Poor-quality car dealers. You know the score: dodgy facilities, salesmen you wouldn't trust with your pet rock, F&I guys who nickel and dime your paycheck into oblivion and service departments for whom "bilk" isn't just a word- it's a way of life. Industry analysts and desk-chair pundits alike condemn many (if not most) auto dealerships as a cancer on the industry. Believe it or not, car manufacturers share your distaste. Hence the reason the newly excised Chrysler LLC flashed its private equity muscles, threatening to close "underperforming" dealerships. Is that legal? 

The short answer is: there is no short answer. Franchising laws come in 50 flavors. These state laws are extremely complex and vary enormously from jurisdiction to jurisdiction. If there's an overarching theme to these statutes, it's that they tend to favor (i.e. protect) the franchisees.

For example, in many states, a franchisor may not terminate or refuse to renew a franchise agreement without legally demonstrable "good cause" for doing so. Franchisees may also sue franchisors for injunctive relief (e.g. a court order prohibiting franchise termination) or rescission (undoing the franchise sales agreement), PLUS damages. Oh, and the Federal Trade Commission can step in to enforce state laws.

So, in business terms, Chrysler can shutter its underperforming dealerships, but their legal bill is bound to be on the Orion's Belt side of astronomical. In fact, any automaker considering cutting dealer deadwood has one word on its mind: Oldsmobile. GM's December 2000 termination of its Oldsmobile franchise is example no. 3 in the OED under the phrase "cataclysmic meltdown." When all was said and done, this little exercise cost General Motors about $1b- not including various intangibles that corporate PR folks might call "good will" or "public image." 

Still, it's got to be done. Toyota has 90 American dealers for every percentage point of U.S. market share. General Motors has 300 dealers for every point and Chrysler is nominally better at 270. There is nowhere near enough space to detail all the reasons why this state of affairs is toxic for the American manufacturers. Suffice it to say, the end result is that the dealer bloat is stomping the life-support machine attached to Chrysler's sales numbers and wrecking what's left of Chrysler's battered consumer image.

Chrysler's decision to prune its dealer network can only go two ways. The manufacturer can either simply pay the dealers to shut down or fight them in court. Although the word extortion comes to mind, a pay off would be the quickest and easiest way to make the problem go away. Alternatively, Chrysler's lawyers could say screw you, see you in court; lots and lots of courts. If Chrysler's army of high-priced lawyers loses at trial, it'll cost them a ton of money. If they win at trial, it will still cost them a ton of money.

Chances are they'd win some and lose some and pay through the nose for the privilege. Either way, the bottom line is the bottom line: there's no inexpensive way for Chrysler to trim its dealer network. 

There are more devious alternatives. Chrysler could reduce the amount of dealer "holdback." That's the money– roughly two to three percent of a vehicle's retail price– held by the manufacturers prior to sale. Dealers depend on this post-sale cash to book paper profits and make money. Chrysler could make the size of the holdback performance related, or simply drag their heels.

Chrysler might also say "Hang on; we've got some production issues. We've got to allocate our 300Cs very, very carefully. At this point, only five star Chrysler dealers can have Hemi-powered cars." There is precedent: SRT-8's are doled-out by corporate caveat.

While any such moves brings the threat of lawsuit, pretty much everything does. Chrysler can make life hard enough for "bad" Chrysler dealers that they'll have no choice but to send their dealership to the land of Plymouth, Eagle, AMC, De Soto, Nash, the New Yorker, Imperial, Cordoba, Daytona, Cirrus, Concorde, LHS, 440, Dart, Breeze, Spirit, Reliant, Omni and… well you get the idea.

There was one legal development of late, a silver-plated lining to the grey cumulus clouds filling The Big 2.8's sky. In Leegin Creative Leather Products v. PSKS, Inc., the Supreme Court overturned a 96-year old precedent that made any kind of vertical (manufacturer-set) price rules illegal on their face, without any other examination. 

Under the old rule, dealers could make patently senseless decisions with prices, like fleece customers for $10k over sticker on a Solstice or mark Trailblazers down so much as to utterly pulverize their residual values. Now that General Motors or Chrysler or Ford can call dealers out on the carpet, they have much stronger control over some of the more foolish moves they make. It can't hurt, but it won't really help. 

Aside from select Jeeps, Chrysler's sales suck. Given this inescapable fact, you'd think that the hard-pressed born-again domestic automaker would do everything in its power to keep the folks on the American front lines happy. After the sales bank debacle, after brazen "channel stuffing" (forcing dealers to take cars), after barring "under performing" Chrysler dealers from the company's life-sustaining used car auctions, after sending these dealers letters threatening to shut them down, you'd think Chrysler's corporate clowns would have run out of ways to alienate the troops. Wait! Here's a new one: exclude some dealers from the corporate Internet sales funnel. Way.

Automotive News discovered the Crisis Corporation's Internet shenanigans by searching online for Chrysler dealers within a specific zip code. They got a list of all the dealers in that area. When they clicked on the name of one of the dealers, they either did or didn't get transferred to the dealer's website. A decision made at the top level prevented some (if not most) dealers benefiting from leads generated (or now not) by the company's all-singing, all-dancing brand-specific websites.

Chrysler, Dodge or Jeep dealers who don't have the corporate "Five Star" dealer rating (Chrysler pentastar, geddit?) get screwed. If you select a Five Star dealer, you can request a quote, search inventory, schedule a test drive or set up a service appointment. If the chosen dealer didn't quality for the five-star designation, you get a message to call or visit the dealership. End of story.

What makes a Five Star dealership worthy of such consideration? According to www.fivestar.com, Five Star dealers must meet "specific requirements set by DaimlerChrysler." They have "strict facility requirements [so] you can expect a clean and pleasant place to shop for a vehicle or have your vehicle serviced" and employ "consistent, proven processes focused on satisfying every customer every time." 

Even better, they're staffed with "sales professionals [who] are product experts trained to make sure you find the vehicle that best suits your needs [and] service and parts professionals… trained by DaimlerChrysler to properly diagnose your vehicle, repair it right the first time, and get you back on the road quickly." At this automotive nirvana, "employees work together as a team to ensure that, once you purchase a vehicle from them, you have a seamless ownership experience that can only be called Five Star."

If you stop to think about it, a dealer answering to the above description is kinda what a customer has a right to expect from a "normal" car dealer. Chrysler's Five Star folk are only doing what any well-managed, customer-focused dealership should be doing. In that sense, maybe Chrysler's right to cut out its non-Five Star dealers from the cyber-loop. Of course, Chrysler dealers who don't have the Five Star rating don't quite see it that way. 

B.J. Brickle runs both a Chrysler-Jeep dealership and a Nissan franchise in South Carolina. Customers can access his Nissan inventory via Nissan's on-line services. Not so his Chrysler product. "I have a guy just handling Internet leads [at the Nissan dealership]. If you respond to me on the Internet, I'm back to you in an hour. With Chrysler, I don't have that option."

Chrysler's e-favoritism is a classic case of rhinectomy for facial spite. In areas where there are no Five Star dealers, customers looking for local inventory are denied a peek at Chrysler stock– unless a dealer with fewer than five stars wants to bear the expense of listing their inventory on their own site. Even if they do, the vehicles aren't accessible from the corporate mothership's site, where many buyers begin their car-buying adventure. 

In typical Big Three Kremlin style, Chrysler says it's "studying" the problem. They say the selective electronic referrals are designed to reward Five Star dealers and encourage lesser stores to work toward certification. "We're re-evaluating all elements of the Five Star program and hope to have a resolution soon," said spokesperson Lidia Cuthbertson. 

