According to the Consumer Federation of America, most large insurance companies rely on computer programs like "Colossus" and "Claims Outcome Advisor." These spreadsheets calculate how much money an insurer can save if they deny ALL their customers’ claims. The companies then set an acceptable claim approval rate and instruct their adjustors to “delay, deny and defend.” Readers with children will recognize Mr. Incredible’s fictional employer Insuricare. Readers without sprogs should recognize DCX.

First, the corporate mothership determines how much money they want to "save." Then the word goes out. Delay. Do not address fundamental problems: runaway health care and pensions costs, stifling union work rules, bloated dealer network, lousy branding and relatively poor product quality. Deny. Keep telling everyone that everything’s going to be alright. Defend. Maintain the status quo at all costs; only make changes that tweak the existing system.

Obviously, Chrysler is not the only American automaker that bases its business on The Triple-D Defense. The media’s fascination with Chrysler’s German ownership has obscured the simple fact that the automaker's plight is, at the deepest level, no different from GM's and Ford's.

While Banc of America celebrity auto analyst Ron Tadross continues to fan the flames of the “Chrysler for sale” conflagration– suggesting that the American automaker is viable as an independent company because its smaller and not quite as FUBAR as GM and Ford–  Chrysler is plenty big enough to stress DCX’ independent-minded shareholders and just as FUBAR as GM and Ford. 

DCX CEO Dieter Zetsche’s response to industry speculation about his American subsidiary’s financial distress underlines Chrysler's underlying weakness. Dieter's public declaration that he's "considering all options" also highlights the point we’ve been making here for some time. Chrysler's equals Germans masters are happy to stand back and watch Chrsyler kill itself.  

Why else would Dieter allow Chrysler’s management to institute Plan X From Outer Space, a carbon copy of Ford’s Way Fordward and GM’s Jump Down Turnaround Sell Every Bale of Hay?

Chrysler will now cut jobs (mortgage its future to shed its union-protected workforce), close factories (amputate market share), reduce inventory (try to match supply against market share it’s already lost), sell the family silver (including “transportation services”), re-invest in what they should have built in the first place (allocate $3b for new engines, transmissions and axles), promise to build something that will sell (hybrids) and, last but not least, die.

The media seems entranced by any discernible difference in Chrysler's story and that of its cross-town rivals. Will GM and Chrysler share the rapidly deflating life preserver known as the GMT900 truck platform? Again, the similarities between Chrsyler's overall situation and that of GM and Ford are far more important than any SUV freak show.

And just as The Big Two's dreams of resurrection are floundering on the rocks of reality, Chrysler's Plan X turns the phrase "product strategy" into an oxymoron.

The official bumph is pretty vague. Chrysler says it will shift its product mix away from trucks and SUV’s towards smaller and more fuel efficient vehicles. Plan X includes unspecified promises to cut three to six models from the company’s 32-vehicle lineup. It has also promised 20 all-new vehicles and 13 refreshed vehicles by 2009.

In other words, beating Ford and GM in the deck chair rearranging sweepstakes is Job One. While it’s true that Chrysler’s virtually perfected the art of badge engineering eliminating development costs (e.g. the "new" Avenger will be a rebodied Sebring), launching so many new models is an inherently expensive business; it costs tens of millions more to introduce a new nameplate than it does to improve and promote an existing one.

Meanwhile, the basic problems besetting Chrysler’s product portfolio remain: weak brands, a farrago of constantly changing, not-entirely-wonderful models, and an ADD-related failure to fully market and support any one model. Of these, bad branding is the company killer. What is a Chrysler? What is a Dodge? What do they make again? Only Jeep remains focused on a definable mission– which the company is busy diluting with soft-roaders and urban flava posemobiles. 

Given Chrysler’s financials, crushing union obligations and “throw it against the wall and see what sticks” product plans, Dieter would have to find The Mother of All Suckers to buy Chrysler. Perhaps he will. Probably he won’t. Which leaves DCX two options: fix their American patient or watch it commit suicide.

