Germans don’t like the phrase “assisted suicide.” The preferred term is aktive Sterbehilfe (active assistance in dying). Apparently, it's not a crime. Euthanasia is a crime. Assisted suicide is not. However you slice it, it's clear that this “activity” is not unknown in Germany’s corporate culture. While DCX’ leadership keeps insisting they want to nurture the Chrysler group back to health, they seem Hell bent on helping it meet its demise.
DOA: Joe Eberhardt. In the summer of 2003, the Dark Lords of DCX appointed Herr Eberhardt Chrysler Group Executive Vice President – Global Sales, Marketing and Service. From the time he arrived, everything Jolting Joe did seemed to reflect a callous disregard for his employer's survival. In three years, Eberhardt managed to turn a company on the verge of a renaissance into an organization standing on the precipice.
For one thing, Eberhardt approved the two worst automotive ad campaigns in recent history. The cartoonish “Ask Dr. Z” commercials succeeded in making a fool of both his boss and his boss’ company, while the “WTF?” Dodge Nitro spots almost achieved the impossible: slowing sales of a hot-selling product. Joe was just getting warmed-up. When sales started tanking, Joe started banking. By reneging on Lee Iacocca’s promise not to build vehicles regardless of customer demand, Eberhardt’s Chrysler boldly went where Chapter 11-aversive executives fear to tread.
And then Eberhardt plunged Chrysler Group deep into rebate Hell. The company’s incentives are now double the industry average– and growing. And if that wasn’t enough to convince Chrysler’s German masters that it was time to confiscate Joe's belt and shoe laces, Eberhardt unleashed his pièce de résistance: alienating the entire Chrysler/Dodge/Jeep dealer network. Never a one for the subtle approach, Joe forced dealers to take vehicles they couldn’t sell, then insulted their sales abilities when they didn't sell them. No wonder the President of Southfield Chrysler said “Joe needs to work on his people skills a bit.”
In this case, there’s no need for the old “Did he jump or was he pushed?” debate. Think of Mr. Eberhardt’s corporate demise as aktive Sterbehilfe and call it good. But where does Jolted Joe’s departure leave the automaker with enough unsold inventory to give every person in the state of Wyoming a new vehicle (assuming they’d want a Chrysler product)– not including the suspiciously undisclosed number of vehicles they have stashed away in that infamous sales bank? Fleet sales!
When reporters asked Chrysler's [remaining] execs why they're offering both a soft top and a retractable hard top on the new Sebring, the expense accounters said the ragtop was a “lower cost alternative” for the rental market. You don’t have to be a Taurean to know that positioning a new model in the resale toilet from the outset isn’t a very smart move– unless you’re trying to make dumb ones. Hmmm.
While we’re second guessing management motivation, those of you who’ve wondered if Chrysler’s got a cunning plan to build up the sales bank as a hedge against UAW actions needn’t. If that were the case, the company wouldn’t be overproducing and backlogging Rams and Pacificas and other models that aren’t selling; models that will continue to wither against fresh models from GM, Ford and Toyota. If riding out an extended strike was the plan, Chrysler would be would amassing Calibers, Wrangler four-doors and other popular models.
How’s this for a theory: Daimler-Benz wants Chrysler to fail. There were plenty of German execs who thought the “merger of equals” sullied MB’s good name. Perhaps powerful factions within DCX denied Chrysler the resources it needed (e.g. advanced engineering) so that the American automaker and its German supporters would be hoisted by their own petard. Maybe they actively worked to destroy Chrysler so they could fill the power vacuum left by the automaker's eventual bankruptcy/sell-off. It wouldn’t be the first time that one part of a large company plotted against the interests of the other, in a fight to the death for control.
Maybe it didn’t start that way, but I bet that's the way it is now, as executives scramble to diassociate themselves from DCX' all-American adventure. I mean, why did Dr. Z and his zealots stand around so long, watching Eberhardt drive Chrysler over a cliff? Surely someone above him should have yanked Joltin' Joe out of the game a long time ago. You could even say that Joe's superiors are as guilty as Eberhardt for Chysler's declining physical and mental health. Oh… that’s right. They can’t be guilty. That’s not a crime in Germany.
Well, if you actually get someone the deadly pill for comitting suicide: Yes, that IS a crime here in Germany. If your theory of conspiracy turns out to be right, heads will roll at MB, I’m sure. There are many shareholders who aren’t amused about Chrysler killing their investment. They wanna see Chrysler get flogged as soon as possible. Your theory is reasonable.
Best – Herman the German
Honestly, I think your conspiracy theories are laughable. I’d say, that Eberhadt is just stupid like no other, but he never intended to bring Chrysler down and neither does anyone over in Germany.
Even the ones at DCX who’d like to get rid of Chrysler know, that there won’t be a buyer unless the prospects are good. And I really doubt, that there are a lot at Mercedes who’d like to get rid of Chrysler. All those speculations come from external sources.
Also, it’s nice to have a scapegoat. I mean Eberhard is surly responsible for all kinds of problems, but to say that “In three years, Eberhardt managed to turn a company on the verge of a renaissance into an organization standing on the proverbial ledge.” Is really a little far streched.
If the product was there, it wouldn’t have mattered that he didn’t cut production since the cars would have been sold. What you can say is that during the crisis, he was the worst man to be there.
Another man with heaploads of responsibility is Tom LaSorda. He now has a deadline until the end of the month to produce a turn-around plan that finds the approval of Dr. Z in Stuttgart Untertürkheim. If he can’t do that, he’ll be history as well.