This is beyond nuts. With precious few exceptions, Chrysler's sales are down across the board, with no immediate prospects of resurrection. At best, the company has a truck-heavy, mediocre lineup. While you can certainly understand Chrysler's general desire to trim its bloated dealer network, there are dignified ways to go about it (e.g. Chapter 11). Now is not the time to demoralize dealers struggling to put food on their table and, by extension, Chrysler's.   

One thing's for sure: Chrysler needs to stop "re-evaluating" their web policies and understand the number one rule in sales: make it easy to buy. Stupid moves like this serve no useful purpose. The two-tier internet strategy pits dealer against dealer, and dealers against the company. It may not violate the letter of their franchise agreement, but it annihilates the spirit.

New owners or no, Chrysler still seems Hell-bent on self-annihilation.

As top executive for a large manufacturing enterprise, Bob Nardelli was a tremendous success. As the man in charge of a gigantic retail business, not so much. Like any automaker, Chrysler’s survival depends on both its ability to manufacture class-leading products AND get its dealers to provide class-leading customer service. So, as Nardelli takes Chrysler’s helm, the question must be asked: is he half the man he needs to be? The answer is Six Sigma.

Navy vet and Motorola employee Bill Smith created the Six Sigma management system (a.k.a. the “Way of the Sword”) for Motorola in the 80s. Six Sigma’s goal: design and create products with no more than 3.4 defects per million. Like many such theories, its principles are enshrined in acronyms: DMADV (Design, Measure, Analyze, Define, Verify) for product creation, DMAIC (Define, Measure, Analyze, Improve, Control) for production. Its success depends on continuous, company-wide commitment.

GE CEO Jack Welch was an early accolade of Six Sigma. When Welch appointed Bob Nardelli CEO GE Power Systems, “little Jack” deployed Six Sigma with ruthless effectiveness. Applied to a division building and selling locomotives and power generators for other business (i.e. BTB), Six Sigma worked a treat. Excellent products were designed and built, and management limitations minimized (retarded innovation, inflexibility, group-think, insulation).

In December of 2000, Nardelli lost a bid to replace his mentor at GE. Despite a complete lack of retail experience, Nardelli landed the top job at Home Depot. Appropriately enough, Nardelli cleaned house, replacing Home Depot's top management and rationalizing every aspect of the business.

Seven years later, at the end of his tenure, Home Depot’s market valuation had declined by 40 percent. Much to the chagrin of stockholders, Nardelli floated away on a $200m golden parachute.

Nardelli’s over-reliance on Six Sigma lay at the heart of his troubles at Home Depot. As a system of measuring improvement, Six Sigma could work on a retail level— in the same sense that Darwinian principles of “survival of the fittest” could work as a political system. But just as social Darwinism isn’t flexible enough to subsume competitive belief systems, Six Sigma is not exactly what you’d call a people pleaser. For example…

Nardelli used Six Sigma to streamline Home Depot’s in-store staffing. By adding self-checkout technology and generally thinning the ranks of floor staff, Nardelli was able to correct a “defect” in the chain’s “production process.” The moves cut costs and, thus, increased the amount of money available for employee training.

The strategy reduced the number of employees on the floor, and turned many of the remaining employees into data measurers and desk jockeys, sapping time once lavished on Home Depot’s customers. Appropriate data was collected, but customers were not well pleased with the tumbleweeds blowing through the aisles of the big box home improvement store. You can do it, we can help, but you gotta find us first.

“Bump’em Bob” Nardelli also directed his [new] management team to apply Six Sigma principles to strategically re-position Home Depot’s displays and products. As you can imagine, the statistical emphasis robbed some of the “surprise and delight” from the Home Depot retail experience, in a genre where emotion is a precious commodity.

But more than that, Six Sigmatitis proved to be a demoralizing influence on Home Depot’s human infrastructure. Nardelli’s less than warm personality and his willingness to eliminate all those who opposed his methodologies cast a icy pall over Home Depot’s corporate culture. 

"Facts are friendly" is one of Nardelli’s favorite sayings. So here’s a handful. In July of 2007, Chrysler’s sales were down eight percent compared to July 2006, even while they spent an average of $4,082 per vehicle on incentives. Inventory is down 17 percent over last year, but it’s still an 81 day average supply (45 days being the goal, 60 the current American norm).

Obviously, Chrysler’s manufacturing operations could use stricter guidance. Strict defect measuring is always welcome in the world of car production. And despite the trail of broken careers at Home Depot, it’s also true that Chrysler’s middle management torpor could benefit from some pruning.

But injecting Six Sigma into the Chrysler culture is no long term solution. In the ultra-competitive automotive marketplace, where Toyota’s lean production system sets the standard for manufacturing efficiency, an automaker needs more. It needs strong branding and a spark of genius. Even Jack Welch knew that Six Sigma had to be balanced against the need for risk in order to foster genuine creativity.

But Cerberus didn’t hire Nardelli to return Chrysler to greatness. They hired him to prepare the company for sale. To slash and burn the automaker's production process, corporate bureaucracy and dealer network, so they can strip and flip the result. Nardelli is all the executive Cerberus– if not Chrysler– needs.

[For more info. on Six Sigma, go here .] 

When Daimler gave sold Chrysler to Cerberus, it seemed as if things were looking up for the beleaguered automaker. With a return to American ownership, they no longer had internal factions gunning for each other. Cerberus spoke highly about Chrysler's leadership; they would take a "hands off" approach to running their automotive acquisition. They offered union leaders assurance: we're in it for the long run. No need to worry about "strip and flip." And then Cerberus announced that Robert Nardelli would take over the reins. Ladies and gentlemen, the three-headed dog is finally baring its teeth.

Mr. Nardelli has a reputation for getting results. Before the exec was asked to leave Home Depot's employ earlier this year, he doubled the company's sales. OK, Nardelli's tenure coincided with one of the biggest building booms in years, but he successfully expanded the franchise into Mexico and China and increased earnings 20 percent for four straight years. The fact that Home Depot's stock price fell eight percent during his reign is irrelevant to Chrysler; Cerberus is a privately owned firm that doesn't have to answer to stockholders. 

While at Home Depot, Nardelli earned a fearsome reputation as an abrasive and ruthless cost-cutter. While profits soared, customer satisfaction and employee morale plummeted as he replaced experienced full time employees with cheaper part-timers. Nardelli also alienated store managers with his insistence on centralized command and control and micro-management. At the Depot's home office, "Boot'em Bob" replaced 98 percent of the top executives within the first five years.

Nardelli's forced departure from Home Depot was as controversial as his tenure. Of his $210m severance package, House Financial Services Committee Chairman Barney Frank said, "Mr. Nardelli's contribution to raising Home Depot's stock value consists of quitting and receiving hundreds of millions of dollars to do so."

So that's who's at the helm now: an ironfisted, hard-charging beancounter who has no qualms about dumping experienced employees to save a few bucks. He's a perfect fit with a company that emphasizes turning a profit as quickly as possible and doesn't mind tearing new acquisitions apart to do so.

And what of former CEO Tom LaSorda, the guy who had to deal with all the crap Daimler dished out, who Dieter Zetsche ordered to cook up a turnaround plan even as Chrysler's German masters were making plans to dump the company? Indeed, it's only been a few weeks since Cerberus Chairman John Snow praised LaSorda and his turnaround plan at a Detroit Economic Club luncheon.

The party line: LaSorda "agreed" to stay on as vice-chairman and president. Nardelli says LaSorda will "continue to have primary interface, responsibility and authority of working closely with UAW."

Of course they're going to keep him around for that.  LaSorda comes from a family of union activists; he has a good relationship with both the United Autoworkers Union (UAW) and the Canadian Autoworkers Union (CAW) leadership.

