Earlier this week, the European Union rubber-stamped the DaimlerChrysler divorce. So that's it. Later this financial quarter, prefix and suffix will go their separate ways and Cerberus Capital Management will marry the battered bride. Overlooking the fact that Chryslerberus will soon be importing Chinese-built cars for their U.S. customers, the automaker plans a nationwide dealer party for the born-again "all-American company." With all that has– and hasn't– happened to Chrysler of late you have to wonder exactly what and why they're celebrating.
Other than Chrysler's liberation from spousal abuse, there's not a lot to commemorate in Auburn Hills. Despite Cerberus' deep pockets, Standard & Poor's and Moody's Investors Service have just dropped the American automaker's debt rating to "junk" status. Whether this will affect Chrysler management's ability to float loans to stay afloat remains to be seen, but it's not what you'd call a good omen.
And loans are the order of the day. Even as Chyslerberus' debt rating's tanked, Chrysler's new management's been busy looking for someone to loan them $12b for the automotive side AND $8b for Chrysler Financial. If going $20b deeper in debt isn't risky enough, the automaker is reportedly borrowing the big bucks at around 8.5 percent. The interest payments alone could keep Chrysler from profit for many years to come.
S&P analyst Gregg Lemos-Stein goes further. Lemos-Stein says if the U.S. car market remains on its current downward trajectory, Chrysler could be in default by 2010. In an interview with BusinessWeek, he said "One of our big concerns is that it doesn't take a dramatic reduction in sales to put Chrysler at risk." In plain terms, one good recession and Chrysler would join AMC and Studebaker at that big car lot in the sky.
Cerberus' top dog realizes his new acquisition's precarious position. After the House passed stringent new fuel economy rules, Stephen Feinberg made a rare personal appearance to schmooze senators into relaxing the standards. Chrysler's taskmaster's pegged the cost of meeting those standards at $7K per vehicle. The extra expense would, Feinberg argued, put Chrysler out of business.
Well, he would say that, wouldn't he? Gas-guzzling trucks and SUV's still account for some 70 percent of Chrysler's U.S. sales. And North American sales account for 92 percent of Chrysler's total turnover. Not to put too fine a point on it, the automaker is at the mercy of the U.S. economy. And, by extension, gas prices.
As American gas prices climb and large vehicle sales plummet, Chrysler has nothing in their automotive arsenal to staunch the arterial spray. Their last two "Hail Mary passes," the Sebring and Avenger, are so bad that even CEO Tom LaSorda was reportedly "quite upset" with what his employees had wrought. Chrysler's smallest cars, the ancient PT Cruiser and the only slightly more technologically advanced Caliber clones, hardly have Toyota, Honda or even Chevy scurrying for cover.
Next up: the refreshed minivan twins, out this fall. While Chrysler has been the minivan sales leader since inventing the genre, and the new models' rear facing captain's chairs are a way cool unique selling point, it's unclear whether or not the minivans can reinvigorate a moribund market. And if they don't, what profit is there being King of a shrinking kingdom?
Even Chrysler's much-ballyhooed partnership with China's Chery carmaker offers no immediate prospect of financial relief. By the time the partnership designs a car to U.S. safety and environmental specs, ramps up the supply chain and assembly line, works out any production and quality problems, passes all EPA and NHTSA tests and puts the first cars on the boat, the entire market may have shifted, leaving the Sino-American venture flatfooted.
None of this bodes well for the future of Chrysler as we know it. As we've pointed out time and time again, Cerberus is in the business of dissecting sick businesses. They rend asunder what the founders hath put together, make as much as they can from the salvageable parts, and then dump the rest.
The more time that passes before Cerberus takes control of Chrysler, the worse their immediate prospects and the higher the likelihood they'll do what they swore they would never, ever do: strip and flip.
The Detroit News estimates that once the ink is dry and the dust settles on the financial dealings, DCX will have paid $673m to get rid of Chrysler. Given the problems facing Chrysler, and the way DCX stock has gone up since they started dropping hints they were selling it, it looks like money well spent.