And you have to admit that it was Zetsche who turned Chrysler around in the first place. So blaming the Germans is easy, but simply wrong.
The Old Man has driven an MB since before it was cool, in 1962. But he stopped buying them before Chrysler came on board.
Now, even knowing just how good an MB can be, their assimilation of Chrysler has left both out of running for consideration in the last three cars I’ve bought.
Suicide watch? I buried them years ago.
It’s easy to blame marketing when sales are soft, but we all know that product is the #1 reason for sales. Not that Eberhardt didn’t earn a lot of the blame — the advertising has been awful, and the sales bank a mess.
Frank, you make a great point that if the purpose of the sales bank were to hedge against a strike, DCX would be stockpiling hot sellers and not trucks that are a generation behind the market.
You also are the first writer I’ve seen state the obvious — that there is no way Joe built that sales bank without LaSorda and Dr. Z knowing and — at least tacitly — approving.
I’ve been rooting for Chrysler the underdog wince the days of the bailout 20+ years ago, but the current strategy is baffling. One thing German ownership has brought is an insistance on stout platforms – at least Chryslers are safe vehicles now.
But the interiors are cheapo, and Chrysler has essentially outsourced the engineering of its car platforms. This is a good way to take out cost, but it also makes it hard to win in the retail market. So maybe the strategy is to become the fleet sales company, as GM and Ford abandon the market.
It’s not a bad strategy, and the new midsized cars are at the heart of it. Decent enough, although not quite at the level of Accord/Camry/Fusion; but if they are cheaper to produce, fleet sales can be profitable.
But trucks have been some 70% of sales for Chrysler, and the strategy here is hard to see. The Compass and Aspen are a mess, the Durango, and Ram are dying out there, and the minivans are a year away from the new model. Gonna be a tough year.
At a minimum, Chrysler needs to rationalize SUV platforms — they have four right now: (a) Liberty/Nitro, (b) Commander/GCherokee, (c) Durango/Aspen, and (d) Wrangler. That’s two or three too many.
Honestly, I think your conspiracy theories are laughable. I’d say, that Eberhadt is just stupid like no other, but he never intended to bring Chrysler down and neither does anyone over in Germany. Conspiracy theories aside, there still has to be something more here than meets the eye: 1. Eberhardt has a proven track record. As head of DaimlerChrysler's operations in Britain from 1999 to 2003, he "boosted sales and dealer profits in a tough market." That doesn't sound to me like the performance of someone who is "stupid like no other." 2. No one works in a vacuum. He had bosses. Why didn't Lasorda or someone at DCX corporate realize what was going on with the sales bank and overproduction and stop him before it became a crisis (and a huge embarrassment)? 3. Surely someone under him had to see what he was doing. Was there no one in Chrysler Group who had the balls to tell the emperor his wardrobe was a bit lacking? 4. If everything's on the up and up, why won't they give an accounting of the number of vehicles they have stashed in the "sales bank?" Or do they even know how many there are? 5. True, the product is at the heart of these problems, but even the lowest-GPA Marketing 101 student could tell you if your product isn't competitive, you don't turn up production and pretend it's selling anyway. LaSorda may have been given a deadline for a turnaround plan, but he's good as gone anyway. They already have his replacement warming up in the wings. As soon as Wolfgang Bernhard can get his exit from VW ironed out, expect to see him on the next jet to Detroit Metro.
Frank:
On your points:
1. While that’s true, the system at Mercedes/Europe is quite different from the one at Chrysler/America. For one, people usually first order the car and only then it’s being built. Secondly, I’d imagine, that it’s quite different to sell luxury cars than mass market cars.
2. As I said, I think LaSorda is equally guilty. He definately had to know about it, but probably had faith in Eberhardt’s nice looking Power Point charts, until it all collapsed.
3. Probably true as well, but a lot of people don’t dare to disagree with their bosses or if they do, it’s still up to the boss to decide.
4. I never said that everything is on the up and up. I’m the first to agree that Chrysler is in deep s***. The sales bank is a big problem, and it’s probably Eberhardt who deserves the blame. But I’m sure that now, Dr. Z is doing evrything to get rid of it by severly cutting production.
5. If Bernhard would re-join Chrysler, I think it would be the best thing that could happen. He has proven that he faces and even tells the truth and he’s not afraid to take any measures necessary to get back on track.
I still have my doubts though. Bernhard so far has said that he has no intention of leaving Volkswagen while DCX denied any interest in signing him. Of course that doesn’t mean a lot but it still leaves me skeptical.
LaSorda may have been given a deadline for a turnaround plan, but he’s good as gone anyway. They already have his replacement warming up in the wings. As soon as Wolfgang Bernhard can get his exit from VW ironed out, expect to see him on the next jet to Detroit Metro.
Yea, that’s the ticket. Now that Daimler has run Chysler into the ground pawning off old platform bits and tech and creating a sales bank of unsold cars thanks to Daimler exec Joe Everhardt (who should be fired, not demoted) now let’s bring in yet another Daimler executive to screw the company over.
I don’t think Lasorda’s the man either, but they need some Americans with gas in their veins to run this company. Oh wait! They did have them but they all resigned or were shown the door after the “merger of equals”.
On Bernhard’s future, from Automotive News earlier this week:
Rumors that Bernhard will return to DaimlerChrysler are getting stronger.
Bernhard recently met with DaimlerChrysler CEO Dieter Zetsche to sound out the possibility of returning to his former employer, a source said.