Nardelli, on the other hand, is about as non-union as they come. During the exec's tenure at GE, roughly six percent of the company's workforce was unionized. It's no secret that Home Depot has an almost Wal-Mart-like aversion to unions. Nardelli may not be the last person the UAW and CAW would want to see sitting across a negotiating table, but he's definitely at the back of the line. 

Given Boot'em Bob's rep for ousting execs, once "Tommy" (as Nardelli calls him) finishes dealing with the unions, LaSorda's golden parachute will unfurl. Gerald Meyers, a professor of business management at the University of Michigan and former chairman of American Motors, sums up the situation: "His days are numbered. I thought they were going to give him six months. They aren't going to give him six days." 

Burnham Securities' auto analyst David Healy agrees.  "It's hard to interpret this move in any other way than they didn't like LaSorda's record. Clearly, they were not happy with LaSorda or they would not be making this change."

How does all this sit with the unions, who are smack dab in the middle of negotiating their new contract? UAW President Ron Gettelfinger is taking his usual ask-me-no-questions, wait-and-see attitude about the management change. Equally characteristically, CAW president Buzz Hargrove hasn't been shy about expressing his "reservations." Hargrove said he was "surprised and concerned" by the choice. "We left [the initial meeting with Cerberus] with an understanding… that Tommy and his team would remain intact."

This doesn't bode well for Chrysler's hopes of remaining a fully integrated American automaker. Clearly, Nardelli is Cerberus' hatchet man. He has no compunction about making changes to produce short-term profits, regardless of the long-range ramifications. "Strip and flip" may eventually look like it would have been the kindler gentler option. Pre-Nardelli, pre-Cerberus, Chrysler was standing on the ledge looking into the abyss. Nardelli is about to kick it off.   

Last week, Chrysler announced they’d cancelled plans to build their super-sized 300, the Imperial sedan. Company Spinmeister David Elshoff cited new, more stringent EPA mileage and emissions regulations and added a moral spin: given the “current climate,” bringing the Imperial to production would have been "irresponsible." Regardless of the need to conform to political correctness and regulations yet to be enacted, the “poor man’s Phantom” had few friends in the punditry biz. (The word ugly featured prominently in their analysis.) And yet, deep-sixing the Imperial was a big mistake. 

To recap: aside from Jeep, Chrysler’s LX platform cars have been the automakers only functional success since the 300 debuted in ‘04. In the first half of 2007, the 300, Charger and Magnum sold a combined 145k units (including the endlessly scorned fleet sales). That's a pretty impressive accomplishment considering that the base cars are saddled with an overburdened 190hp 2.7-liter six cylinder engine connected to a four-speed slushbox. Or the not-entirely-unexpected fact that Chrysler has done nothing to build on the models’ success.

This neglect lies at the heart of Chrysler’s boom-and-bust problem. The cycle is simple: teetering on brink of disaster, Chrysler bets the farm on a new car. The finished product is a good idea, adequately executed with bang-up-to-the-minute looks and acceptable functionality. The press goes wild. Chrysler lets its Savior sit and rot while competitors catch up and move forward. The company once again peers into the precipice of penury and prepares for yet another four-wheeled Hail Mary.     

So here we are, with a three-year old Chrysler 300 and Co. Their interiors are still unacceptably bland and rubbery. The Insurance Institute for Highway Safety (IIHS) still describes their side impact rating with a curt “internal organ injuries likely.” More disconcerting (from a marketing standpoint, not your liver’s), Chrysler doesn’t have a clue where the 300 and its platform siblings go next.

Ask Porsche or Jaguar; evolution is a bitch. Move too far away from a model’s original design and you alienate your base. Stand pat and at some point everyone who wants one, has one. Either way, after the initial surge, conquest sales are a constant uphill struggle. When you’re talking about a car with an iconic design and a tightly gathered brand proposition— 911, MINI, Beetle, Mustang, 300, Charger, Magnum— the struggle is even harder.

The Imperial was a bold attempt to extricate Chrysler from this predicament. Although stretching the brand to include a $50k stretched 300 may seem a bit of a stretch, Chrysler was once an upscale brand. A reasonably priced Imperial would have been just the thing to move the company upward and forward. Much as BMW’s 7-Series casts warm fuzzies on the “lesser” 5-Series, the Imperial could have served as a step-up for 300 drivers.

If Chrysler had decided to put the Imperial’s hypothetical budget into developing their existing LX cars— new engines, interiors, gizmos, suspension components, etc.—you could make a good case for ditching the XXXL LX. If Chrysler were spending the development bucks on rescuing the lame and lamentable Sebring, you could also—

Actually, no. Chrysler doesn't have a prayer of going toe-to-toe with Toyota. Test drive a four-cylinder Sebring and a four-cylinder Camry back-to-back, witness the utter devastation and then you too can see why Bob Lee, Chrysler’s head of powertrain development, called the Sebring an “embarrassing miss.” Besides, why reinvent the wheel? The LX cars were a hit. Stylish, big rear-wheel-drive cars differentiate Chrysler from Toyondissan. Connect the dots.  

And if EPA regulations are becoming more restrictive, pulling the plug on the Imperial is not the answer. (In fact, it’s a particular craven solution.) How about lightening the load and/or fitting it with more fuel efficient engines, including Chrysler’s well-regarded three liter Euro-diesel. And anyway, given the volume of Chrysler 300s and Dodge Chargers, fuel economy need not be a selling point.

Let’s get real: people buying cars equipped with Hemi engines clearly aren’t gas pump sensitive souls. So what if these are not volume-leader automobiles? If the LX triplets were better products, higher margins could offset their lower sales numbers.

By killing the Imperial, Chrysler is yet again demonstrating a void where its automotive acumen should be. Stylish, big, powerful and distinctive ought to be the buzzwords on their dry-erase board. If you must, cross off “big.” But the other attributes should be treated like pre-safari inoculations.

When Chrysler sticks to this approach– the Charger, 300C, Magnum, Jeep Wrangler– it sees green. When it deviates– the Sebring, Avenger, Aspen, Compass– salesmen have to feed their kids toothpaste sandwiches. With the Imperial, Chrysler had a shot at selling a vehicle in the winning category. As far as stockholders and stakeholders are concerned, not building the Imperial was irresponsible. What was Chrysler thinking when they cancelled it? They weren’t.    

Do ya have a hankerin’ for a cheap small car that can’t be satisfied by an offering from Korea, Japan, Europe or the good ‘ole US of A? Me neither. But Chrysler’s CEO thinks you– or someone– does. On July Fourth (no less), Tom LaSorda finally inked a deal with China’s Chery Automobile Company. As early as 2009, Chrysler could be offering Dodge-branded, Chery-manufactured subcompacts in the US and Europe. Target price: $7k. Too good to be true? You bet it is.

About a week before LaSorda was ordering Chinese, Brilliance submitted their would-be Autobahn cruiser to the Germany’s Automobile Association for 40mph head-on and side-impact tests. The sedan failed brilliantly, earning just a one star rating (five possible). The spectacular result for a Chinese-made sedan has raised new questions about Chery’s readiness to produce vehicles for the U.S. market.

You may recall that Chery, China’s eighth largest automaker, survived a brief association with the sterling silver tongued Malcolm Bricklin, whose numerous vehicular importation schemes include the shameful Yugo. The rupture of the Bricklin-Chery deal cleared the path for the Chrysler agreement. As Bricklin walked away from his abortive Chinese venture, his parting comments were prescient.

“The Chinese need to learn that you cannot develop cars for the Chinese market and then upgrade them for the North American Market,” the entrepreneur proclaimed. “You must build for the North American market and then de-option for other markets, never having two standards for quality since great quality is the only option.”  