No matter what Cerberus does or doesn't do to/with Chrysler, the forthcoming party in Auburn Hills will be nothing compared to the celebrating that will be break out in Stuttgart.
Am I the only one that sees the Cerberus take over as a strip and flip?
It’s a financial firm, after all. They’ll find someone else to make cars for them. It’s all about the Financial unit.
GS650G:
Follow your own thought.
Let’s say they strip Chrysler (layoffs, plant closings, model and line reductions)….to whom would they sell it after it’s done?
Who would want it, or be in a position to
resurrect Chrysler?
[Not trying to start a p*ssing contest here, just asking a fair question.]
/JT
It appears that the future of the American automobile industry is re-badged imports with semi-maccho sheet metal. The question is not when it happens, but how long it takes. I can see Cerebus selling off manufacturing to pay off the purchase and becoming a marketing company. A Mexican Jeep made from Chinese parts…
Um, no. See 3rd to last paragraph.
My guess is that Chrysler’s future is a badge put on Chinese-made cars. Jeep and Dodge trucks will probably be jettisoned at some point and we’ll get Plymouth back as Chrysler’s lux division.
Their last two “Hail Mary passes,” the Sebring and Avenger, are so bad that even CEO Tom LaSorda was reportedly “quite upset” with what his employees had wrought.
Where the hell was LaSorda when they were being designed?
Insofar as Stephen Feinberg pegging the cost of meeting the new CAFE standards at $7K per vehicle is concerned, the automakers have cried wolf too often.
Forgive me, but hasn’t the Cerebus motive been discussed in prior Suicide Watch editorials? I remember Magna being pointed out as a potential vulture to the carcass of Chrysler after the financial division would be removed via disembowelment. Also, Cherry, our least favorite beast from the East, has also been mentioned.
Of course these aren’t likely paths this story will take, but those have been brought up before.
JT: Let’s say they strip Chrysler (layoffs, plant closings, model and line reductions)….to whom would they sell it after it’s done?
Who would want it, or be in a position to
resurrect Chrysler?
Just speculation on my part, but…
They’d keep the Chrysler Financial unit and would have no problem selling Jeep to GM or some foreign auto company (OR keep Jeep Division and outsource production to Magna). Dodge and Chrysler divisions would be sold to a Chinese or Indian company wanting a pre-established production and distribution network in the US. The end product would be far from a “resurrected” Chrysler.
I can see Cerberus keeping the financial side of Chrysler and then selling the auto manufacturing side to a Chinese or Indian company. What up and coming auto manufacturer wouldn’t want established tooling and production lines? This article mentions figuring out production bugs and glitches – there’d be a lot less glitches for a Chinese company to figure out if they use existing plants and assembly lines. Even though Chrysler in up shit creek without a paddle, I think there’s still going to be a few potential buyers looking for a cheap entry into the North American auto industry.
My guess is that Chrysler’s future is a badge put on Chinese-made cars. Jeep and Dodge trucks will probably be jettisoned at some point and we’ll get Plymouth back as Chrysler’s lux division.
Hmm, the last Plymouth I remember (I came to the US 5 years ago) is the Plymouth Neon…hardly luxury…or maybe as a competitor for Buick.
Am I the only one that sees the Cerberus take over as a strip and flip?
I don’t see it. Aside from the financial unit, there’s nothing for Cerberus to flip, at least not yet.
The typical pattern of private equity is to fix things before flipping them. The return on investment comes from the value that you create in completing the turnaround. Cerberus hasn’t turned around anything just yet, so selling everything immediately would miss the point.
I think that you have to step back and figure out what they bought. I see it as this, in this order:
-The financial unit
-The brand equity of Jeep
-A branded distribution network
-Two other brands (Chrysler and Dodge) which are in poor shape but might be salvagable.
-A few decent nameplates in the Chrysler and Dodge stables
The financial unit is what it is — it will help to pay the bills while the rest of the plan is underway.