DaimlerChrysler’s German works council would not accept Bernhard as head of the Mercedes Car Group, a post he was due to get in 2004. Zetsche is considering with U.S. managers whether Chrysler group CEO Tom LaSorda should continue in his post following recent heavy losses at the group. Bernhard could succeed LaSorda.
“Bernhard would be welcomed back in the U.S.A.,” said one of his confidants.
8 years since the DCX merger occurred, and this is all they have to show for it? 8 years was enough time to turn the entire product line over once, and although there are a few hits, there are quite a few duds, too.
Chalk up another victory for Detroit groupthink. Everyone else loses.
Does anybody know where the picture used in the article was taken or what the character is supposed to be standing next to Herr Joe? Freaks me out.
I thought Kerkorian was the assisted suicide guy.
As a nervous Benz owner, I hope this is all true. I’m tired of the “how is your new Chrysler” jokes.
It is unbelievably distressing to watch history repeat itself to this extent. Those of us who have lived a while remember all too well the situation back in 79/80. Dodges and Plymouths with rusted wheels after months of outdoor storage made their way even to Scandinavia. After a year “in the field” you could have a “new” Aspen for like 4K when list was around 6K (those were the pre-sticker shock days). Have the morons running Chrysler forgotten this (don’t think so), or are they just masters at propping up next months figures in absolute denial of reality (that I think)?
I was living in Germany when Daimler bought Chrysler. A German friend ask me what I thought about it and I responded it was good for Chrysler and bad for Daimler.
(I think he was looking for more a “Nationalistic” response from me)
I thought it odd that Daimler would do this but the Jeep Cherokee is (was?) very popular in Germany. There is a huge Chrysler factory up near “Herman the German” (At an Autobahn Kreuz which escapes me now) that imports Jeeps and fits them with diesel engines. If Daimler decides to bail on the merger, I think they will retain the Jeep brand. Gotta like Dr. Zetsche when he refers to the UAW as “irrational”. Germans tend to speak their minds which is refreshing compared to the American MBA song-n-dance.
Any sufficiently advanced incompetence is indistinguishable from malice.
Good essay. I’d only quibble with the complaint about offering the Sebring coupe in both a retractable hard top and a traditional ragtop. Some of us retail buyers actually prefer the latter. I think ragtops look better, and I worry about the long-term reliability of retractable hard top technology . . . especially when produced by one of the Not So Big 2.5.
When reporters asked Chrysler’s [remaining] execs why they’re offering both a soft top and a retractable hard top on the new Sebring, the expense accounters said the ragtop was a “lower cost alternative” for the rental market. You don’t have to be a Taurean to know that positioning a new model in the resale toilet from the outset isn’t a very smart move– unless you’re trying to make dumb ones. Hmmm.
Total BS Frank.
The Sebring convertible has been the best selling ragtop in the US for many years, partly due to its price point. If DCX were to offer ONLY the high-tech but costly retractable hardtop it would certainly slash the sales rate. Entry level convertible shoppers are price sensitive. Competitors such as Ford’s ragtop-only Mustang vert would fill in. Offering both tops is a smart move.
Or not.
Occam’s razor is most easily expressed as: “All things being equal, the simplest solution tends to be the best one.”
In this situation the simplest explanation is that DCX management combines large egos with poor judgement resulting in bad choices made. Conspiracy theories are fun, and are occasionally correct. However, when plain old dumb explains a situation it is most often the correct set of reasons.
http://en.wikipedia.org/wiki/Occam's_razor
Kaisen, From Automotive News, Nov 27: Chrysler thinks the top offering will appeal to a broad range of customers, especially rental fleets that want a lower-priced vehicle. I don't see anything there about building for "price sensitive" shoppers. They specifically said they're building a "lower-priced vehicle" for "rental fleets." And what do you think will happen to the reputation and resale value of all Sebring convertibles when these rental units start hitting the used car market? Same thing that happened to the last generation Sebring convertibles' resale value. Septic Tank City.
If Mercedes was serious about building Chrysler 8 years ago when they merged, I would expect better things from both companies by now. I don’t know if the folks on the board of directors at that time are still involved, perhaps if most of them have been pushed aside by people with a different vision, that would support the notion of a planned demise.
Since the merger, they have only had one real hit, the 300/Magnum/Charger line. The trucks and other cars have been left out to rust and now they are chocking to catchup. Ford saw the same issues over the last 5 years or so.
I think Ford realised their situation soon enough to pull out of it, hopefully DCX will do the same thing.
Frank-
AN said ‘especially’ not ‘exclusively’ rental fleets that want a lower priced vehicle. They’ll still sell plenty of ragtops to the public.
If the rental market became flooded with retractable hardtops, resale value will be impacted just the same. The Sebring convertible will still be the darling of daily rental fleets regardless of top configuration. So, with that, why not postion the RHT as non-rental so retail customers have reason to buy new, rather than wait for them to come off rental? For those who must buy new, but are shopping ragtop competitors, the lower pricepoint of the ragtop keeps them at Chrysler dealers rather than Ford. The slow-selling retractable hardtop G6 is $4500 more expensive than a Mustang ragtop. Hmmmm…
TTAC readers might be interested to know that the Sebring’s top mechanism (engineered and produced by Karmann) is the same whether it is vinyl, cloth, or hard composite.
Frank, I agree that it isn’t good for DCX to target the rental market with its ragtop. But I don’t think that only offering a retractable hard top would have been a good move.
Consider the entirely plausible scenario that Chrysler’s retractable technology turns out to have embarrassing reliability issues. That could do significant damage to what has been a small but profitable market niche for the company for many years.