That’s pretty rich for the man whose Canadian-built SV-1 (Safety Vehicle 1) was famous for its leaking gull wing doors. Anyway, assuming Bricklin learned his lesson, Chrysler didn't. The Sino-American partnership plans to upgrade the Chinese market Chery A1 for the U.S. market.

John Humphrey says Chery’s unlikely meet their ambitious 2009 target for U.S. export. In fact, J.D. Power and Associates’ General Manager for the Asia/Pacific region says that none of the Chinese auto manufacturers are prepared to meet U.S. environmental and safety standards.

Humphrey says Chery is closer to being ready than its fellow Chinese manufacturers, but a U.S.-legal Chery A1 is still “at least a product generation away.” If Humphrey’s correct, Chrysler’s re-branded subcompact is about five years out. 

In China, the Chery A1 sells for $7100 to $7900. Both LaSorda and Chery’s CEO have announced that the U.S. A1 will sell for $7k. Does this mean that the American market will get a stripped-down version? Not likely.

Industry analysts say that the A1’s $7k price point is highly unrealistic; they estimate that the Chinese export would have to sell for $10k to turn anything even remotely resembling a profit.

George Magliano, automotive research director for Global Insight is adamant. “I don’t think seven is going to work… In the U.S., this thing has got to be styled right, it’s got to perform right, it’s got to have quality, it’s got to have safety. You don’t get that for $7k.”

Erich Merkle, director of forecasting for IRN Inc., predicts that the Chery-Dodge could cost as much as $15k– once laden with features that U.S. consumers demand (e.g. power door locks and windows, and a high end stereo system).

Immediately after Chrysler and Chery signed their agreement, PRC Communist Party bureaucrats gave official approval to the Chrysler-Chery deal ('natch). At around the same time, the partnership garnered the attention of another government.

Reacting to the importation of tainted Chinese pet food and toothpaste into the American market, Congress plans to hold its first hearings on the safety of Chinese-manufactured goods this month.

The recent recall of 450k defective Chinese-made tires sourcing from the Hangzhou Zhongce Rubber Co. also caught the eye of the Senate’s Commerce Committee. Don’t expect any pity on Chinese manufacturers from the Democrats that now control both houses of congress, who’d love nothing more than to slow the tide of imported cars and Chinese car parts that “steal” union jobs.

The smallest car in Chrysler’s current arsenal is the linebacker-sized Caliber, whose base price is roughly twice that of the proposed sticker for Chery A1 import, whose quality and driving dynamics can’t hold a candle to the Honda Fit, Toyota Yaris or Nissan Versa.

While you don’t have to survey a dealer lot stuffed with unsold Aspangos to appreciate Chrysler’s need for a viable subcompact, summoning a federalized Chery A1 seems a distinctly enigmatic choice.

OK, dumb. If the Chinese import's two years too late and twice the targeted price, it’s going to hit the exact same wall as the Caliber. If the Chery A1 gets a one star government crash test rating… In this country, three strikes and you’re out.

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.

So that's it: deal done. Yesterday, federal regulators cleared DaimlerChrysler's suffix sale to Cerberus Capital Management. In the absence of any immediate change to the status quo, the United Auto Workers (UAW) and the Canadian Auto Workers (CAW) couldn't be happier with their new overlords. Chrysler dealers have also met with the new bosses and sworn their fealty. So it's one big happy family, all pulling together for their mutual health and happiness. And if you believe that, I've got some Ford stock I'd like to sell.

If Chrysler were a healthy company with an economically viable work force, a solid product line and strong financials, Mercedes would have kept it. If Cerberus didn't make billions by transforming ailing companies into cash cows– or sending them to the slaughterhouse– they wouldn't have bought it. So what we have here is a moment of silence: a dignified pause before Cerberus grabs its finest filet knife and guts Chrysler like a fish.

To understand the fishmongery to come, it's important to see Chrysler through Cerberus' eyes. As far as CEO Stephen Feinberg and his Armani-clad mob are concerned, Chrysler doesn't make cars. It makes loans. Its cars, trucks, vans, minivans, SUVs and pickups are simply a means to an end: profitable paper. Chrysler Financial Services is the only part of Chrysler Group that makes any money. Cerberus already owns 51 percent of GM's financial services unit, GMAC. Join the dots. Do the math.

Despite Chrysler's CFO's pre-sale pooh-poohing of the possibilities, Feinberg dropped hints about "synergies" between Chrysler Financial and GMAC at the recent dealer pow-wow. Believe it. It's only a matter of time before Cerberus combines its two lenders to grab the lion's share of the auto loan market from Ford. Aside from the power that comes from being number one, former GMAC Prez Bill Lovejoy reckons the deal will generate tremendous efficiencies in finance and remarketing off-lease vehicles.

Of course, an auto finance company needs autos to finance. That's where the rest of Chrysler comes in– but not Chrysler as we know it.  

Start with this: Cerberus is a deal maker, not a car maker; and they sure ain't no miracle maker. They know they can't get Chrysler's unions to agree to the kind of wage and benefit roll backs needed to create American-built cars that compete with non-union transplants– at least not without exercising the nuclear option. While long overdue, a showdown strike would kill the short term value of Cerberus' investment (which is their primary frame of reference).

So here's Cerberus' cunning plan: they're not even going to try. Oh, they'll ask for the same concession as Ford and GM (should there be any on offer). But Cerberus isn't counting on union malleability. They'll simply turn their back on their American unions, build or buy cars elsewhere and transform Chrysler dealers into the automotive equivalent of Wal-Mart. In other words, Cerberus will decouple the traditional link between automotive manufacture and retail.

It's a bold strategy: gut Chrysler to save Chrysler. The fact that GM CEO Rick Wagoner has already expressed interest in a combined Chrysler Financial and GMAC shows that the major players "get it." They understand that cash is King and outsourcing is the way forward,

How much branding is needed for it to work? Could Chrysler dealers sell GM or Ford products? Would Cerberus pick-up Jag and Land Rover, turn them over to someone else to manage and sell the resulting products through their dealers? Sure. Why not?

Of course, none of this relieves Chrysler of its burden to build/import vehicles American consumers want to purchase. Something other than what they're trying to sell at the moment. And so the urgent reevaluation process has begun.

The Detroit News reports that CEO Tom LaSorda and Chief Operating Officer Eric Ridenour consumed Consumer Reports' scathing reviews of the Nitro and Sebring/ Avenger, checked the sales stats and freaked. Apparently the suits were "quite upset" that they "missed where the market was to end up versus our projections." They've begun a "series of deep dives into its processes and standards," looking at both current and future products.

But can they keep Chrysler afloat until Cerberus can change the game? Jeep is the only Chrysler division that's making money, but it isn't enough to carry the group. While Cerberus has deep pockets, will they be willing to continue pouring money into Dodge and Chrysler while they try to reverse nine years of epic mismanagement? 

Although Cerberus repeatedly insists they're in it for "the long run," they've never actually defined the term. Since all things are relative, Chrysler has to move quickly if they're to survive the latest chapter in their less-than-illustrious recent history. Cerberus' mission is to make money, pure and simple. Whether sliced to bits or served whole, any company that doesn't meet that goal is history. 

In Greek mythology, Cerberus guarded the gates of Hades. Anyone who challenged the three-headed dog was ripped to shreds. In American business, the Cerberus private equity group guards the investment firm’s cash. Unlike the mythical canine, they don’t wait for foolish interlopers. They seek out struggling companies and rip them to shreds– sorry, “turn them around.” For reasons yet to be revealed, the United Auto Workers (UAW) have welcomed today’s announcement that Cerberus has purchased Chrysler from its German overlords. Is someone about to teach an old dog some new tricks?  