In today’s Automotive News, an analyst for investment bank Dresdner Kleinwort claimed that the official German document detailing DaimlerChrysler’s legal obligations makes no mention of Chrysler's health care liabilities. Dresdner theorizes that the Germans could “nurse Chrysler back to health” then float Chrysler on the stock market. The goal: attract the same sort of corporate buy-in that Daimler is so desperate to leave behind.

Back in the real world, Dresdner’s telling DaimlerChrysler stockholders that the German side of the business could leave Chrysler standing on the ledge while successfully defending itself against any future liability claims. So much for being a good neighbor.

[Click below to hear RF read the above text.] 

Valentine’s Day. The day that keeps jewelers, greeting card companies, florists and candy makers afloat from the one Christmas to the next. The day where millions of dollars are spent around the world in the hopes of an increased chance of getting laid. And this year, it’s the day when DaimlerChrysler will reveal their makeover plan aimed at diverting Chrysler Group from its seemingly self-destructive course. Will “Project X” prove to be a lovefest for all concerned, or is it another St. Valentine’s Day Massacre just waiting to happen?

European stockholders and more than a few Mercedes executives have made no bones about their desire to trim the deadwood. They think DCX should ditch the “C” and become Daimler-Benz once again. If they had their way, the Chrysler Group would be cut loose and left to drift aimlessly until it either managed to paddle its own boat or went under. Either way, they would no longer have to worry about any corporate cross-breeding that could contaminate their unsullied gene pool.

According to a report in The Detroit News, the “dump Chrysler” partisans are about to be disabused of that notion. On February fourteenth, CEO Dieter Zetsche, Chrysler Chief Executive Tom LaSorda and Mercedes-Benz Chief Operating Officer Rainer Schmückle will officially unveil their revitalization plan for the stricken American automaker

The new plan contains some ideas analysts have long expected: radical downsizing of Chrysler’s production capability, consolidating its far-flung operations and slashing over 10K blue collar jobs. But the new deal also contains a real shock, a decision that’s bound to raise more than a few eyebrows amongst Mercedes’ German stockholders. First, the details…

Under the new regime, Chrysler will do the GM thing– UAW buyouts and plant closures– to become a leaner, meaner automaker. As part of this revitalization program, Chrysler will also strengthen its ties with its Teutonic teammate. The two companies will share parts (though restricted to underbody components to avoid “cheapening” the Mercedes brand.)

The two automakers will also jointly create a shared architecture for the next-generation M-Class, Grand Cherokee and Durango. And they’ll co-develop new vehicle designs, including the next crop of small cars for American and European consumers.

In addition to the formal restructuring plan, there are other indications that the Berlin wall dividing these two “equals” is crumbling. According to today’s Automotive News, Chrysler is considering offering a diesel version of their newly redesigned minivan by model year 2010.

The diesel minivan would be the second Chrysler product equipped with a Mercedes oil burner, a 2.2-liter turbocharged four. (The Grand Cherokee will offer a 3.0-liter V6 diesel starting next month; the diesel Ram 1500 projected for model year 2010 will have a Cummins turbodiesel engine).  

Chrysler is also consolidating minivan production to their plants in North America. They’ll end production at the Magna Steyr plant in Austria and move the European-market diesel and right-hand-drive Grand Voyagers back to a factory on Chrysler’s home turf. Once they replace the Italian-sourced diesel they currently use with EPA-certified Mercedes iron, there’s no reason not to offer them for sale in the US as well. And if that happens, could diesel passenger cars be far behind?

Chrysler’s restructuring plan sounds sound, but it flies in the face of the company’s well-established internecine conflict. As we’ve reported previously, the battle lines between the two behemoths have already been drawn. Lest we forget, DaimlerChrysler corporate development boss Ruediger Grube made a pre-Christmas declaration that "a Mercedes will remain a Mercedes and may not share a platform with anyone."

