It’s true. The United Auto Workers (UAW) six hour strike against Chrysler was nothing more than a bit of empty posturing, some meaningless moaning and a quick and unsatisfying climax. Oh I’m sure the union bosses are basking in the warm afterglow of successful pattern bargaining; safe in the knowledge that Chrysler will render unto Caesar the same plunderiffic health care deal as GM, as they look fordward to their next payout. And Chrysler’s new masters must also be happy with the deal. (Ipso facto.) But anyone who’d hoped that someone in Detroit would have the balls to finally shaft the UAW has been left high and dry.
Truth be told, I was one of those observers who assumed that a switch from public stockholder to private equity ownership would help Chrysler grow a serious set of stones. With no one to answer to but their free-spending wives, ex-wives and children, with pockets deeper than an Icelandic ice core, Cerberus' directors could do what The Big 2.8’s erstwhile guardians had never done (if the thought even occurred to them): walk. Hey Ron! You want job guarantees and a bazillion dollar health care VEBA? See you in China. Anyone want to buy Jeep?
That said, my belief in Cerberus’ ability to upset the union applecart disappeared long before the UAW negotiations began. A few weeks after Chrysler’s overlords installed former Home Depot CEO Bob Nardelli into the top slot, I suspected Cerberus couldn’t get wood. There was only one good reason to hire the Prowler-owning auto industry virgin, a man whose largest contribution to his previous employer was self-checkout terminals (for which he paid himself $210m). To cull the deadwood and strip Chrysler like the Grinch looting Cindy Lou Who’s house.
This he didn’t do. If anything, Nardelli’s added complexity to the system. First, he failed to fire Chrysler Prez Tom LaSorda; the exec that helped the Germans run the ailing American automaker into the ground. Next, Nardelli appointed his office manager as his new turnaround titan. Then he hired Toyota’s Jim Press as Chrysler's car czar; a self-professed "servant leader” whose consensus management style poses no threat to Chrysler’s dysfunctional bureaucracy. These are not the actions of a revolutionary intent on a destroying a busted business model.
I know: it’s hard to believe that Cerberus would allow Chrysler’s new management team to adopt the same “steady as she goes” strategy that’s helped GM shed huge chunks of market share and drop billions over the last 17 years, and led Ford to mortgage everything up to and including their logo. With bankruptcy’s long shadow hanging over Detroit, how could anyone with even the gentlest grasp on recent history assume that tweaking overheads, products, sales and marketing is a recipe for success?
And yet, where’s the game changer?
The weird thing is that Chrysler seems to know what it should be doing to reinvent itself. They made a head fake in the direction of cleaning their dealers’ clocks, looking to trim a bloated dealer network Chrysler can’t afford. And then they backed off. They talked about killing overlapping, brand-defiling models and refocusing their product line. And then added more complexity: a new hybrid-building hothouse. AND we're still waiting for the Pacifica, Durango, Aspen, et. al. to die. Chrysler hinted that a GM-style union health care VEBA superfund wasn’t for them. And then they agreed to it.
Perhaps the UAW agreement is simply Cerberus’ attempt to buy some time. Let’s get the best union deal we can, keep the dealers’ doors open and the factories humming a while, and THEN we’ll blindside them. THEN we’ll close factories, kill models, import Chinese products, cut deals with other automakers to retail their products, sell off brands, face the dealers in court, etc. It’s a heartening thought for those who see Chrysler’s re-invention as the key to its survival, but the facts don’t fit the theory.
Cerberus’ is famous for implementing a “100 day” plan on their new acquisitions. The 100 days have come and gone; if they were going to kick out the jams, the jams would be kicked. Aside from adding new management, the carmaker Cerberus owns today looks strikingly similar to the carmaker Cerberus purchased on May 14– new union contract and all.
In fact, the day before the UAW strikelet, Chrysler announced they were cutting 415 full-time white collar jobs from their Auburn Hills HQ, and saying sayonara to 1000 temps. The bloodletting was part of LaSorda’s pre-Cerberus turnaround plan, which dictated that the automaker shed 11k hourly and 2k salaried jobs over three years. So the “old” turnaround plan was/is still chugging away behind the scenes, even as Cerberus headed into and out of UAW negotiations. That ain’t good.
It’s time to face facts: Chrysler’s new boss is the same as the old boss. Same game plan. Same results. The UAW non-strike strike proves that the real indecencies are yet to come.
MSNBC did an article on the apparent “speedup” in the strategy shift:
http://www.msnbc.msn.com/id/21231263/
Interesting quote:
Mr Press, who was hired from Toyota last month, said “we’ve got to look at the products through the eyes of the customers. It used to be that you had trade-offs. For the future, you’ve got to have customers satisfied.”
For instance, he indicated that Chrysler is likely to pull back from its recent strategy of attempting to give the Jeep brand a softer, more urban image.
Basically, the buyout may not have changed course much, but it may have sped up the plan…?