Jeep has the most brand value, although oil prices are an obvious threat. Replace the dogs in the lineup with stars, and this could generate nice returns.
The dealer network and its brands would give a foreign entrant a grand entry into the US market, but at this point, it would almost be easier for a foreign player to create its own brand, rather than buy into some broken ones. Again, Cerberus would benefit from fixing these brands before selling them off.
In my mind, this means that Cerberus will likely reduce the number of nameplates (lower overhead, more focused marketing and branding) and build these companies up before selling them. Over the long run, Jeep will end up in separate hands from Dodge-Chrysler.
Part of this may involve foreign outsourcing, but it may not. If Cerberus is in it for the long run, I’d say that outsourcing is more likely, as a cost reduction strategy. I’m more inclined to think that they won’t outsource it themselves — the party that eventually buys in a few years will be the one to implement the outsourcing plan. The new buyer would be attracted by the strong brands created by Cerberus and the dealer network, and would attempt to create value for itself by reducing its future costs through offshoring (not necessarily outsourcing.)
Notice the lack of discussion about plant and equipment. Effectively, the fixed assets have relatively little value in this deal. The real value is in the brands, and the return will come from what Cerberus can do with them. If the brands can be repaired, then Cerberus will have done well; if not, the venture will have failed, and at that point, it will be stripped and dumped.
Gas-guzzling trucks and SUV’s still account for some 70 percent of Chrysler’s U.S. sales. And North American sales account for 92 percent of Chrysler’s total turnover. Not to put too fine a point on it, the automaker is at the mercy of the U.S. economy. And, by extension, gas prices.
Exactly right. So, you would think that Chrysler wouldn’t need any other incentive to start designing fuel efficient vehicles. They should have begun doing it years ago.
But, no. They stick their head in the sand and keep telling themselves that “everything will be okay”.
I mean, really. If your business is desperately vulnerable in one particular area, wouldn’t you do whatever you could to fix that vulnerable area?
Chrysler seems intent on actively keeping its vulnerability. It’s mind-bogglingly stupid.
This, in a nutshell, is a perfect example of what’s wrong with many US automakers: a complete lack of strategic planning.
They rely on the hot models just to squeak by. If the hot model tanks, then it’s the next hot model that will really be great. There’s no refinement of models and improvement over time.
They frantically throw anything they can get their hands on at the wall, desperately hoping that something will stick for long enough while they cast about for the next thing to throw at the wall.
No strategic planning.
Adapt or die. Looks like Chrysler is choosing the latter.
Chrysler is a dead company not even walking, but reeling in rigor mortis, ready to collapse in a heap. For that matter, so are Ford and GM, but this is Chrysler’s death watch.
Cerebus were either fools to bother (buying Chrysler) or else they have “a plan” stashed away in some safe, somewhere.
Like (if I may use a little conjecture) –
-make Dodge trucks only
-make Jeep suv’s only
-make Chrysler cars only
-discontinue US production after the UAW refuse to play ball late in the year and jettison the miserable mid-sized crapheaps (even though only recently introduced)
-import Jeeps from commie China (they are produced there on a 50/50 JV right now)
-import some mid-sized Chery crapheap from China (with ubiquitous Mitsubishi 2.4 engine) and pitch it against the same market as the Kia Optima (cheap! midsized! wow!) and rebadge it as a Chrysler (what? Valiant?)
-move pickup truck (Dodge) production to Mexico (from the US)
-move Caliber production to China (from the US)
I’m not saying I like any of these ideas, I’m just using conjecture as to what I think is “somewhat likely”.
After all, some people are commenting that Cerebus only want the financial side – but hey, guys and gals, for auto loans to the public? You need to have something to hold as collateral…. like a car?!