The tension between Germany’s “Mercedes first, last and always” loyalists and Chrysler’s American “You gotta help us out here” realists puts DCX on a tightrope. On a practical level, the Mercedes’ stockholders who share Ruediger’s reticence are not likely to back down simply because Mercedes has finally decided to do what they should have done in the first place. The backlash could be anything from demanding Zetsche’s head to wholesale stock dumping.  

Just as dangerously, an anti-Chrysler cabal within the Mercedes organization could simply drag its feet on the implementation side of the deal. Just by not helping to make the agreement work, Mercedes’ management could make it fail. They’d simply wait for the plan to fall apart in the existing melee of clashing corporate cultures.

Zetsche, LaSorda and Schmückle have all spent a lot of hours and burned a lot of jet fuel to try and salvage the rocky relationship between the Chrysler Group and its German masters partners. But as any marriage counselor will tell you, both partners have to work to make a relationship a success.

Until and unless Mercedes’ best and brightest get with the program, the recriminations will fly. Hopefully this Valentine’s Day will mark the start of something beautiful, rather than the beginning of the end.

When Daimler-Benz began its Apache dance with Chrysler in 1998, everyone wondered who was leading and where the Hell they were going. At first, the “merger of equals” looked like it would bless Chrysler with Mercedes’ best engineering. When the 300C was built atop some last gen Mercedes cast-offs, and ye olde SLK-based Crossfire [dis]appeared, it seemed that Chrysler would at least get some natty hand-me-downs. Then DCX leadership declared "a Mercedes will remain a Mercedes.” Now it's Dancing With the Stars gone bad, and it's bound to end in an elimination.

In fact, this German – American automaking partnership is starting to look more like The War of the Roses. For example, Chrysler is negotiating their next United Auto Workers (UAW) contract. They’re asking the UAW for the same health care concessions bestowed upon GM and Ford in 2005. When the union dug-in their heels, DCX CEO Dieter Zetsche jumped in and publicly announced the union had acted “irrationally.” With friends like these…

According to Businessweek online, despite Dieter’s name calling, the UAW returned to the negotiating table and offered Chrysler the health care concessions they sought– provided DCX let the UAW organize their ‘Bama-based bubba Benz buildin’ barn. Given Chrysler’s recent hemorrhagic losses and their need to cut costs wherever possible, you’d think Mercedes would at least consider the offer. Nein. It appears platforms aren’t all Mercedes refuses to share with its “equal.”

Chrysler's quarantine is unhelpful on many levels. Or is it? After deciding that it needs a small car for the U.S. market, after discovering that the home office wouldn't let them work their ‘Merican mojo on SMART or A-Class underpinnings, Chrysler has snuggled up to China’s Chery automaker. They’ve signed a letter of intent to build and import a B-Class segment car for America’s entry-level market. Chrysler’s Chinese play will give Chery a chance to dip its toes in the world’s biggest automobile market (still), in anticipation of introducing their own lineup. 

Equally important/ominous, the Chrysler Group is about to sell Chery a complete assembly line for building automatic transmissions. Chery will ship the entire line, currently living in Kokomo, Indiana, to Wuhu, China. It’ll give Chery an inroad into transmission engineering and production (without having to rely on reverse engineering). Initially, the transmissions will go in cars produced by Chery for Chinese consumers, but there’s nothing to keep them from shipping the transmissions back to the US for use in other Chrysler models. Talk about UAW end runs and low cost outsourcing…

In short, the Chrysler-Chery tryst seems to be going much better than the Chrysler-Mercedes marriage. Hmmm.

There are renewed reports from Europe that DaimlerChrysler is thinking of “spinning off” (a.k.a dumping) Chrysler. Although the corporate mouthpieces are spouting the obligatory denials, there is a vocal (and growing) group of German shareholders who want to get rid of Chrysler and return to Daimler-Benz. About 80 percent of DCX’ common stock is held by German citizens and institutions, so management there tends to sit up and take notice when the stockholders start banding together. German shareholders convinced then-CEO Juergen Schrempp to kill a deal with Mitsubishi a few years back. They could do the same with the Chrysler partnership.

