products, the Crossfire sports car, the Pacifica wagon and the coming rear-wheel-drive sedans and wagons are innovative and good. So what are the problems?
It isn't a universal view, but some auto writers say the new cars aren't home runs or even ground-rule doubles. Some say that the Pacifica wagon is too pricey, the Crossfire two-seater isn't special enough, that the coming rear-drive cars look too bulky and that U.S. buyers will be unwilling to spend $35,000 to $40,000 for these cars. I don't buy into those arguments. I say these new vehicles are good, but they won't change Chrysler's fate.
First, understand that Chrysler is largely a truck company today--77% of its business comes from pickups, minivans and sport utilities. Chrysler's trucks are successful. Its minivan, despite ever-growing competition, is still the world's best-selling minivan. The big Ram pickup is a huge success. The Jeep Liberty is also a success.
The Dodge Durango SUV has been weak, but a new model is out. OK, the critics say the dealers have to give away Grand Cherokees in order to move them. Maybe, but it's a tough, overcrowded market now.
What about Chrysler's passenger cars? They are mainly split among the new rear-wheel-drive models coming out next year and the smaller front-wheel-drive models. The rear-wheel-drive cars are to be built in one plant in Canada that has the capacity for 220,000 cars per year on two shifts and 300,000 on three shifts. But the new models will have higher prices than the old ones.
High prices and fierce competition in the U.S. today could hold sales to around 150,000 a year. If that happens, this new platform would be a serious moneyloser.
Chrysler's front-wheel-drive cars aren't much help. I think it's possible that DaimlerChrysler (nyse: DCX - news - people ) will give up on Chrysler and Dodge cars and try to survive on trucks.
I don't think that would work.
A good part of the problem is the market strategy--the killing of Plymouth, the merging of big Dodge and Chrysler and Jeep dealers under one roof, and the move upscale. Making better and pricier cars isn't a bad strategy, but it takes years to accomplish. And I don't think the executives in Germany have the patience to see through their own strategy.
The old Chrysler succeeded on speed and daring. The Germans are more methodical than fast. Look at the PT Cruiser, which was an instant hit but is losing traction. Why? The Germans waited too long before adding new models, and they still haven't expanded the line to its full potential. Management failed to add a third row of seats to the Grand Cherokee, which would have given the line a new burst of life.
I believe the 1998 merger between Daimler and Chrysler could have worked only if it was a genuine "merger of equals," which was the way the deal was originally announced. Instead, the Germans planned from the beginning to mislead the Americans. (Daimler boss Jurgen Schrempp even admitted this on tape.)
I am particularly bitter toward Schrempp and Daimler management for the lies and the way that they treated the American executives. I've got a grudge and I'm not ashamed of it.
The loss potential is enormous: billions of dollars in a single year. If there isn't drastic improvement--and soon--the German board of supervisors is bound to consider divestiture. They are well aware of how BMW prospered once it got rid of Rover.
Some have suggested a spinoff to Daimler stockholders. The company's biggest stockholder, Deutsche Bank (nyse: DB - news - people ), has a 12% share, and it wants out of Daimler. I don't think Deutsche Bank wants to end up owning a large chunk of a damaged Chrysler.
Others have suggested that Daimler might sell off Jeep and its other trucks. But potential buyers, such as General Motors, Ford, Toyota and Nissan, make competitive trucks and don't need all that old capacity or union contracts. Jeep is another story; it could be sold, but I'll get to that later.
The best solution: sell all of Chrysler back to Americans. Don't worry. There will be buyers. The terms will be easy--BMW actually paid the Brits to take back Rover in 2000.
The tough part is that American buyers will insist that Jeep be part of the deal. Maybe Daimler will retain a 20% interest in the new American company in exchange for making Jeep part of the sale.
Don't you remember what happened the other times Chrysler got into trouble? How leaders with imagination, charisma, spirit and vision appealed to American patriotism and support for the underdog? Remember all the rabbits they pulled from the hat--the minivan, the rebirth of the convertible, turbo cars, five-year warrantees and even the rebate?
I doubt if the American public feels the same degree of loyalty or enthusiasm for a foreign-owned company. Unless the Germans quickly figure out a way to get things back on track, the $1 billion loss in the second quarter will be the prelude to an endless nightmare.
I hope I live to see the day that Chrysler once again becomes an American company with American management.
I would say his assesment is spot on. The merger was a mistake to start with and everyone on the outside knew it (AOL-Time/Warner comes to mind as well). Chrysler does not add anything to Daimler Benz and the sooner they divent themselves of Chrysler the better.