Some retired members of the union I have talked to are insistant that all of the domestic 2.8 are doing whatever it will take for them to show that their businesses are in such dire strafes so that they can get concessions during the upcoming negotiations. Then, after they do, the dom2.8 will unleash their rebound plans that will bring them back from the brink and have them making money again. I chuckled inside each time I heard it told to me, but decided not to say anything to the contrary. Hey, afterall, they’re allowed to dream too …
I can see the 300 being to this decade what the Studebaker Avanti was to the 60s. Great idea, but not in time.
Good riddance to those arrogant,self serving,egotistical German overlords. The only reason sweet little polly purebread Chrysler ran off with that eurotrash was to avoid sleeping with Captain (I am old and I smell) Kerkorian. Cerebus has it’s ulterior motives and like most ulterior motives they only make sense to them. I think by the third quarter they will be obvious to all. It would be almost impossible to do worse than Daimler, they have erased almost all value.
I once read a pretty interesting comment (don’t remember if it was on TTAC!). Anyways this was related to Jolo comments above. The holy trinity of the US automakers are gearing toward the anihilation of the UAW. How? by declaring themselves unsolvent at the same time in one fell swipe.
Think about it the negociation possible by the UAW if all of the big 3 arrive to the table in chapter 11.
Of course this would be the biggest corporate gambit in the entire history of humanity, remembered forever in the annals of MBA textbooks! Fat chance that those excecutives are bold enough for that one.
Chrysler is official dead, as many have pointed out. Looking back, Cerberus has, historically, only held on to a private equity acquisition for an average of 14 months. That’s not nearly enough time to breath life back into this corpse via turnaround. Rather, a bit of reorganization, some major dumping, a bit of hardball, and instant profit has been their M.O. to date.
They will keep the financial assets and sell the manufacturing assets to Magna or Cheery before the hemorrhaging destroys any hope of profit. Right now it’s all smiles and handshakes, but tomorrow I think we all know what to expect.
Interesting that at one point they admit that the Sebring is not a good design, and in June it sold very well!! http://wardsdealer.com/latest/sales_boost_chrysler/
Pch101:
Notice the lack of discussion about plant and equipment. Effectively, the fixed assets have relatively little value in this deal. The real value is in the brands, and the return will come from what Cerberus can do with them.
Those are my thoughts. But then I consider the costs of the ‘fixed assets’ and I’m not so sure.
CAN there be ANY savings in shutting plants (given the potential job’s bank costs)?
Will any domestic plant showdown leave dealers with nothing to sell for a period? (Sure, there’s spare production capacity all over – but it takes time to ramp up a Chinese Ram Cummins turbodiesel…
Will any domestic plant showdown leave dealers with nothing to sell for a period? (Sure, there’s spare production capacity all over – but it takes time to ramp up a Chinese Ram Cummins turbodiesel…
This is part of my point as well. There is no magic wand to wave that is going to create millions of units of product offshore for Dodge, Chrysler and Jeep to sell. It’s nice to speculate about offshoring new factories, importing Cherys, etc., but the designs, production capacity, etc. that would be necessary for Cerberus to do this just don’t exist today. It would take years to offshore the entire manufacturing capacity, not weeks or months.
To restate the point, the vulture fund side of private equity is all about brand building. The typical turnaround target is a company with good potential but that has been poorly managed. The goal is to turn this management failure into a high return (often 25%+ IRR) that can be generated by selling the repaired company to someone who would buy it if it worked, but didn’t want to or couldn’t fix it themselves.
If it becomes evident in 3-5 years that the turnaround will fail, that’s the point at which it is broken apart. If anything gets sold before that, it will likely be because (a) that piece of the acquisition was considered early on to be dead weight or (b) it has cash value that’s ripe for the plucking.
I have no doubt that Cerberus is, in part, buying the brand potential. My question is whether that brand potential is strictly limited to Jeep, or whether Chrysler and Dodge are also viewed as having some turnaround prospects. My guess is that they see all three as having potential, but time will tell.