Meanwhile, LaSorda is the man in the middle.  He’s due to release his turnaround plan for Chrysler Group by the end of February. Other than a goal of cutting production costs by $1k per car, the details of the plan are sketchy at best. You can bet he’ll be sweating bullets over this, though. Rumors are rampant that he’ll be replaced by Volkswagen's Wolfgang Bernhard, who will be seeking gainful employment by then.

Like The Mystery of Edwin Drood, there are several possible endings to this drama. DCX could be so enthralled with LaSorda’s plan that they leave everything just as it is (unlikely). Or DCX could decide the Chrysler Group is worth saving but needs stronger leadership (possible). Or DCX could start treating Chrysler as an equal, as originally advertised (yeah, right).

Then there’s are the more extreme possibilities. German stockholders, tired of Chrysler’s losses and seeming lack of direction, band together and force its sale. To survive, Chrysler would have to strengthen its ties with Chery. It’s even possible that Chery would buy Chrysler outright. Either that, or Chrysler flounders a few years on its own and dies. 

It’s not a pretty picture.  The next six weeks or so will be crucial to Chrysler’s survival.  By the first of March we should know whether the Apache will turn into a tango, or if Chrysler will end up tossed out into the street. 

In the late ‘70’s, Chrysler and Mark Knopfler had a lot in common. The automaker and the guitarist were both in dire straits. Unlike the British rock group, Chrysler’s sales were stuck at rock bottom. Most of the automaker’s offerings were badge engineered clones. Overproduction and their so-called “sales bank” had pushed inventory to an all-time high, dragging profits to an all-time low. Enter Lee Iacocca. Lee took draconian measures: cutting models, restructuring, trimming fat and introducing radical new models. Within a few years, Iacocca’s intervention had transformed a company on the brink of disaster into a profitable enterprise. Twenty years later, Chrysler’s come full circle. And once again, it’s time for intervention.

First, someone’s got to get Chrysler out of denial. The company must face the cold hard truth that they’ll never be General Motors, Toyota or (God forbid) Ford. By attempting to be a “full-line automaker,” Chrysler’s diluted their model lineup to the point where it’s become an incoherent farrago of fragmented failure. As part of this realization, Chrysler must also dump the GM mentality. They must stop looking at the next new model as The Next Big Thing: the car/truck/minivan that will save the company. Instead, Chrysler should take a holistic approach to their mental illness.

Chrysler should step back, take a deep cleansing breath, and reassess the role of each of their divisions. At least they have a good place to start. With just three divisions under their corporate umbrella, Chrysler’s ready to realign each division to target specific market segments (unlike the two other domestic automakers with eight divisions apiece,). A logical realignment: Dodge builds family transportation, Chrysler creates premium vehicles and Jeep handles all the truck/utility vehicles. 

With those demarcs clearly set and understood, Chrysler can finally set about killing overlapping, duplicative and extraneous models. Say goodbye to the Aspen, Crossfire, Stratus, Pacifica, Magnum (rolled into Charger), Town & Country, Nitro, Patriot, Compass, Viper, Sprinter (returned to Mercedes) and Commander. And while we’re at it, abort the Challenger.

Once that’s done, Chrysler can realign their remaining models within the new corporate structure. Dodge’s lineup would consist of an economy car (manufactured under their new agreement with China’s Chery but designed entirely on this side of the Pacific), a compact hatchback (Caliber), a family sedan and wagon (Charger/former Magnum) and a van (Caravan). To underline its commitment to value-for-money, every Dodge model should offer a BlueTec diesel engine option. 

Chrysler Division would offer a premium compact (next generation PT Cruiser with a better name), a premium midsize sedan and convertible (redesign of the redesigned Sebring), a premium sedan (300) and a luxury sedan and convertible (based on the E-class platform but totally American in design and execution). Every engine offered should be based on the Hemi— already about to be offered “free."