Retractable hard tops are likely here to stay, but I suspect that automakers will get burned if they don’t keep a few ragtops in the mix as they perfect the new technology.
The top mechanism is irrelevant. The point is they're designing a new car "especially" for the lowest rung of the automotive food chain – the rental market. Will there be other buyers? Of course. Some new car buyers will go for it just like there were buyers for the previous model. However when you set your sights low from the outset, then publicize you're doing just that, it doesn't speak very highly of your confidence in the product's market positioning. This Sebring could help bring a bit of prestige back to the Chrysler name. Instead, it's going to reinforce the perception that Chrysler's a builder of rental and fleet vehicles. Not a good position for a company that's struggling for its survival.
Rental fleets aren’t all bad. Sure TOO MANY in fleets, or using fleets as a dumping ground for excess production is a negative. But daily rental fleets are a here-to-stay reality representing a relatively large number of new vehicle sales. Even almighty Toyota sells roughly 15% of their Camry production to fleet (representing thousands more rental units than Sebring convertible).
Volume justifies R&D. Convertibles are a niche product. Having a dedicated convertible (as opposed to a coupe with the top sawed off) is an expensive proposition. I would suggest that the Sebring convertible is a better car BECAUSE of rental volume they could count on.
I think DCX’s problems STILL come down to product. I happened to be in a local Dodge dealership yesterday. I asked a buddy who works there, “how’s sales on the new stuff?” They are just now able to get enough Calibers to keep a few on the lot. The Nitros, however, are “not moving as fast as we expected.” (Personally, I think they look like they beat a Liberty with an ugly stick, within an inch of its life, but that’s just me.) Here in the Texas Panhandle, trucks are still moving well, but everybody’s nervous there about Toyota. And with good reason. At the local Chrysler/Jeep emporium, the story is largely the same – no 07 Wranglers in stock – and they have more orders than they can handle. Commanders, Aspens, and the like are gathering dust on the lot. I’m told not to expect a supply of Wranglers until APRIL or MAY. Sheesh…
It seems that the consistent thread between the big 2.5’s blunders is that they build what they want us to buy – not what we want. You’d think that if they see some models sitting on lots, and others flying off them, they’d try to build the popular ones. Sad…
Perception maybe?
A few years ago, DCX was lauded for a good turnaround.renewal, and everyone cheered at the dynamism of the merger.
Yet, at the time, there was only one appealing product: the 300 and it’s separated at birth siblings. Based on a Mercedes platform, which DCX was very quick to point out was the last generation E, with bits of current suspension. Don’t mix Mercedes with common Chrysler.
Otherwise, previous and new Sebring, same old mnivan, load of trucks and SUVs, it’s all the same old recipe. It did not work for Ford or GM, why would it work for DCX?
It may look obvious in hindsight, but they were making all the same mistakes that the others did. Building too many of stuff that did not sell, killing resale value with rental sales, 10 years product cycle…
The Detroit Free Press reported on 12/03/06 that “many Chrysler Corporation workers and analysts remain mystified by the automakers recent production schedules…scheduled overtime this weekend for production of Dodge Ram pickups and Jeep Grand Cherokee…”
They’re paying autoworkers overtime to build Rams and Grand Cherokees, among other of their hot sellers.
What is the possible point of simultaneously increasing your cost of production (overtime labor) while increasing your cost of sales (new additional sales incentives/rebates)? The lights are on, but nobody’s at home.
I distinctly recall standing in my buddy’s garage BS’ing while he worked on his latest street-rod project (and I “supervised”).
I’d just bought a 1999 Neon a couple of weeks after it was announced Daimler-Benz was “merging” with Chrysler. (That was my last US branded car, ever. It was built in Mexico – and it was such a POS I will never go back, having already had a 1997 Chevrolet Cavalier and previously given up on Ford for the 3rd and final time, but I digress).
We were talking about the prospects of “Dimmer Chrysler”. I must add here, that my buddy has lived in Germany twice, for several years each time and speaks fluent German, married a German wife and understands the ‘kulture’.
He assessment was that it was not a merger, but the Germans wanted it to look that way – but they’d taken over Chrysler. (He was correct 100%).
My assessment was that now, we’d have a “nice” combination of the worst possible aspects of the two companies in all of their products.
German “styling”, American “quality control”, German attitudes about what they’d build “you VIL like de carz ve bild for YOU! Ja! Because ve are RIGHT and you must.” American crap-hole cheap plastic interiors. Did I nail it, or what?
But I have to admit being blind-sided by the sales-bank. I gave the Auburn Hills boys way too much credit for learning from history, obviously, and they could not or would not do so.
Bye bye Chrysler. It’s been a real trip.
1966 Rambler Ambassador (admittedly not Chrysler group at the time, but crap nevertheless). 1975 AMC Pacer (likewise, and way worse crap than the 1966). 1975 Dodge Charger. Crap. 1976 Plymouth Volare. Crap. 1967 Chrysler Newport. Not bad, but no brakes. (Long story – mom-in-law totalled my 4 year old Volare just when I had no money to buy another decent car). Another 1976 Volare. Worse crap than the first. (Yeah, I’m a slow learner, huh?). 1984 Plymouth Reliant K. Total crap. 1999 Dodge Neon. End-of-the-road.
So who’s the clown standing beside Joe? LaSorda perhaps?
Seems to have quite the sad face.