“The Detroit News estimates that once the ink is dry and the dust settles on the financial dealings, DCX will have paid $673m to get rid of Chrysler. Given the problems facing Chrysler, and the way DCX stock has gone up since they started dropping hints they were selling it, it looks like money well spent.”
How sad is that? And $20B @ 8.5% (Not a bad rate for “junk” status). Do they even teach this in business school?
Interesting. It looks like Jeep is going to get sold again. Kind of humbling that this “iconic” American symbol has spent most of its history getting passed around like a drunken groupie at a heavy-metal band’s after-party. First it was Willys, then Frasier/Kaiser, then AMC, then Renault, then Chrysler…why not let GM have a turn? Or better yet, Ford, which built as many Jeeps in WWII as Willys did (the GPW.) Maybe they could resurrect the Gladiator concept (Wrangler-based pickup) and call it the new Ranger? :-)
Isn’t their current onslaught of new vehicles (Sebring, Nitro, Patriot, etc.) their last-ditch “turn around” effort? These new products are in full swing–what else can they do? Game over, man.
The myriad issues facing Cerebus are almost mind numbing-UAW contract negotiations,3$-4$ gas,declining retail share,dependence on fleet/retail,bloated dealer network,perceived and actual quality,relentless import assault and poor prior management. There has to be something they see as value. It has to be the brand but it is going to take an innovative marketing campaign that neither Ford or GM has ever conjured up. The actual reasons for this purchase do not seem apparent. Back of the envelope numbers make sense,sell 2 million cars/yr,400k fleet,1.6 retail,2000 dealers fom 3700 each sell 800/yr,close some US plants,move production offshore. This sounds great but how do you get there? They will have to make some very large disruptive moves right away in a business that historically has moved incrementally.
I would like to add that both Chrysler and Ford of Canada launched “Employee Pricing” campaigns again this week. Ahh..the good old days of reduced prices coupled with delivery allowances.
“CEO Tom LaSorda was reportedly “quite upset” with what his employees had wrought”. I’ve seen this several times before. So, the ceo doesn’t even know anything about a major new model costing a billion dollars or whatever to launch? What is it that ceo’s do, exactly?
I was talking with a car dealer friend, this past weekend, when we went to the Bonhams and Butterfield auction of the Hogan collection of vintage (1932-’46) Fords (and one Mercury sedan convertible and one Lincoln Continental) about whether or not Chrysler can survive. This friend is a steely-nerved businessman, but he is also an auto enthusiast. He said he felt that if Chrysler can survive long enough to make the 2009 Dodge Challenger, it would be a success and sell as many as 20,000 to 40,000 units. We both agreed that Chrysler needs to quit making the vehicles that don’t sell; and those who read this site know which ones those are.
Recently, I drove a Jeep Wrangler Rubicon and was surprisingly impressed – half expected to find a vehicle poorly built – by the build quality and capabilities of that machine, all for just about $30,000. If they can build something such as that, for the money they ask, and make a profit on it, there’s some hope.
As an American, I’d like to see them keep building the Jeep here in the states. But given the news that Moody & Poors knocked down Chrysler paper to “junk status,” it might be asking too much.
Hmm, the last Plymouth I remember (I came to the US 5 years ago) is the Plymouth Neon…hardly luxury…or maybe as a competitor for Buick.
No, it wasn’t a luxury brand but it is an established brand which I assume is still owned by Chrysler. I’m forecasting a mass market/luxury pairing a la Kia/Hyundai.
I agree with previous comments that this is just an elaborate dance with the end goal being the exercising of the UAW parasite from the company.
As for Tom-boy being upset, I am sure that he has so much on his plate right now that the guy barely sleeps. You know what they say about the distraction costs of mergers…this guy has probably been putting slide decks together for the last six months on what-if scenarios, turn-around plans, etc, that his eye was off the ball regarding product planning. Not acceptable, but understandable.
You have to have relaiable lieutenants, and that is where the management savvy comes in; just seems he can’t pick ’em, or maybe the pickin’s are slim? I mean an industry in this kind of shape is not exeactly the most most attractive for talent.