Jeep should keep their current lineup sans the faux Jeep models axed above and add a line of pickup trucks. Rather than try to out-mega GM, Ford and Toyota, Jeep should concentrate on the long-neglected compact truck market with a Wrangler-based midsize model (replacing the Dakota). Jeep should also offer a diesel option across the board and every 4WD model should be “trail rated.” 

Once this realignment is complete, Chrysler has to address their dealer network. Since the new regime would eliminate brand overlap, all three brands could be offered at every dealership. That said, culling is a big part of the program. Chrysler needs to make sure there aren’t too many dealerships in any one area; their dealerships should compete against other brands, not against each other. If this means closing or consolidating dealerships in metro areas, then do it. 

Along with “right-sizing” their dealer network, Chrysler should step-up and become the first major manufacturer to provide a totally “dealer-less” alternative for customers who desire it. If a buyer wants to shop, negotiate, arrange financing and close the deal on the internet, let them. Instead of haggling with a specific dealership, the customer would work through a centralized national or regional sales office. Once the transaction was complete, the customer would select where they wanted to take delivery, then go to the dealership to sign on the dotted line and pick up their vehicle. Consumers have no problems buying books, clothing, and even groceries over the internet.  Why should car shopping be any different?

If DCX is serious about keeping Chrysler Group alive, they’ll have to take some drastic measures. A band-aid here and a Prozac there may keep it limping along, but in the long term the underlying problems will keep resurfacing, driving Chrysler closer and closer to its demise. Recovery will require long term, intensive and painful therapy.  Last time, Dr. Lee had the right prescription. This time, let’s hope Dr. Z can make the right decisions, and give Chrysler a chance to return to full mental acuity and maybe even a hit or two.

TTAC recently placed Chrysler on suicide watch for the easily correctable fact that vast empty spaces and dealers’ lots are stuffed with Chrysler/Dodge cars, trucks. minivans and SUV's that no one wants to buy. The new Sebring is a far deadlier proposition: a car headed straight for rental car Hell. For a few bills less than our semi-loaded (half cocked?) Sebring tester, you can buy a base Chrysler 300, which, according to Mr. Mehta, has “reinvigorated American car design.” The new Sebring is less invigorating than Vicodin. In fact, I reckon the model only exists because car rental customers are still willin' to take what they get.

With cars and trucks piling up, it’s looking like the Daimler/Chrysler merger/takeover is on the skids. Mergers are always tricky in the auto business. It can work– if both sides put forth an effort. Unfortunately the DCX mess looks rather familiar…

There are three kinds of companies in the automobile industry: mass market manufacturers (e.g. Toyota and GM), niche players (e.g. Subaru or pre-acquisition Saab) and luxury automakers (e.g. BMW or Porsche). The first depend on volume, the second rely on selling a narrow product range at a premium price and the third must unload large numbers of high margin vehicles (or a limited run of extremely profitable products).

Obviously, mass-market makers have the most financial clout. They can afford to buy-up other companies; usually cash-strapped niche makers. Occasionally, one mass-market automaker will absorb a weaker one, either for marketing power or additional production capacity. These acquisitions usually work out– though the smaller party is completely dominated/ annihilated by the buyer (Toyota/Daihatsu, GM/Daewoo, Volkswagen/Skoda, etc). But there’s another type of acquisition: when a “mass-luxury” brand buys up a downtrodden mass-market player. BMW tried it, and the results were disastrous. 

In the early 1990s, automakers were flush with cash. BMW, one of the smallest independent world producers, was feeling vulnerable. (Car sales move in cycles; the lower end of the luxury market is always vulnerable to shrinking demand.) Without entries in the mass market, BMW felt a need to get in with a volume manufacturer. They approached Honda about a partnership– and were rebuffed. Barely changing tack, BMW went after the closest thing to Honda they could find: Rover.