Mr Press, who was hired from Toyota last month, said “we’ve got to look at the products through the eyes of the customers. It used to be that you had trade-offs. For the future, you’ve got to have customers satisfied.”
That is what he brought to the table? Reading between the lines, he is saying we have burnt too many customers in the past with lack-luster vehicles, but now that the Japanese are in the game, we can’t get away with that anymore.
I went into the wrong field. I need to be a CEO in Detriot.
seldomawake :
Thanks for the link.
The speculation that Chrysler would put “top hats” over some other automaker’s greasy bits is exactly the kind of game changer we’ve been looking for. And… what?
Given that Chrysler just made nice with the UAW, I’d expect that strategy to appear outside NA, ’cause if it showed-up here, the UAW wouldn’t be well pleased. As for the so-called “speed-up…”
“Mr Press cited a decision to reduce fourth-quarter production by 82,000 units which was taken on the basis of a seven-minute conference call.”
If that was strictly true, I’d be VERY worried. In fact, it was a LONG overdue move that barely scratches the surface of the problem of Chrysler’s crap cars.
But it reminds me of the “THAT’S NOT THE NEW CORVETTE” story attached to GM Car Czar Maximum Bob Lutz– which turned out not to be true (he literally mistook the new ‘Vette for something else). Press seems to be generating his own press these days. As stated in the above editorial, the image of a decisive exec doesn’t square with his background and training.
More to the point, I reckon top execs make three maybe four important decisions a year. Slicing 82k off of Chrysler’s bloated production schedule isn’t one of them.
HaHaHa! You had me at Dickless Porn!
Everyone was expecting armaggedon when Cerberus took over, but not too much has happened.
We all know Cerberus is not going to sit back and let the dry rot continue, so perhaps they needed to stretch the 100 day plan out because the rot was just so deep.
Instead of doing some major renovations, it looks like they are now planning the demolition and re-build. It’s just taking longer than expected.
Jeff in Canada:
Demolition is revolution, not evolution. Or, as Lyndon Johnson used to say, a bad decision is better than no decision.
If Cerebus had their eyes on Chrysler Financial all along, they might have missed a whole lot on the manufacturing side. It’s not like they have a lot of experience in the car making business, nor did they bring someone in with the chops to help out. Cerebus is rich and successful. This group is so smart they may believe they understand this industry. Like VW thinking they could build a super-luxury car.
RF:
Then he hired Toyota’s Jim Press as Chrysler’s car czar; a self-professed “servant leader” whose consensus management style poses no threat to Chrysler’s dysfunctional bureaucracy.
Come now Robert, you know as well as I that no one in our side of the industry is going to hire someone who actually would shake things up. They may have a private firm feeding them cash, but as far as I can see, its just business as usuall.
Now if I could only get promoted up the ranks in say, five weeks, we’d see some changes. Of course, I’d also like to wake up to a new 599 in the driveway, which I think has a better chance of happening.
I still don’t understand any of the automaker’s decision making process. They know they have a lot of fat to trim within the union, but can’t touch them because it would be a contract violation. My first step would be to fire all non-essential personel within the company-side of the structure, regroup, then tell the union that the jobs-bank stuff is never going to happen (let them strike, which will lean your inventory). Get yourself lean, then tell the union that it is their turn.
A job is not a right, it is a privilege. If you are a non-essential employee, generally you know it as soon/before the company does. If you know that and don’t have a plan B, I have no sympathy for you.
In parallel with this, there should be a clear, concise plan for new product. Design a template for the engineers to follow. Give them the guidelines for what purpose each vehicle must serve, then let the engineers do what they are best at. A line of cars that do not overlap and are exciting would do a lot.
Thirdly, set higher standards of quality. A friend of mine works for a Tier 1 automotive supplier in the area. He said that the products they make for Japanese companies (namely Toyota) must be perfect, or they reject all of them. On the other hand, American automakers (namely Chevrolet) will take them at a discounted rate. If you want to be great, you must expect greatness from those that support you. It is time to stop pussy-footing around. Americans are known world over for their pride. It is time we start convince people we deserve it again.
All of this points to the fact that running an auto company is actually complex and a wiley bunch of hedge fund MBA’s can’t just waltz in and fix Chrysler overnight. Now that Cerebrus is in (over their heads) how are they gonna get out? Car companies can run quickly and violently into the red. Even with big bucks, they don’t have time for too many missteps.
kick out the jams
Robert, are you a Clash fan and a Who fan?
Cerebrus’ game changing plan for the sinking vessel…get someone else to man the pumps. Big deal.
pockets deeper than an Icelandic ice core
The metaphor you’re looking for is “deeper than a Greenland ice core” since the ice is as much as 4 km deep on Greenland. Iceland has its share of bigglaciers, but they’re puny by comparison, and even the Vatnajökull glacier is only a couple of hundred meters deep.
That would be “Kick out the F&^&*&g Jams!” as in the MC5.
I said it a long time ago – people on the outside have absolutely no clue what it takes to get a car from concept to dealer. Chrysler is not a maker of kitchen counter top appliances. There’s a totally different set of rules.