I don’t know whether a conspiracy theory is correct, but it’s certainly plausable. What I DO know is that over in Germany, Z and his motley crew are seriously considering cutting off Chrysler from Daimler. Not much has come of the merger, other than Chrysler helping bring Mercedes quality down into the dumps, and bringing down overall company profits.
The Sebring convertible has been the best selling ragtop in the US for many years, partly due to its price point. If DCX were to offer ONLY the high-tech but costly retractable hardtop it would certainly slash the sales rate. Entry level convertible shoppers are price sensitive. Competitors such as Ford’s ragtop-only Mustang vert would fill in. Offering both tops is a smart move.
The Sebring has been the best selling ragtop not just due to price, but mainly due to lack of competition. What if Nissan or Honda offered ragtop Altimas and Accords? Apart from the obvious awkward styling they would have, they likely would sell better than the Sebring (which in the grand scheme of things, isn’t much at all). And last I checked, Solara ragtops were selling close to Sebrings despite being at a higher price-point.
The bigger question to think about is *why* would any company want a ragtop convertible of a mainstream model? Look around; most companies seem to be moving away from that. Hardtops are increasing in popularity, and most of the remaining ragtops are found on luxury or niche models.
“Why would any company want a ragtop convertible of a mainstream model?”
Well, why not? Didn’t the Sebring have a real – or at least useable – rear seat? That’s a plus, seems like most convertibles don’t have that.
Fundamentally, ragtop “version” or not, it’s still a convertible and it can help you get presence in the convertible market.
If offering a ragtop version (and I’m hoping there’s a quality level here that “ragtop” doesn’t do justice) allows DCX to sell a version of the car at a lower price, that’s probably smart marketing. Especially if, as was suggested earlier, they used smart parts-bin engineering to support the different lids economically.
Well, why not? Didn’t the Sebring have a real – or at least useable – rear seat? That’s a plus, seems like most convertibles don’t have that.
Fundamentally, ragtop “version” or not, it’s still a convertible and it can help you get presence in the convertible market.
Despite the relative success of the Sebring convertible, Chrysler isn’t known for convertibles.
When people think convertibles they tend to think of Ferrari, Porsche, Mercedes, BMW, and Corvettes.
Which means, to gain a real presence in the convertible market, you must offer a somewhat-exclusive, higher priced, niche or luxury convertible. It’s all about the image and prestige.
Case in point is Toyota’s Solara convertible; even with decent sales, Toyota’s presence in the convertible market is almost un-acknowledged.
It’s interesting to note that the Lexus SC430 hardtop, despite selling in smaller numbers, gives better presence and prestige in the market to Toyota than the Solara ever could.
What are you guys, nuts? Chrysler's drowing in a sea of unsold product, wearing cement shoes labelled cost structure, and you're arguing about whether or not they should sell the Sebring with a ragtop, hardtop or both? That's like arguing about the quality of the Titantic's china as it tumbles onto the floor. This article suggest that Chrsyler is a lost cause to its German masters. The company could be sold or simply shut down. How about some feedback on topic?
The problem with DCX over the past year has been poor marketing and inventory management, along with getting caught with their pants down due to poor market conditions as they transitioned to new models.
They started 06 with a lineup full of models due for replacement or refresh, right in the middle of the post Katrina runup in gas prices: Liberty, Wrangler, Minivans, Sebring/Stratus, Pacifica, Durango, Neon, Ram all getting long in the tooth and with decling sales.
Now that the new models are finally starting to show up in force, sales numbers are starting to improve. November sales up 3%, with strength showing up in Wrangler, Sebring, and Pacifica. Caliber had a strong debut. Nitro and Wrangler already have 100K backlog of orders. The only dud thus far has been Compass.
07 promises new Avenger, Liberty, Patriot, Minivans, Sebring Convertible and Durango hybrid, and new unnamed crossover vehicle.
08 will bring Challenger, new Ram pickup, new compact vehicle, and possibly new 300C/ Charger.
Chrysler will not have a model older that 4 years old come this time next year (except save maybe PT Cruiser).
Get Wolfgang in there and RIP Eberhardt and the Sales Bank, and Chrysler should be just fine.
Unlike Ford or GM, DCX is not going to run out of money anytime soon; if they were, then why would Mercedes and Smart have gone on for so long with huge losses?* If they were willing to invest into rejuvenating the U.S arm of the business, it could be turned around very quickly. But I fear that, like the bosses at Ford and GM, DCX’s higher-ups are a very arrogant and aloof lot. They would rather let the infection spread than admit they need treatment. And, if that means waiting until amputation is necessary… well, I guess we’ll have to wait and see. Does the name Fokker mean anything to anyone? Read the Wikipedia entry of Jurgen Schrempp if you’re curious. Sure, he’s been gone for nearly a year now, but DCX’s corprate culture doesn’t seem much different to me.
*P.S: I find it amusing that, when the company was making profits a couple years ago, they were all coming from the Chrysler side of the company. Mercedes and Smart were still losing big time back then, and rightfully so… Mercedes’ quality has been a problem since the early ’90’s, at least.
It all goes back to product.
The big 2.5 have allowed their vehicles to molder with too-long product cycles, while the Japanese and Koreans run on much shorter times to market. This leaves Chryler, GM, and Ford hopelessley behind. Just as they build a catch-up car, the Japanese unleash new Camrys and Accords.
The Ram is outdated. The Nitro is a reskinned Liberty (Old). The Minivans are hopelessly behind even Hyundai. Sebring is ugly and uncompetitive with Camry and Accord. Caliber will flame out when the word gets out about that CVT and the crap interior. Pacifica has a new engine and hood. Big deal. Aspen? Don’t even start with that…
The US companies have to radically re-think their product cycles and development times. If they cannot, they’ll always be behind the competition.