The Rover Group was comprised of the remnants of several famous British carmakers. The company had been struggling since the late ‘60’s. It was on government life-support through the ‘70’s and ‘80’s.  At the time of sale, British Aerospace owned Rover (they bought it for a song from the British Government). It was profitable. Yes but– a closer examination should have set off alarms.

By then, Rover was selling tarted-up Hondas to counter their loss of market share. It no longer had the manufacturing capacity, overseas dealers or engineering staff to play in the mass market. BMW thought they were buying a cut-price Ford. What they got was a second-rate Acura.

After buying Rover from British Aerospace (and ousting Honda), BMW got down to cases and discovered just how deep the rot was. Rover’s only remaining mass-market cars were over 10 years old (and had never been world-beaters). The Honda-based units slotted just below BMW’s existing line, and several were due for replacement. Land Rover was at least famous and profitable, but quality problems were rife. Instead of being a window into the mid-market, Rover became a money-pit.

After a few years, BMW took the new MINI and ran. They sold Land Rover to Ford and “gave” the other new car– an up-market sedan called the Rover 75– to a group of investors along with a large “loan.” In the end, Rover died, Ford got Land Rover (still with quality issues) and BMW got one nice selling niche car with an English factory to match– but no mass-market presence and huge financial losses.

Daimler’s purchase of Chrysler is eerily reminiscent of Bimmer’s British misadventure. At the time of purchase, the “Crisis Corporation” and Rover both had shrunken market share, with profits depending on a few up-market vehicles. Neither had significant fleet or foreign sales (though being confined to the US market beats being stuck in England). Both had profitable niche off-road makers in tow. Both even had a Japanese “partner” (though Rover was dependent on Honda, Mitsubishi leaned on Chrysler). Neither company had a significantly profitable presence in the heart of their home market. 

Once bought, Chrysler developed a “hot” set of cars in high-end niches (the new 300 triplets) using previous-generation Mercedes technology. And then… nicht mehr. Although Chrysler and Mercedes will continue to share “unseen” parts and back office functions (until they don't), cross-brand platform sharing has been declared verboten. "A Mercedes will remain a Mercedes,” Daimler Chrysler’s head of development told a German union gathering yesterday. “And may not share a platform with anyone [save Maybach]."

Thus the new Chrysler Sebring is based on a warmed-over Mitsubishi platform, the company’s getting slaughtered in the small car market, the once profitable minivan segment is shrinking for want of innovative product and Dodge’s truck market is under siege (and just got news of layoffs). Through all this, despite their investment, Germany seems happy to watch its US “equal” tie an American made noose around its neck. In fact, it’s only a matter of time before Chrysler’s German masters sell off Jeep and/or the whole shooting match.

Of course, there is a wider lesson here: by the time a mass-market automaker is weak enough to be bought it’s too weak to compete. And eventually dies.

Germans don’t like the phrase “assisted suicide.” The preferred term is aktive Sterbehilfe (active assistance in dying). Apparently, it's not a crime. Euthanasia is a crime. Assisted suicide is not. However you slice it, it's clear that this “activity” is not unknown in Germany’s corporate culture. While DCX’ leadership keeps insisting they want to nurture the Chrysler group back to health, they seem Hell bent on helping it meet its demise.

DOA: Joe Eberhardt. In the summer of 2003, the Dark Lords of DCX appointed Herr Eberhardt Chrysler Group Executive Vice President – Global Sales, Marketing and Service. From the time he arrived, everything Jolting Joe did seemed to reflect a callous disregard for his employer's survival. In three years, Eberhardt managed to turn a company on the verge of a renaissance into an organization standing on the precipice.