Hmmm…just graduated from B-school, I know, I am going to work for the big 2.8. Winning strat if I ever heard one.
You want talent ??? Detroit can’t handle talent son.
What the hell is Dieter Zetsche doing in the picture?
Mcloud1:
What the hell is Dieter Zetsche doing in the picture?
Whatever it takes to get the hell out of Dodge (literally).
# d996:
July 6th, 2007 at 11:23 am
You want talent ??? Detroit can’t handle talent son.
Thanks for the laugh. :)
You are welcome-it would be nice if Japan/Korea would thank Detroit for giving them so much laughter. You know they do-I can just see all the salarymen after a hard 28hr workday, drunk,putting on skits-“oh rook at me I bob rutz I fry planes,I so smart nobody understand me”
“What the hell is Dieter Zetsche doing in the picture?
Whatever it takes to get the hell out of Dodge (literally).”
And the poor Sean Connery looking dude next to him appears as though he has just been tagged to be Chrysler’s new CEO….The look of horror.
“maybe the pickin’s are slim? I mean an industry in this kind of shape is not exeactly the most most attractive for talent.”
Yup. Nobody with talent wants to work with unionized labor.
Now, on a serious note, I seriously think that Chrysler is screwed, and that they are inches away from hitting a wall with a big Toyota logo on it. I know that Chrysler is not going to get out f this one. I agree with many here, Ceberus is just going to strip Chrysler of anything useful, and throw the dieing carcass overboard.
Chrysler has got it ALL WRONG. Their product line sucks, their advertising sucks, and their dealer network sucks.
First of all, their line up is plagued with a bunch of bean counted go karts and urban flavmobiles. Not a single car in their current line up appeals to me right now. Not one. Chrysler has come to think that to make a great car, all they need to do is take some crappy chasis, throw an ass-ugly body on it, and pack it with a lot of gadgets. Now in contrast, lets look at one of Detroit’s biggest successes, the Ford Taurus. First, the Taurus was very sexy, it handled like a dream, was comfortible, was innovative, unique, and it had many gadgets as well. But, with teh Taurus, Ford put gadgets on the bottom of the list. What they put the most focus on was creating a well rounded automobile.
I think that Chrysler’s advertising is really what is driving customers away. Dode’s cars are being advertised as big, intimidating power boxes, Chrysler as bling mobiles, and Jeep as urban flavmobiles. I think the original Compass ad with the bobbleheads was one of the dumbest advertising compaigns that I have ever seen. It even beats Ford’s BOLD MOVES compaign and the “Ask Dr. Z” ads.
What Chrysler needs to do is clean the gunk out of the Jeep line, and stremline it. That means goodbye Patriot, Compass, and Commander. For Dodge, they need to go back to the 90s, and stop making their cars all intimaditing. Nodbody is going to buy a car that scares them. They need to instead have a line of cars that are sleek, innovative, and that appeal to customers and enthusiasts alike. And they need to stop all the Hemi bullshit, The Hemi is nothing more than a fad that has passed. Nobody cares about the Hemi anymore. The Ram and Durango also need a redesign. They are heavilly outdated, and with the redesigned Silverado, Tundra, and a new F-150 on the way, it doesn’t stand a chance. The Nitro needs to go, as it is a symbol of everythign that is wrong with Dodge. It is just this big, ugly powerbox that will repulse just about everyone with an IQ above 10. The build quality of their cars are also bottem of the barrell. I checked out a floor model Caliber at a Dodge dealer near my house, and it was cheap plastics and misaligned panels galore. The carpet was even slightly scrunched by the rear seat.
Pretty much, right now, with teh exception of maybe two or three models, Chrysler’s product line can only appeal to teenagers. Though then again, I am a teenager and I am completely repulsed by most of the garbage Chrysler is turning out. but all around school I hear people talking about how they think the LX cars are “Sweet” and how they want one and crap. In fact, I think that it is the LX cars that are keeping Chrysler afloat. The rest of their models are tanking.