Ever since DaimlerChrysler’s management announced they would practically give Chrysler away explore all options for resolving Chrysler’s financial problems, the unions have fiercely opposed the automaker’s sale to an equity fund. UAW President Ron Gettelfinger listed it as the least desirable scenario possible.

Canadian Auto Workers’ (CAW) president Buzz Hargrove was more succinct: "We're absolutely opposed to any private-equity firm. Anyone who takes [Chrysler] over has to respect our bargaining agreement and respect our members. There's no room for cutbacks."

Cerberus is no stranger to union intransigence. The group’s play for bankrupt auto parts supplier Delphi floundered of the rocks of the UAW’s refusal to make any significant wage, pension or health care concessions. Like the belligerent, limbless knight in Monty Python’s Holy Grail, the severely denuded Delphi workforce was itching for a fight. Cerberus walked.

Now that Cerberus has purchased Chrysler, the UAW suddenly wants to come across as a team player. In a UAW press release, Gettelfinger stated, "The transaction with Cerberus is in the best interests of our UAW members, the Chrysler Group and Daimler. We are pleased that this decision has been made, because our members and the management can now focus entirely on the development and manufacture of quality products for the future of the Chrysler Group."

Just how willing the UAW is to “focus on… the future of the Chrysler Group” will become clear this September, when contract negations begin. Earlier today, DaimlerChrysler Chief Executive Dieter Zetsche said the sale was "not conditional on any aspects of a collective bargaining agreement." So the gloves are still off– especially over at the CAW. 

The CAW’s president, who represents about 10k Chrysler workers, is adamant he “can't imagine anything to convince me this is in our best interest." Buzz told the press that he was upset because no one contacted the CAW about the pending Chrysler – Cerberus deal. "There should have been some dialogue." 

Dialogue. Right. In fact, the Mexican standoff between Chrysler’s unions and its owners continues. Except this time, the union faces Cerberus’ fangs.

If the unions threaten to strike, they may have to put up or shut up. Cerberus is flush with cash. With a (relatively) small amount of cash invested in Chrysler, Cerberus could let the plants sit idle until the unions cave. And if the unions don’t?

They could resort to the dreaded “strip and flip” for which investment firms are so well known. Cerberus could disassemble Chrysler and hold their own fire sale, divesting themselves of most of the current operations. It wouldn’t take much for Tower Automotive to absorb the profitable Jeep division. Jeep and/or other automotive divisions would go to the highest bidder, most likely a Chinese or Indian company wanting to set up a U.S. operation.

It’s important to keep in mind that Chrysler Financial is the crown jewel in Chrysler’s moth-eaten Empire. It’s the only other part of the Chrysler Group that actually makes money. Cerberus already owns 51 percent of one finance company, GMAC. Would they take the cash they get from Daimler as part of the deal, use it to bail out GMAC then roll it and Chrysler Financial into The Mother of All Finance Companies? You betcha.

In fact, it seems logical that Chrysler Financial is Cerberus’ “real” target in all this. After all, what does a private equity firm know about designing, engineering, building, distributing and selling cars? Nothing. This brings us back to where we were before Cerberus made its move: Magna.

Canada’s Magna International is all about building cars. They were the only bidders for Chrysler talking about working with the unions, building new products, yada, yada, yada. Only owner Frank Stronach was adamant that he didn’t want to use his own money. So…

Cerberus sells the automaking end of the business to Magna.

It’s not a bad plan. Let Frank sort out the UAW, Cerberus banks some big bucks with GMAC and Chrysler Financial (Cerberus LOVES cash flow) and turns Chrysler into a lean, mean, distribution machine. Chrysler could buy products from China, India, Canada, wherever, and then use Chrysler’s dealer network to move the metal. 

Does all this mean Frank Stronach will become the legendary demi-god who tamed Cerberus? Stay tuned.  

In Greek mythology, Heracles performed twelve tasks set by King Eurystheus. Any one of these tasks would have finished off a mere mortal, but the dynamic demigod persisted, prevailed and finished the job. Of course, ol' Herc only had to do things like slay the Nemean Lion, kill the Stymphalian Birds, obtain the Girdle of Hippolyte and capture Cerberus the guardian dog of Hades (not to be confused with Cerberus the guardian dog of GMAC). I mean, it's not like he had to do something really hard, like save the Chrysler Group. That's the one task that could have turned our hero back into a zero. Just ask Chief Executive Officer (CEO) and President of Chrysler Group, Tom LaSorda.

Last fall, DaimlerChrysler hit the wall. Sales of Chrysler's truck-heavy product portfolio were dead. The company was saddled with a surplus of over half a million vehicles Dealers were fed up, thanks to corporate "channel stuffing" (forcing dealers to take vehicles they didn't want and/or hadn't ordered) and other heavy-handed Chrysler mismanagement. And while the Mercedes-blessed 300 was a solid hit, DCX corporate development boss Ruediger Grube publicly stated he didn't want Chrysler polluting Mercedes by pursuing cross-brand platform sharing.  

During a fiscal year that ended-up dropping $1.4b, every management decision seemed ill-advised and inappropriate; carefully designed to push the Chrysler Group over the ledge. Ignoring his own management malpractice, DCX CEO Dieter Zetsche took a good hard look at his dazed and confused American patient and told LaSorda to sort it out. LaSorda was charged with preparing a recovery plan in time for DaimlerChrysler AG's Annual Press Conference on February 14, 2007.  

Although LaSorda inherited Chrysler's mess from his German overlords, our intrepid hero rolled up his sleeves and set about cleaning up DCX' Augean stables. LaSorda set a cost-cutting target: $1k per vehicle. Meanwhile, DCX finally came to their senses and dumped Joe Eberhardt (the man who alienated their entire dealer network). LaSorda added sales and marketing to his labors and set about devising a Hades exit strategy.

LaSorda developed a comprehensive Recovery and Transformation plan. It addressed Chrysler's key problems in seven different areas: product strategy, fixed costs, structural changes/manufacturing, material costs, revenue management, quality and capital management.  Chrysler's Main Man was set to announce the plan with a publicly stated goal: returning the Chrysler Group to profitability by 2008. And then…

Doktor Dieter used the same press conference to drop a bombshell: DCX was thinking about dumping Chrysler "exploring all options" concerning Chrysler's future. It didn't take a genius to figure out what Zetsche meant. Instead of "can we turn Chrysler Group around?" it's "who'll give us the most for this turkey?"  It was a stunning though perhaps inevitable betrayal of LaSorda's Herculean efforts.

Although LaSorda was told to press on, the rug-pulled-from-underfoot situation has taken its toll on Chrysler's mental health. Employee morale is at an all-time low. German stockholders are pushing for a quick sale. The Canadian Auto Workers union (CAW) doesn't want them to sell. The United Auto Workers union (UAW) is covering all bases, from talking with potential buyers to considering bidding themselves. Bidding front-runner Magna is sucking up to the CAW and UAW, talking with them about unionizing the company's current operations. Executives are bailing out. Yet the show has to go on.

At this point, Tom LaSorda probably wishes he was facing the Lernaean Hydra. Still, he's made some genuine progress. He's cut production, eliminated the last vestiges of the infamous sales bank, introduced several new (if not exactly stellar) models, and announced a $3b construction program for drivetrain and engine plants. For April, Chrysler Group's sales rose two percent above last year, countering Mercedes' loss and keeping DCX on the positive side of the ledger. 

But LaSorda's labors are far from complete.

According to LaSorda's turnaround plan, Chrysler will eliminate/buy out 13k jobs. But even if the automaker finds the necessary cash and shoulders the ongoing legacy costs, it won't be enough. Chrysler needs concessions. With a change of ownership in the offing, it's a Sisyphean task. 