For one thing, Eberhardt approved the two worst automotive ad campaigns in recent history. The cartoonish “Ask Dr. Z” commercials succeeded in making a fool of both his boss and his boss’ company, while the “WTF?” Dodge Nitro spots almost achieved the impossible: slowing sales of a hot-selling product. Joe was just getting warmed-up. When sales started tanking, Joe started banking. By reneging on Lee Iacocca’s promise not to build vehicles regardless of customer demand, Eberhardt’s Chrysler boldly went where Chapter 11-aversive executives fear to tread.

And then Eberhardt plunged Chrysler Group deep into rebate Hell. The company’s incentives are now double the industry average– and growing. And if that wasn’t enough to convince Chrysler’s German masters that it was time to confiscate Joe's belt and shoe laces, Eberhardt unleashed his pièce de résistance: alienating the entire Chrysler/Dodge/Jeep dealer network. Never a one for the subtle approach, Joe forced dealers to take vehicles they couldn’t sell, then insulted their sales abilities when they didn't sell them. No wonder the President of Southfield Chrysler said “Joe needs to work on his people skills a bit.”

In this case, there’s no need for the old “Did he jump or was he pushed?” debate. Think of Mr. Eberhardt’s corporate demise as aktive Sterbehilfe and call it good. But where does Jolted Joe’s departure leave the automaker with enough unsold inventory to give every person in the state of Wyoming a new vehicle (assuming they’d want a Chrysler product)– not including the suspiciously undisclosed number of vehicles they have stashed away in that infamous sales bank? Fleet sales!

When reporters asked Chrysler's [remaining] execs why they're offering both a soft top and a retractable hard top on the new Sebring, the expense accounters said the ragtop was a “lower cost alternative” for the rental market. You don’t have to be a Taurean to know that positioning a new model in the resale toilet from the outset isn’t a very smart move– unless you’re trying to make dumb ones. Hmmm.

While we’re second guessing management motivation, those of you who’ve wondered if Chrysler’s got a cunning plan to build up the sales bank as a hedge against UAW actions needn’t. If that were the case, the company wouldn’t be overproducing and backlogging Rams and Pacificas and other models that aren’t selling; models that will continue to wither against fresh models from GM, Ford and Toyota. If riding out an extended strike was the plan, Chrysler would be would amassing Calibers, Wrangler four-doors and other popular models.

How’s this for a theory: Daimler-Benz wants Chrysler to fail. There were plenty of German execs who thought the “merger of equals” sullied MB’s good name. Perhaps powerful factions within DCX denied Chrysler the resources it needed (e.g. advanced engineering) so that the American automaker and its German supporters would be hoisted by their own petard. Maybe they actively worked to destroy Chrysler so they could fill the power vacuum left by the automaker's eventual bankruptcy/sell-off. It wouldn’t be the first time that one part of a large company plotted against the interests of the other, in a fight to the death for control. 

Maybe it didn’t start that way, but I bet that's the way it is now, as executives scramble to diassociate themselves from DCX' all-American adventure. I mean, why did Dr. Z and his zealots stand around so long, watching Eberhardt drive Chrysler over a cliff? Surely someone above him should have yanked Joltin' Joe out of the game a long time ago. You could even say that Joe's superiors are as guilty as Eberhardt for Chysler's declining physical and mental health. Oh… that’s right. They can’t be guilty. That’s not a crime in Germany.

Just a few years ago, Walter Chrysler’s namesake was riding high. The “partnership of equals” between America’s Chrysler Corporation and Germany’s Daimler-Benz bore fruit in the form of the critically acclaimed Chrysler 300 and Dodge Magnum. “Hemi” was the performance buzzword. “SRT” indicated the performance deal of the decade. Fast forward to ’06 and everything Chrysler’s doing seems strangely, willfully, specifically designed to push the automaker to the brink of self-annihilation.

Post-Katrina, when the market for pickups and SUV’s tanked, Chrysler’s management kept the production lines humming. As of early November, the North Jefferson Assembly Plant in Detroit (Grand Cherokees and Commanders) and the Windsor Assembly plant in Ontario (Pacificas, Grand Caravans and Town & Countries) were both working overtime shifts, producing more and more moribund vehicles. The result has been as frightening as it is predictable: excess inventory on an epic scale. We’re talking 500k unsold vehicles.