For the Chrysler brand, i don’t know where to start. if it weren’t for the 300, they wouldn’t have a shred of credibility left. I find the Aspen to be one of the dumbest iedas I have EVER seen. Dump it now. The PT Cruiser is become extermely dated, and the whole retro thing is really working its way out as well. Dump it as well. the Sebring looked good in pictures, but it is killed by the rampant cost cutting.
To tell the truth, the only car that appeals to me in Chrysler’s line up is the jeep Grand Cherokee. But that is taking a backseat to a bunch of flavmobiles like the Compass.
Chrysler needs to make their vehicles more credible luxury vehicles instead of blingmobiles, Dodge needs to make their models less intimiditing, and put their focus on design and innoation instead of muscle and Hemi power, and Jeep needs to streamline their product line. THey also should bring Plymouth back, as a maker of entry level cars. They need to make it a producer of bland, normal cars that are cheap, innovate, and reliable, as well as appealing to customers, and being sold on friendly showroom floors. Pretty much, it will be a Honda/Toyota fighter.
But I know for sure that if Chrysler continues in their current direction, they will be dead in no time, and Cerberus is going to simply gut them and hold a fire sale of anything useful that Chrysler still has.
Again, I was surprised by MB purchase of Chrysler as I thought they would learn from BMW’s bad expeirence with the Rover goup.
However, I under estimated that infamous German ego.
I agree at somepoint Chrysler or part of the group will be sold again. One of those future buyers will be mainland Chinese.
When that occurs you will see some major fireworks in Detroit and D.C.
I think the original Compass ad with the bobbleheads was one of the dumbest advertising compaigns that I have ever seen. It even beats Ford’s BOLD MOVES compaign and the “Ask Dr. Z” ads.
I think both were edged out by the cringe-inducing ‘geriatric Lee Iacocca’ ads of a couple years ago, including one on a golf course with Snoop Dogg.
His appeal as a pitchman was overrated 25 years ago. His target demographic were snidely referred to inside Chrysler at the time as PODS — Poor Old Dumb Sh*ts, middle-aged working-class males who were impressed by a brash, tough-talkin’ loudmouth in a suit.
Fast forward to the new millenium, and unless Chrysler had some secretly-brilliant strategy targeting the over-70 demographic, about the only people who still remembered or cared about Iacocca, the whole exercise reeked of bloated executive egoism and intellectual solipsism — “Hey, we’re all out of ideas, let’s bring back our executive spokesguy from 1979 and earn a few corporate butt-kissing points!”.
As a side note, the last three rental vehicles I’ve had via business travel have all been Chrysler or Dodge products.
Fleet darlings.
On the plus side, I am probably one of the few who actually think that Chrysler/Dodge cars have finally started to show something resembling external styling in the last few years. For two decades, I wouldn’t even give their vehicles a second glance….milquetoast jellybean styling or worse. Liberty was cute, too. Unfortunately, as soon as you open the door it is still obvious that much is still very wrong, and Chysler’s non-cars have taken a decidedly frightening turn for the obsene (Aspen, Nitro, Durango, etc).
Labor costs! Labor costs! Labor costs!
Folks, there is a lot more to Chrysler’s future successes than labor costs. Just in case you think that the executives at Chrysler are trying to perform a re-enactment of The Producers, consider the following…
Cerebrus is planning to put billions more into R&D than Chrysler was initially given through D-B. In fact, one of Chrysler’s core strengths before the German takeover was their heavy investment in R&D. Once D-B took over, the budgets for many of their platforms were slashed and others were delayed for years.
Cerebrus may be a finance company, but without a long list of exceptional mainstream products Chrysler will fail as a company. I believe Chrysler will be focusing squarely on building excellent products… and their quality of components should improve markedly over the next several years.