Zarba, just to clarify your comments:
Ram will be all new for either 08 or 09. This needs to happen asap!!
Nitro is built on brand new 08 Liberty platform. 08 Liberty will be reskinned and rejeeped 07 Nitro. Not the other way around.
6 year old minivans are still #1 in segment. How is this hopelessly behind Hyundai????? Brand new minivans will only strengthen DCX’s position in the segment.
Sebring sales are already better than last year. And Avenger prototype has been well received from an exterior standpoint, and will definitely strengthen DCX’s weak position in mid-size Sedan segment.
Caliber may or not flameout. DCX has heard of the lukewarm response to CVT, do not be surprised if a different tranny doesn’t show up in 08.
Pacifica also has a new price point and new 6 speed auto, along with all the new features you mentioned. Sales up in Nov.
Chrysler was the only one of the Big 2.5 to have a bunch of product in the pipeline when the hard times hit. That is why their slump will be short.
What are you guys, nuts?
Chrysler’s drowing in a sea of unsold product, wearing cement shoes labelled cost structure, and you’re arguing about whether or not they should sell the Sebring with a ragtop, hardtop or both? That’s like arguing about the quality of the Titantic’s china as it tumbles onto the floor.
This article suggest that Chrsyler is a lost cause to its German masters. The company could be sold or simply shut down. How about some feedback on topic?
Certainly.
I feel that Daimler *should* in fact cut ties with Chrysler, “demerge” as they say, and refocus on making Mercedes more competititive with not just BMW, but the ever-growing juggernaut that is Lexus. Daimler must have noticed when just a few days ago Lexus announced that next year they will introduce a performance division, which of course will compete with the M and AMG divisions. Not only that, but the first model, the Lexus IS-F will debut in January stealing the thunder from the M3 debut in a couple of months.
Mercedes last I checked was making a profit, and Chrysler is not. Z and crew should cut any heads related to Chrysler, jettison ties with the company, and refocus Daimler.
As to being shut down, could be. I mean really, who would actually be interested in Chrysler if Daimlier were to cut ties?
Super AROD: the Nitro is a reskin of the existing Liberty platform. The ’08 Liberty will use much of the same Nitro body architecture, but its not a new “platform” either way.
This article suggest that Chrsyler is a lost cause to its German masters. The company could be sold or simply shut down. How about some feedback on topic?
How about outsourcing to China and other dirt-low cost countries? DCX already has major operations in Mexico and Canada. The proposed Dodge Hornet may be the beginning of this wave, and US operations allowed to dwindle down to just the few vehicles profitable with high legacy costs, thus throwing the UAW a bone, albeit a tiny one.
And that’s not just for DCX, but for GM and Ford, too. Fully leverage the benefits of a multinational corporation. Move HQ to a tax free resort in the Caribbean. Of course, whatever bad happens overseas, they’ll be saddled with, coups, hurricanes, lack of intellectual property protection etc.
If Chrysler’s problem is its cost structure, driven by payouts to retirees, then closing it down doesn’t help Daimler — the retirees still need to get paid, and oh, by the way, you just created another 100,000 retirees.
Selling doesn’t work either — no one will buy a company that loses money and has little chance of turning things around.
The only answer is to cut white collar costs by outsourcing engineering and try to retain revenues by whatever means possible.
I think, before the parent company would abandon Chrysler, it might try selling some of its own products, at Chrysler stores. Visualize, for example, Smart cars selling at certain, select Chrysler stores. Another thing which might happen, is eliminating certain models, before abandoning the Chrysler division, entirely. The Pacifica sounds ready for that; and possibly the Sebring. The Sebring just never has caught on and is, now methinks, too long in the tooth. A ball-park guess is that DaimlerChrysler might go back to DaimlerBenz, in the next three to five years. I think they will wait and see what the 2008 Dodge Challenger does, as a halo car, to revigorate the name “Chrysler.” But then again, I could be wrong.
Should Daimler sell off Chrysler? Sure — that would make life a bit easier. But given the Asian invasion of Europe and MB’s quality problems, I don’t think Daimler would recover from acquisition fever as easily as BMW.
As for Chrysler, one can only speculate as to whether anyone would buy it. Perhaps it would all come down to the deal. For example, might declaring bankruptcy open the door to the severe downsizing needed to attract the scavengers?
That said, I don’t see a need for massive outsourcing. If the corporation were right sized with regards to its product line and production infrastructure, I would think costs could be brought into line.
“I mean really, who would actually be interested in Chrysler if Daimlier were to cut ties?”
It seems that only the Chinese would be logically interested, and all they would want would be the brands and all the tooling, patents and other IP. They would have no interest in picking up the company intact because that would mean picking up the massive liabilities for retired workers, union contracts and the like. I can imagine them cherry picking assets like they have done with MG-Rover.