LaSorda's doing his best to keep Chrysler employees motivated amid the uncertainty. In an effort to shore up flagging morale, the exec sent an email to his employees all but begging them to keep their focus. "Let me be clear. We have a solid plan, but success depends on your active engagement. It is all about harnessing our energy to execute the Recovery and Transformation Plan." 

Given the overwhelming "sell" vibe coming from of the majority of the DCX board and German shareholders, LaSorda has to feel that he, like Hercules, is expected to accomplish his tasks unassisted. Hercules took twelve years to get ‘er done; LaSorda's expected to make Chrysler Group "solidly profitable" in two. If he does, it will be the stuff of legend.

In the Phantom Menace, Anakin Skywalker stands in front of the Jedi Council. Master Yoda senses that Skywalker’s fear of losing his mother is clouding his mind. “Fear is the path to the dark side,” Yoda pronounces. “Fear leads to anger. Anger leads to hate. Hate leads to suffering.” And there you have it: the story of the merger between Daimler-Benz and the Chrysler Corporation. Witnessing much suffering, we are.

Like Anakin, every Daimler-Benz CEO has been afraid of losing his metaphorical mother. In other words, they’ve been scared that Daimler-Benz will fall prey to a hostile takeover. In 1984, Daimler-Benz CFO (and later CEO) Edzard Reuter decided that the only way to keep Daimler-Benz independent was to grow to the point of indigestibility.

At the time, Daimler-Benz had huge cash reserves. They could have easily survived a complete failure of one or two new model lines. But Reuter believed that the market for Daimler-Benz products wasn’t big enough to accommodate poison pill-scale growth. So he decided to diversify.

Reuter mined Daimler-Benz’ cash mountain to buy numerous aerospace and technology corporations. Unfortunately, his acquisitions were bottomless pits. Reuter burned so much cash during his regency that Daimler-Benz’ 1995 stock price had fallen 12 percent since the fateful day he’d assumed control in 1987– despite a wildly successful Mercedes brand.

In 1995, Reuter floated away on his golden parachute, creating corporate lebensraum for his successor, Jürgen Schrempp.

Schrempp soon sold every major business that wasn’t part of traditional automaking. When he finished de-acquisitioning, Daimler-Benz was exactly where it was ten years earlier, only poorer.

By this time, the global car industry was in the throes of massive consolidation. BMW, GM and Ford were buying-up once storied marques. FIAT was on the ropes. Toyota’s epic growth was continuing. Industry analysts were predicting that the international automotive market could only sustain five independent car manufacturers by 2005.

And then Deutsche Bank, Daimler-Benz’ long-time majority shareholder, announced it was dumping its stake in the German automaker. If Yoda would have been present, he could easily have sensed the fear within Schrempp.

Schrempp decided that Daimler-Benz had act upon of the old Italian saying: il pesce grande mangia il più piccolo. Daimler-Benz had to eat someone else not to get eaten.

Honda topped the list. Still smarting from its ill-fated tie-up with Britain’s Rover Group, the Japanese automaker was deaf to Schrempp’s overtures. So Schrempp started negotiations with/for Chrysler.

At the same time, Ford approached Daimler-Benz about a possible tie-up. When the Ford family made it clear that a takeover (Ford over Daimler-Benz) was the only acceptable scenario, Schrempp pulled the plug on the negotiations. After all, Chrysler had announced “game on.”

Daimler-Benz paid $36b for the American automaker, called it a merger of equals (a.k.a. “a wedding in heaven”) and breathed a sigh of relief. They singularly failed to notice a disturbance in the force.

One year later, on March 10, 1999, it all started to go downhill. That was the day DCX’ Board of Directors rejected DaimlerChrysler’s plan to take over the world Nissan. Schrempp wanted it. Nissan wanted it. But Schrempp was too afraid unable to push his plans through the Jedi Council DCX’ Board of Directors. 

Renault ended up buying Nissan. Under the leadership of Carlos “The Slasher” Ghosn, the two companies formed the most successful merger in recent automotive history. Schrempp was left shaking his head, knowing that Nissan could have provided Chrysler with the high quality small cars it needed for the U.S. market (a task now left to DaimlerChrysler’s less-practiced Chinese partners).

Still hungry for a Japanese partner, DaimlerChrysler bought Mitsubishi, a wounded manufacturer with plenty of production problems. This decision lead to the second important date in the history of DaimlerChrysler’s failure: April 22, 2004.

On this fateful day, Daimler-Chrysler’s Board of Directors decided to end any further financial help for its ailing Mitsubishi brand. Schrempp had staked his reputation on making Mitsubishi work. It needed a massive cash infusion. But the force was weak with that one.

After the Board’s rejection of his request, Schrempp’s days were numbered. By the end of 2005, he finally stepped down, taking with him the grand global “vision” that was supposed to fuel the Daimler Chrysler merger.

By the time this epic episode faded to black, DaimlerChrysler’s stock price stood at sub-‘95, (pre-Schrempp) levels. Now it’s Dieter Zetsche’s turn to clean up the mess that Schrempp left behind. And when he’s finished, Daimler-Benz will be where it was 10 years ago, only poorer.

According to the official numbers, CEO Reuter and Schrempp’s delusions of grandeur successful attempts to prevent a Daimler-Benz takeover burned through some $60b of Daimler-Benz’ money, although the unofficial estimate place the amount as high as $120b. And it ain’t over yet.

Let’s just hope Dr Z is not afraid.

Once upon a time, a loafer-wearing businessman buried the front end of his rented Oldsmobile in a dune on the barren southwestern point of Galveston Island. I retrieved my Jeep Liberty and drove it to the Olds across a sea of tidal dunes carved into the coast like three foot swells; the Liberty loped from crest to crest in a spray of sand. Within minutes, I dug out enough of the Olds’ front bumper to affix a strap and pull the trapped car onto smooth packed beach. So how does this Jeep lover rate the prospects for the new 2008 Jeep Liberty? D.O.A.

Codenamed KJ, the current Jeep Liberty came to market in 2001 as an ‘02 model. In the U.S., its introduction overlapped production of the ancient, outgoing Jeep Cherokee by about six months. It was a sensible move; dual production kept the assembly lines running and assured the new Liberty a soft launch to major league success. The Liberty has been America’s best selling compact SUV since 2005.

The redesigned 2008 Liberty, code named KK, will roll off the assembly line this fall. Looking to revive the Cherokee’s now legendary styling, the KK is shaped like a brick on wheels. Aficionados have dubbed the new Liberty a mini-Commander (Lieutenant Commander?). In case you’re wondering, that’s about as far from a compliment as a Jeep lover can get without dropping the F-bomb. The Commander, an unmitigated sales disaster, is being quietly dropped from Jeep’s multi-model roster.

But questionable looks aren’t the only reason why the Liberty’s segment-leading success will soon be over. The new Liberty is destined to be a dud because the existing Patriot and four-door Wrangler Unlimited will cannibalize its sales.

To test my suspicions I turned to L.O.S.T. (Liberty Owners Special Team). Most of this club and web forum’s members are apex users; they modify their cute-faced grocery-getter with lift kits and larger, knobbier tires and take them to places that SUV critics say SUV owners never go. The members’ antics prove that the current Liberty’s solid frame, low gear transfer case and stout-hearted rock crawlin’ engine make it a “real” Jeep.  

Granted, this hardcore owner group’s behavior doesn’t represent the mainstream suburban Liberty owner. But L.O.S.T. members are living the dream that draws all of the lifestyle wannabes to the brand.  I submit that their leading-edge opinion is a good bellwether of the platform’s future. So I polled their website’s visitors about the new Liberty’s place within Jeep’s lineup.