On a side note, there aren’t enough colorful metaphors in my vocabulary to describe how Daimler’s handling of the 2.7L engine fiasco will hurt this company. Out of all the threats in the marketplace, none is more deadly as a bad reputation. The 2.4 head gaskets, the 2.7’s insidiously bad lubrication design, and the millions of defective rear differentials out there is what bothers me. For every Cherokee that hits 250k, Chrysler has thousands of vehicles that truly struggle to get there. Take a look at the allpar site for over 200k vehicles and compare it to virtually any other nameplate out there. I think THAT’s really going to be Cerebrus’ biggest obstacle in the times to come.
Oh, and about minivans. They will most definitely make a comeback. There is more room to stick all the things one likes to play with while on the road. As compared with SUV’s they get better mileage, are far more comfortable to drive, and offer far more promise for the inclusion of all the handy little technologies the automakers want to push for greater profits.
I firmly believe that in the long run a successful business needs to have a compelling Reason To Be (RTB)in the eyes of the customer base. Chrysler has no such organizing principle today. Decades ago Chrysler was one of only three large volume suppliers to the US marketplace and that in itself was enough RTB. A market needs at least three vigorous competitors for capitalism to even sort of work it’s magic.
Now the situation is that the US automotive market has a huge number of vigorous competitors and a handful of also-rans. Chrysler has devolved into the largest of the also-rans. Toyota, Honda and even Hyundai make better minivans than Chrysler. GM, Ford and Toyota make better trucks. Almost everyone makes better small, medium and large size cars.
Perhaps Chrysler will go the way of vintage US consumer electronics brands and become a label slapped onto Chinese imports. Even the once dominant Schwinn bicycle is now such a neutered beast.
The current situation of mediocre vehicles, often horrible dealerships and an out of control cost structure make one wonder why the finance types have even gotten involved. I guess it helps that they were paid to take the company off the German’s hands. However, sometimes the most expensive car is the one someone gives you for free!
The coming higher CAFE standards really put a stake in the heart of this vampire.
Here is a list of fleet sales. Note Sebring and Avenger fleet to retail sales.
http://www.fleet-central.com/af/stats2007/cars_web.pdf
Those fleet/retail numbers are very interesting. They make the “success” of the Chevrolet Impala out for a lie. The numbers also show just how much trouble Chrysler is in.
Kia also looks to be a rental car darling. Mazda has a surprising high fraction of it’s output going the fleet route as well.
Chrysler has got it ALL WRONG. Their product line sucks, their advertising sucks, and their dealer network sucks.
I will just reiterate what has already been said in earlier articles, “marketing, marketing marketing”.
I do not mean finding a new way to apply porcine lipstick. I mean figuring out what customers will pay for and building it. Classic example – crappy interiors. There are only a couple of reasons people still buy VW’s and it ain’t durability.
Lastly, as for the “I wouldn’t buy it” or “I think it is ugly”, you are a sample of one. Not meaningless, but definitely ont definitive. Because if that weren’t the case, Honda would be stuck with about a years worth of Civic’s and CRV’s. Please let the MCP know he can have his car back.
I’ve said it before, for my money, Chrysler has the worst lineup of vehicles out there. While I don’t like GM’s offerings as a whole, they do have one very bright star to build upon, Corvette. When was the last time you saw an add that included Chrysler’s halo car, the Viper? I certainly can’t remember one since D-B bought them. Sure, there aren’t many people out there who are going to buy a Viper, but what’s the purpose of a mass market retailer building a car like the Viper if you aren’t going to use it to promote your brand? Ford used the Ford GT in it’s commercials even though it was even more unattainable than a Viper. That was a car to lust after,a nd even if you couldn’t afford it you went to the Ford dealer to stare and drool over one. Then the salesman would steer you towards a Mustang GT.
As far as advertising, I’ll cast a vote for the moronic Nitro commercials. From the car falling through the earth to the other car getting blown up when it gets a jump start from a Nitro, they assaulted and insulted my intelligence in the extreme. These commercials were enough to make me not even consider a Chrysler product.