I think before DaimlerChrysler divested themselves of the Chrysler division, they likely would discontinue some models – the Sebring and Pacifica come readily to mind – and wait perhaps until the 2008 Dodge Challenger comes out; the latter simply to see how much life might still be in the “MoPar” name, that obviously still has some emotional value that translates into a cost/benefit equation. If that wasn’t true, at least for a segment of the population, why else would people be paying up to $2 million for cars that are, while rare, still series production, as opposed to hand-built, cars? If the upcoming Dodge Challenger is a flop – think of the Plymouth, later Chrysler, Prowler – top management in Germany are probably going to consider cutting their losses and selling Chrysler. (Yes, the Prowler might have benefitted from a V8.) Will the Chinese buy Chrysler? I think a more appropriate question is whether they’d be allowed to buy Chrysler. To many Americans, Chrysler is still an American company and a big one. It’s a question of perception, and sometimes, perception is indeed reality. There are other factors that would come into play. If the owners in Germany offered, even offered Chrysler to a Chinese consortium, the general press and what passes for journalism on radio and television, would give major play to the story of a “major American firm being bought by China.” As we slide closer to a big election year, there might be a move in Washington D.C., within Congress, if not at the White House, to “save Chrysler. Think it couldn’t happen? Look at the last time the government bailed out Chrysler. But then again, I could be wrong.
Terry, you bring up interesting timing issues. If DCX wanted to try selling Chrysler to the Chinese, I would guess that the best time would be well before the 2008 election (like soon!). Maybe I’m off base, but Bush might be more likely to allow a sale than a new president of either party. Bush is pretty free market, and he has less to lose (since he’s a lame duck anyway).
Congressional Republicans could get worried about being blamed for “losing” Chrysler to the Chinese. The flip side to that, however, is the worry of losing the auto jobs altogether. Some type of bailout plan could address both concerns, but I wonder whether Bush would veto such a bill.
Opposition to a Chinese firm buying Chrysler might be muted among the D.C. politicos because the Chinese government holds such a large chunk of U.S. treasury bonds. We literally can’t afford to piss off China.
I suppose DCX might wait to see how well its forthcoming products do, but I’d question whether the Challenger is all that important to the corporate bottom line given its fairly limited sales projections.
We can only speculate as to how well the Challenger will do. How high will gas prices be? Will folks have tired of retros (e.g., Challenger versus the more “modern” Camaro)? I’m curious as to whether the popularity of the original Challenger will transfer to the new one given that the latter is much bigger, heavier and blockier (due to the higher beltline).
The problems with the Big 2.5 automakers are fairly straightforward, and Daimler falls into the trap of having little to offer that could improve on these deficiencies. Basic issues —
-Product: This should be obvious. While Daimler has come up with some successful hits that have improved the Chrysler brand (the 300 being the best example), it seems unable to turn these gains into improvements that benefit the entirety of the product line. Daimler does not apparently have a complete understanding of the US middle-class consumer, which is not surprising given that German automakers have tended to be product-focused, rather than customer-oriented. (The customer is expected to make concessions to the company’s tastes, not the other way around.)
-Inventory management: This is a hangover from the Henry Ford era, who established the concept of amortizing production costs through excessive production, and leaving the problem of inventory management in the hands of the dealerships. (This is often blamed on the UAW, but the concept was invented by Henry Ford himself, long before the UAW’s formation.) That could work when there was one car in a largely one-brand market (the Model T), but doesn’t work with numerous competitors and many models of different types.
The problem is that the American and European automakers alike have never really figured out how to adapt to one of Toyota’s great innovations — the flexible production line. Instead of producing in large batches with the goal of minimal retooling, Toyota builds in small batches and manages costs through effective inventory management at the parts level. If Toyota finds that it has produced too much of a given product, it switches production to a different model that the marketplace wants. The result: instead of building excess inventories that constrain capital and that will get dumped onto the market at huge discounts that tarnish the brand, Toyota uses its factories to produce profitable cars in managed quantities that can be sold at higher prices.
To its detriment, Daimler long ago inherited inefficient Ford-inspired production methods and continues to use them. This wasn’t a big deal when Daimler sold Mercedes Benzes in small quantities at high prices to niche markets, but becomes disastrous when selling mass quantities of non-premium (read: low-margin) vehicles in competitive segments. It causes the very same problems for Daimler than it traditionally has for GM and, to a lesser extent, FoMoCo — too many cars are produced that nobody wants, which tarnish the badge and get dumped at a loss.
This type of business model is an obvious profit killer when viewed from this perspective. But bean counters tend to measure success by achieving “efficiency”, which means reducing production costs per vehicle. The way they achieve this is to build more vehicles over which to spread the costs (every additional unit costs effectively less to build than the last when measured on a per-unit basis, given the high fixed cost structure), even though nobody actually wants these cars. Thanks to this “logic”, the optimal way to improve efficiency is…yes, you guessed it, to generate more losses!
When you witness an inventory disaster within an organization, you can bet that lurking behind it was some accountant who was striving to be “efficient.” The accountants need to realize that if you reduce your cost per unit by building more units that nobody wants, you will save money per unit, but destroy profits and your brand value. Unfortunately, their ignorance about cars is only superceded by their ignorance of basic finance skills…
Pch101 .. Great and interesting post.
Frank or others who may know .. The key question for jettisonning Chrysler for Daimler seems to be are they responsible for the liabilities?
If they are responsible for all those pensioners and their healthcare then no one would buy into that.. Well maybe some shady Chinese deal where the Chinese company will take a fall, just to get Chryslers tooling and patents.
Daimler really screwed up imo if they were dumb enough to totally make Chrysler part of their company. Ford and co. have been pretty wise with their aquisitions, like owning 33% of Mazda shares. The worst case scenario for Ford is those shares go to zero in value. The worst case for Daimler is chrysler goes to zero in value, and Daimler is responsible for an extra 1.5 billion a year in liability costs.