Although the survey was unscientific and the sample population small, the results were decisive. By a factor of two to one, L.O.S.T. members said they prefer the new four-door Wrangler Unlimited over the forthcoming KK Liberty (62% Wrangler, 29% Liberty).

No surprise there. Most of these owners purchased their Liberty because it’s the best compromise between off-roader and family taxi. Now that the Jeep Wrangler’s ride has been greatly improved and can plausibly seat four passengers, it can pull double duty. And so it will.

Again, most Liberty owners are not mud-plugging militants with dirt, grease and blood under their fingertips. The model’s sold to well manicured urban and suburbanites seduced by the Jeep’s round-eyed headlights and smiling bumper; buyers so smitten by the Liberty’s cuteness that they ignore the harsh ride, heavyweight handling, cramped quarters and horrendous gas mileage.

Those days– and sales– are numbered. The new Lego-shaped Liberty has the cuteness quotient of a shoebox. Of course, such stylistic determinations are subjective. But beholders with an eye for sassy will more likely find Jeep’s own Patriot or even [dare I say it] Compass more suitably adorable. Furthermore, the non-jeep Jeep twins are less expensive and more fuel-efficient. They’re better “cars.”

And consider this: Jeep now sells seven models in the U.S. The situation is so confusing that the brand’s American website has a widget to help a Jeep buyer “find the vehicle that best matches your needs by selecting your preferences from the filters below: Price Range, Seating Capacity, Towing Capacity.” Select the $20k to $30k price range from the drop-down menu and… all seven models remain highlighted.

Put another way, a customer with $25K burning a hole in their pocket can purchase a Patriot Limited AWD, Liberty Limited, Grand Cherokee Laredo or Wrangler X. How’s THAT for model overlap and price point confusion?

Jeep is generally regarded as the Pentastar’s crown jewel, the one brand that’s survived its German owners’ neglect and mismanagement relatively unscathed. As the Commander and new Liberty prove/highlight, DCX has somehow found a way to kill the golden goose. They’ve diluted the brand’s carefully crafted off-road image while failing to produce a credible competitor to Toyota’s RAV4 or Honda’s CR-V. If anyone wonders why Chrysler’s on life support, well, there’s your answer.

At last week's DaimlerChrysler stockholder meeting, a man named Ekkehard Wenger stepped up to the microphone and said his piece. "For nine years you have been sitting on this scrapheap called Chrysler. Nobody has learned anything. To call this a sale is a euphemism. If you pay for the garbage man to empty the dustbin, does that mean you have sold something to the garbage man?" While calling Chrysler a "scrapheap" is a bit harsh– the American automaker supported Mercedes for several years when the Germans were losing money– one wonders how Kirk Kerkorian feels about being called a garbage man.

Captain Kirk surprised quite a few people last week. The incipient nonagenarian beamed down the only private bid for Chrysler thus far: $4.5b, with $100m in cash up front in return for exclusive bidding rights. Kirk's play marks his second attempt to take over Chrysler; a sequel to his ‘95 "I'm with Lee" (Iacocca) tour. While that financial foray failed, Kirk became Chrysler's largest stockholder. He secured a place at the board room table for his beancounter extraordinaire Jerry York. 

In 1998, Daimler-Benz acquired Chrysler. Despite a financial bonanza, Kerkorian expressed his displeasure with the so-called "merger of equals" as billionaires are wont to do: he sued DaimlerChrysler for $2b. Kerkorian claimed Daimler-Benz had deceived investors, misrepresenting a corporate takeover as a partnership. He lost the lawsuit, appealed and lost again.  

Kerkorian expressed his displeasure as billionaires are wont to do: he tried to take over General Motors. After buying huge quantities of GM stock, Kirk secured a place at the board room table for his beancounter extraordinaire Jerry York. When GM rebuffed Kerkorian/York's plans for reform and rejected a suggestion to merge with Renault-Nissan, the Lion of Las Vegas cashed in his chips, sent Jerry home and called it a day. 

Spying Chrysler's upcoming dissolution, Kerkorian is hoping the third time's a charm.  In carefully worded letters from his pet Yorkie to CEO Dieter Zetsche and the DCX Supervisory board, Kerkorian outlined his USP (Unique Selling Point). If they'll deliver Chrysler unto Kirk he'll offer the UAW and Chrysler's senior management "the opportunity to participate… as equity partners in the transaction." 

In a statement released last Friday, Tracinda Corporation (Kerkorian's corporate front) described a Kerkorian-controlled Chrysler where "all the parties share equitably — with no one group (including ourselves) trying to gain an unfair advantage over the others." 

For their part, the Germans are understandably leery of Kirk's intentions. Lest we forget, just three short years ago, Mr. Kerkorian was dragging DCX to court to answer fraud charges, which cost DCX tens of millions of US dollars in legal fees. 

Given Kerkorian's "strip and flip" history with other acquisitions, the United Auto Workers (UAW) is suspicious that Kirk's ode to consensus masks the man's intention to slice the company to ribbons. UAW Local 7 president Dale Hunt asked, "What changed his mind from breaking it up to wanting to keep it together, and now all of a sudden he wants to get involved with the union?" 

Maybe it's got something to do with DCX' assertion that they won't sell to someone just because their bid was worth a few extra dollars. (As if.) The Germans have dictated that two other considerations must be addressed by bidders: preserving workers' benefits and ensuring Chrysler's long-term health. 

That's gonna be a bitch. Chrysler's new master will inherit almost $17b in healthcare liabilities. Kerkorian and Co. are trying to resolve the issue by asking the UAW for healthcare concessions in return for [a purported] 10 percent equity stake in the company, plus a seat on the board.  

Or not. UAW President Ron Gettelfinger vehemently denies participating in any discussions with Kirk's mob.  Last Friday, in an interview with Detroit radio host Paul W. Smith, Big Ron stated, "I've had no discussions with anybody from Tracinda, and I don't recall anyone in our organization talking to them. We've had no discussions in this regard." 

If Kerkorian wants to pull off this deal, he'll have to mend fences with Big Ron's constituency- and fast. Every Chrysler bid is likely to include provisions for UAW concessions. If Captain Kirk wants his money to rule the day, he needs more than a promise to give the UAW an equity stake. As always, a procession of armored cars stuffed with cold hard cash should do the trick. 

Additionally, Jerry York had better start putting in a lot of overtime kissing ass on the DCX board.  With a ten year history of animosity to overcome, Tracinda's main men may be about to learn the meaning of an old military expression: "Don't shit in your own mess kit." 

Neither DCX nor the UAW have shown any interest in Kerkorian's offer.  With competition including one of Chrysler's biggest suppliers (Magna) and a former Chrysler COO (Cerberus' latest hire, Wolfgang Bernhard) this looks like strike three. 

[Cue organ music] Welcome to this week’s installment of “That’s the Way the Daimler Benz!” When we last we left our hapless heroine, little Chrissie Chrysler, the not-so-sprightly maiden was tied to the railroad tracks. The fiendish Dr Z stood nearby, twirling his mustache, laughing maniacally as he mentally explored the options for disposing of Chrissie’s family farm. Will this be the end of our plucky paladin? Or will a courageous cowboy arrive to save Chrissie in the nick of time? Join us as we anxiously await little Chrissie’s final fate. [Fade organ music]

The latest episode of the Chrysler “restructuring” melodrama brings us news that Canada’s Magna Corporation and “a private equity partner” have made a $4.6b offer to buy Chrysler from DaimlerChrysler. Magna’s equity partner remains under wraps, but every indication (i.e. common sense) points to The Blackstone Group LP.

On Thursday, this enormous private equity firm announced an IPO aimed at raising up to $4b. Blackstone is one of three major equity firms (including Cerberus Capital Management and Centerbridge Partners) that’s expressed interest in buying the Chrysler Group from its German owners.