I believe that Cerberus is in way over their heads. They are probably just now realizing the enormity of it all.
So now they might do the strip and flip that they promised not to do….
If Cerberus doesn’t make any transformational changes or big decisions by the end of the year than this whole buyout was to get control of Chrysler Financial. Cerberus pushes paper for a living. They think that this is the deal of the century- they sold billions of loans to Wall street, some of is tied to the future value of Chrysler. They backed off killing dealers because they realized that most floorplan with CF and they provide retail buyer paper that can be resold. If they were serious about product they would have kept Bernhard. Nardelli and Press are just caretakers or to keep with the porn theme fluffers-make sure Chrysler will perform, just not with them. This business has been and always will be about product, if they neglect this in favor of pulling cash out of the back end they will have very few options when/if sales decline more.
Sid: I believe the MC5 began it with “Kick out the jams, MotherF**kers”. That said, the strike at Chrysler was a lame 2nd act by the UAW.
I’ve been in the minority on this one all along, for I’ve never seen this as a strip-and-flip.
For one, there just isn’t much to flip. If there is money to be made here, it won’t come from parting out the organization and finding valuable gems worth plucking.
For another, the hiring choices make it pretty clear that their goal is to make this a functional car maker. They are hiring top flight people from the industry in order to make that happen. I question Nardelli as a hire, but I believe that he was hired more for his success as a turnaround guy within industrial divisions of GE than he was for his failure as an administrator of a retailer (Home Depot.)
It’s ultimately a branding play. Cerberus believe thats the brands can be saved and expanded with the right management in place, and they are busying hiring people outside of the old DCX to get them there.
I suspect that you’ll see a smaller lineup of vehicles in the US, with more efforts to grow the business in emerging markets such as China and Russia. I wouldn’t be shocked if they eventually killed off the Dodge name entirely or just reserved its use for trucks, leaving Chrysler as the main brand for cars and minivans. Look for more outsourcing deals, joint ventures, etc. as a sign of their core strategic plan.
I admit that the business of the auto industry is not my second language but the behavior of Cerberus to this point has not given me the impression of a company out to flip Chrysler, way too much has been invested for that to be the case. Just because they settled with union doesn’t mean that everything is done with. I love the death watch series and have been reading them for a long time but as far as Chrysler and the 3 headed dog goes it just seems that every time you come up with speculation that chrysler is going to get stripped the dog does something to strength the base of the company…why not take a wait and see attitude….after all if a car company could turn themselves around in less than a year wouldn’t everyone do it?
” But anyone who’d hoped that someone in Detroit would have the balls to finally shaft the UAW has been left high and dry.”
But anyone who actually wants the UAW shafted is childish, immature, and frankly a bit unhinged. No decent right thinking person wants to see anyone, or any group, get shafted.
These guys could care less about Chrysler, they are making a killing off CF. If things don’t improve they walk away with 100’s of millions of cash with zero risk. They walk and the secured lenders sell the rest. People are right, this is not a strip and flip. It’s like buying a crappy apartment complex, refinance than collect the rents. When it falls down you walk away with the money collected for rents and let the banks sell everything else.A conspiracy theorist I am not,Oswald killed Kennedy, Armstrong walked on the moon and the CIA didn’t engineer 9-11. I really hope I’m wrong but like others, I have seen nothing that would lead me to believe they really care about autos. On the off chance that Chrysler improves then they get the bonus if they can sell the whole company.
Sid: I believe the MC5 began it with “Kick out the jams, MotherF**kers”.
Dang, and I thought I’d be the only one to even remember that kind of trivia…and I got it sort of wrong. How embarassing.
Robert: “Or, as Lyndon Johnson used to say, a bad decision is better than no decision.”
Yet after escalating Vietnam and not having a way out, LBJ decided to not bother seeking a second term. Some decisions are, apparently, bad enough that no decision would be better.
An interesting article just showed up on Yahoo News, it starts like this:
“As they assembled cars Thursday, workers at Chrysler’s Sterling Heights assembly plant were talking about their new labor contract, wondering if Wednesday’s six-hour strike was enough to get a good deal from the company.”
http://biz.yahoo.com/ap/071011/auto_talks.html?.v=11
If the UAW leadership called a six hour strike just for theatrics they may have missed the boat by bringing down the curtain so fast.
Agree with d996 – haul out what cash you can, get Wall Street to buy your debt – they need something to buy now that mortgage backed securities are bust and then let them worry about it. You don’t even need to go through the energy of stripping and flipping. To continue the porn metaphors – I think it’s more of a suck and spit.
My mind must be in the gutter…this article just made me laugh myself silly.
I find that the funnier something is, the more close the element of truth.
Which is really a sad thing in this case.
Pch101: Great post. I agree with your evaluation. If you want to guess at a company’s plan, take a look at their hiring. I guess only time will tell.
I would also agree with d996.
This would be in line with the Wall Street Shark behavior of past years and consistent with the hiring of Nardelli.