Ja Ja… I do not understand why Daimler would purchase Chrysler. Where was the value in that? Maybe Daimler was just engaging in the auto consolidation frenzy of that time. Methinks Daimler was just hot for the Jeep brand which would/will make one heck of a global brand. Same goes with Hummer. I think Daimler seriously underestimated the power of the UAW.
Replying to SherbornSean:
One thing German ownership has brought is an insistance on stout platforms – at least Chryslers are safe vehicles now.
Safe? As compared to what? From IIHS data, Chrysler cars does not stand out anywhere.
For example, Caliber is behind Civic, Cobalt and Corolla, despite being much bulkier.
Very well said Pch101.
Always nice to see objectivity on TTAC, and not media reports or misinformed enthusiasts.
Jeff in Canada wrote
Since the merger, they have only had one real hit, the 300/Magnum/Charger line.
Please stop perpertrating the myth that the Magnum and Charger were ever “hits”. I’ll freely admit the 300 was a hit for about 2 years, but its two siblings were never close to hits, I’m pretty sure the Charger and Magnum never even met sales expectations.
Opposition to a Chinese firm buying Chrysler might be muted among the D.C. politicos because the Chinese government holds such a large chunk of U.S. treasury bonds. We literally can’t afford to piss off China.
You are right and wrong. We are dependant on China, but like vitrutally every other US trading partner, they are even more dependant on the US than we are on them. Who do you think is going to buy all of those Chinese manufactured goods if the US stops??
Replying to airglow:
You are right and wrong. We are dependant on China, but like vitrutally every other US trading partner, they are even more dependant on the US than we are on them. Who do you think is going to buy all of those Chinese manufactured goods if the US stops??
This kind of relationship is very similar to that between Big 2.5 and their buyers:
Buyers complain about 2.5 cars, yet they buy the cars because 1) the cars are cheap and 2) the manufatures provide the financing.
Americans complain about China, yet they buy the Chinese products because 1) the products are cheap and 2) China provides the financing by buying US bonds.
The difference is that the former relationship is dissolving, yet the latter is strengthening.
Let’s throw in a wild card.
If Daimler-Benz doesn’t like Chrysler, what do they think about being associated with Freightliner?
http://www.freightliner.com/inside/who-we-are.aspx
Personally, it looks to me as if it is not just DCX, but also Ford and GM (obviously – we’re here at TTAC and aware of this) but also Volkswagen, which is in big-time trouble.
I “think” the possibility grows every day that the elitist powers that be have backed the United States into an economic corner (ably assisted by the buying public of the US who always want lower prices/Chinese goods/on credit).
In fact, we’re discussing the possibility of DCX failing, ultimately, taking the Daimler-Benz operations with it; and no, don’t even say “never could happen” because collapses of old companies DO happen. Borgward (thanks to Daimler-Benz, according to German sources), Studebaker (1852-1966), Packard (1899-1958), Pan Am, etc.
Ultimately, with the situation being what it is for GM, Ford, DCX and VW-Audi et al, a massive U.S. recession and inflationary period due to the orchestrated collapse of the U.S. dollar’s value against other currencies, (followed by a worldwide recession) would pretty well chop the viability of these automotive empires in half, as in at the belly button.
Look how long it took Japan to come out of their latest recession – 17 years? The “Asian financial crisis” of 2001 hobbled, just for an example, one of the fastest growing automotive companies in the world (Daewoo – go ahead and laugh, but it’s true) and nearly collapsed most of the economies of South Korea, Japan, Thailand, etc. Ironic that GM picked up much of Daewoo auto for literally pennies on the dollar… soon, the dollar may be worth pennies…. oh wait, compared to when it was based on GOLD…. it…. is.
In fact, for awhile this year, it was uneconomic for the Fed to mint pennies as the cost of the zinc was higher than the value of the penny…. never mind more expensive copper!
Perhaps once and if our country goes through the recession from hell (aka depression and hyperinflation), we might actually be wise enough to elect individuals intelligent enough to lead us away from the grossest and most unintelligent consumerism and waste, towards a nation based upon the precepts of the Constitution, to include a legal tender (i.e. money) with real value behind it.
You know, like GOLD and SILVER. Like the Constitution says should be used instead of “fiat money” (“promises, promises – whoops, we lied, ha ha, foolish you”).
Playing with monopoly money just encourages debt and stupidity. Wasn’t it Benjamin Franklin that said never a lender or borrower be? Certainly, the Bible states that to become indebted to someone makes one a slave to them.
It seems that the bloggers have made an inadvertant consensus on chrysler. That is Joe Eberhardt could not have done all of that damage and the company is now on the way to happiness without this one exec. It seems quite clear that Joe and Lasorda and others were backed into the corner of beiong committed to labor contracts, parts orders and a production schedule that the uber sales man in chief was not responsible for. Eberhardt became like the comedy skit with Lucy trying to eat all of the bon bons she couldn’t put into the boxes in time at the candy factory as the line was running too fast for her to keep up. When you read toyota ahead another 14% last month, did it not occur to any one that in a stationary or contracting market, these added sales were going to come out of someones hide. Since the other volume foreign makers were either ahead or slightly behind, then who was this business taken from? Obviously when everyone was pointing at gm and ford, they forgot chrysler. With the same problems of identical legacy and labor costs as their rivals, chrysler would need some super products to keep from getting decimated like their cross town rivals. With their own share of ancient engines, transmissions and body designs,chrysler was also ready for a fall. It’s just that with the gm kekorian news all this year, and then ford mullaly news we weren’t watching. Now I guess everyone will.
who would pay mercedes millions in phantom consulting fees if chrysler went bye bye?