The “who” of this first offer may remain [slightly] mysterious, but the timing of the play wasn’t. Earlier this week Chrysler General Manager Tom LaSorda told a gathering of Chrysler dealers that an announcement about his employer’s future would be made “soon.” At the same time, Tommy Boy sent an email to every Chrysler employee urging them to “focus on the urgent job at hand–to develop, build and sell great products and establish the foundation for a long and prosperous future.”

Industry analysts and traders knew something was afoot.  DCX stock had risen as much as six percent on speculation that a deal is pending. As Howard Wheeldon, the automaker specialist at BCG Partners in London stated, "I would suggest there is some form of approach that has been made for Chrysler that is springing the shares to life." Well duh.

Ah, but will DaimlerChrysler go through with a sale? Some analysts have suggested the DCX is dangling Chrysler like so much bait to drive their stock up and bully the United Auto Workers into some major concessions. Others just want them to hurry up and get on with it.

Argus Research Corp. auto analyst Kevin Tynan states "I don't think Daimler-Benz is looking to dump Chrysler on the first company that waves a buck at them. But I think it would be in their best interest to let it go." 

According to Citigroup analyst Jon Rogers, a private equity company is the most logical buyer. But Rogers isn’t ready to rule out General Motors. Like former GM board member Jerry York, Rogers thinks the UAW is the linchpin. The union would be more open to offering concessions to GM than a financial buyer flush with cash. 

Even though GM has publicly stated they’re not interested in owning Chrysler, Rogers reports GM could easily borrow up to $18b toward restructuring Chrysler. A zero equity transfer to GM would create $9 billion in value– and the mother of all Detroit Death Watches.

Whoever ends up with Chrysler faces not one but two 900 pound gorillas in the proverbial room: the UAW and legacy costs. Back to former Chrysler CFO and ex-GM’er Jerry York: “I wouldn't even think about [buying Chrysler] unless I could form a true partnering relationship with the UAW.” 

Partner schmartner. UAW President Ron Gettelfinger has stated his union’s first priority in all of this Chrysler kerfuffle: stopping any sale. Although Big Ron says priorities two and three are encouraging a sale to an existing automaker or an equity firm, Chrysler’s new owner or owners will have to deal with the aftermath of what the unions would view as a hostile takeover.

Without concessions, the new boss’ revitalization plans would be stymied by Chrysler’s staggering pensions and healthcare costs. Goldman Sachs estimates that Chrysler’s next gen masters would inherit $16.5b in pension and healthcare liabilities. 

In fact, DCX may not be looking to benefit from the sale of Chrysler– other than divesting themselves of these obligations. University of Maryland business professor Peter Morici can’t see anyone paying much for Chrysler.  "The reality is that unless there are structural changes in the labor agreement, Chrysler Corp. is worth less than zero."

[Cue organ music] What does all this mean for our luckless lass, little Chrissie Chrysler? Sadly, she remains lashed to the railroad tracks, contemplating her fate. It seems that the rescuing cowboys are busy drawing straws, trying to decide who should have the honor of rescuing her from the evil Dr. Z., or whether if it’s even worth the effort. Join us again next week and watch one of her well-heeled saviors swing into action– or not! [Swell organ music then fade]

When DaimlerChrysler unveiled Project X, the media was abuzz. Chrysler’s turnaround strategy included eliminating thousands of jobs, slashing vehicle production by a quarter and mothballing its Newark factory. More ominously, the plan pledged to consider “any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler." To tell the truth, DaimlerChrysler’s “Recovery and Transformation” document should have stated the management’s desire to explore “any option to pump and dump Chrysler.” Those alternatives are gradually coming into focus. First, here’s what’s not going to happen…

DCX isn’t going to spin off the Chrysler Group. Dresdner Kleinwort Wasserstein analyst Arndt Ellinghorst estimates DCX would have to cough up $11b to cover Chrysler’s liabilities before flotation. After deducting health care liabilities, Morgan Stanley’s mavens value Chrysler’s automotive operations at around $9b, and their financial unit at $7.6b. Spending $11b to jettison a company with a net value of $16b doesn’t compute.

Plan A: sell Chrysler to a private equity group. To that end, Chrysler’s German overlords have commissioned J.P. Morgan to prepare a prospectus for an eventual auction. Fresh from cherry picking GM (i.e. buying 51% of their GMAC finance arm), our three-headed pals at Cerberus are in the hunt. Apollo Management, the Carlyle Group and the Blackstone Group are also reportedly interested.

If an investment group ends up owning Chrysler, it’s only a matter of time (a week?) before they break up the MoPar Pentastar and sell the pieces– from existing inventory to entire assembly lines. Chinese carmakers (who couldn’t afford to buy the company) would be lining up for the Mother of All Garage Sales.

Plan B: sell Chrysler to an automaker. According to press reports, Hyundai, Renault/Nissan, VW, FIAT, Mitsubishi and (for all we know) Nikolai Smolensky have all examined the possibility of buying the Chrysler Group and decided there are better– or at least slower– ways to kill themselves. There’s only one automaker brave stupid enough to take on Chrysler’s bloated dealer network, lackluster product portfolio, deeply entrenched union and enormous employee-related liabilities: GM.

Think about it: the above description applies equally to GM and Chrysler. A merger between the two floundering behemoths is about as sensible as two escaped convicts intertwining their leg irons so they can float downriver past their pursuers.

And yet, GM CFO Fritz Henderson is heading a team to contemplate the “synergy” this “merger of dunces” would create. It’s no secret (at least in these parts) that GM doesn’t have the cash to simply sign a check (and seal its doom). That leaves one possibility: an equity deal. And as ridiculous as THAT sounds, the arrangement would give DaimlerMinusChrysler around a 20% stake in GM.

DCX management could save face with stockholders without losing “real” money. Chrysler Group would be “saved” by GM. GM would gain segment-leading minivans and Jeeps. And more dealers than a crack convention. And enough terminally ill product lines to keep automotive historians busy for decades.

None of this bodes well for Chrysler. Or GM. Or Daimler.

Assuming Porsche buys VW, DaimlerWhatever will become Germany’s smallest stand-alone automaker. Analysts at Banca IMI hint that equity investors and financially flush hedge funds are already sniffing around. Talk about irony: fending off a hostile takeover was one of the major justifications for the DaimlerChrysler “merger of equals.” Without Chrysler, Daimler Benz is right back where they were in 1998.

If Daimler found itself on the receiving end of a hostile takeover, the irony could be compounded. Industry analysts see Daimler stripped into pieces, split into separate car, truck, and van businesses. Of course, this is all speculation. But six months ago, who would have thought Chrysler would be on the auction block?

Despite the enormous implications of any change of ownership at Chrysler on the United Auto Workers (UAW), the union remains uncharacteristically quiet on the subject. The obligatory UAW press release on Chrysler’s 13k job cuts payoffs reads like boilerplate: “Today’s action by DaimlerChrysler is devastating news for thousands of workers, their families and their communities.”

When asked about the possibility that GM could “buy” Chrysler, UAW president Ron Gettelfinger responded “I have absolutely no opinion on that at all.” This despite the fact that many of his members see Chrysler’s "alleged" sale as nothing more than a “threat” (i.e. a ploy to gain contract concessions). Gettelfinger, who sits on DCX’ Board of Supervisors, was equally nonplussed about a Chrysler auction. "It may end up that it's not sold. Who knows?"

Fair enough. With all these (and more) potential scenarios, no one can predict what will happen to the once-proud Chrysler Corporation. DCX better be checking their six, though. In their zeal to rid themselves of their American albatross, they may be setting themselves up for a fall. You know what they say about payback.