The ungainly Jeep Commander sits on dealer lots for 157 days before selling. The gainly Jeep Grand Cherokee remains welded to dealer pavement for 120 days. The answer to a question no one asked, the Chrysler Pacifica, stays put for 142 days. The once mighty Dodge and Chrysler minivans hang around 133 and 117 days respectively. In total, excluding fleet sales, Chrysler has 126 days of unsold inventory (compared to Toyota’s 30). And still the production lines keep flowing.

What’s worse, this super-abundance of slow-selling models joins a glut of last year’s models. Roughly 45 percent of the vehicles at Chrysler and Dodge stores are ’06 models. In comparison, ‘06’s make up less than 20 percent of GM’s and about 25 percent of Ford’s current inventories. But wait! This figure doesn’t include all the cars and trucks in DCX’ increasingly-infamous “order bank”: a repository of vehicles that dealers won’t/can’t accept, which drains DCX of hundreds of thousands of dollars a day in storage costs.

And the hits keep not happening. The majority of the machines in Chrysler’s sales banks are base-level vehicles without the equipment most buyers seek. In the words of the dealers, Chrysler is giving them “weirdly packaged minivans” and trucks spec’d-up with “every mismatched combination and permutation of features” they can make.

No wonder Chrysler is resorting to bribery to try and move the metal. They’re offering dealers $200 for every 2007 model they take above their normal allocation, and $400 for every 2006 model they accept from the sales bank. No sale; the payments don’t even cover dealers’ interest payments on the increased inventory. Chrysler Group is also attempting to bribe existing and potential customers with $1k coupons mailed to 3.4m consumers. Will a one percent response rate even cover the postage? Watch this space.

The payment may help ameliorate the negative effects of the company’s financing deals. Customers can now lease a fully-equipped ’07 van or truck for just a few dollars a month more than the lower-line ‘06 models. For another, they’re using bully-boy tactics to cram unsold cars down dealers’ throats. A $3m lawsuit in NY federal court claims Chrysler tried to force one of its larger dealerships to stock cars it never ordered, and then gave competing dealers unfair price breaks.

The situation is so horrific that industry and financial analysts are calling for DaimlerChrysler to divest itself of the Chrysler Group– before the American automaker destroys its German host. Despite Dr. Z’s repeated declarations that Chrysler is not for sale, several important investors agree: DCX should dump Chrysler as soon as humanly possible. OK, but— several analysts put the Chrysler Group’s worth at “zero or less.”  In the words of one investment banker, “No one would buy it… perhaps the Chinese would take it if they didn’t have to pay anything for it.”

Moody’s Investors Service has already downgraded DCX’ debt rating once and may do so again. “We would certainly consider a different rating… if Chrysler were no longer in the group.” JP Morgan remains convinced that management patience towards Chrysler has “worn thin and increases the likelihood that DCX will reduce exposure to Chrysler.” It’s the investment community’s equivalent of yelling “jump!” to someone standing on a ledge.

Clearly, Chrysler needs to reduce production until dealer inventories return to manageable levels, and rethink their whole product portfolio. At the same time, the UAW must agree to some contract concessions. If Chrysler can’t cut costs and quickly make production changes– including temporarily shutting down entire assembly lines– they’ll keep driving the company and their union workers into inventory bloated oblivion. Despite recent “cut and run to China” moves, Chrysler’s long-term survival ultimately depends on unpicking this Gordian knot.

Of course, leaving this difficult endeavor to DCX’ current executive team may not be a wise move; the entire situation reeks of mismanagement at the highest possible levels. Heads must roll (we’re looking at you sales chief Joe Eberhardt), or nothing will change. Meanwhile, Chrysler’s woes raise a troubling question: if DCX can’t turn this ship around, what effect would bankruptcy have on the rest of Detroit’s home team?