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The State and Future of Chrysler, October 2003

Negative results of the takeover

We have on one hand the cost-cutting measures, which have been described by some as insane, by others as necessary. A balanced view may be that massive cost cutting was necessary but the way it was done was, at best, foolish. Chrysler lost many experienced engineers, including most of the Viper team, and many were simply fired or layed off without any compensation package. They moved on to GM, Ford, and others, taking with them a strong dislike of DaimlerChrysler. For example, the Ford GT is essentially the third-generation Viper, with better corporate backing. Much of the team is there - those who did not manage to get into the SRT team. The unfortunate result is that Chrysler's engineering staff is at a historic level of inexperience. Meanwhile, one plant expansion and modernization (Windsor) was halted, a brand new, state of the art plant in Brazil shut down, and suppliers publicly embarassed by an unreasonable demand for an across the board 15% cut in costs - despite the success of Chrysler's supplier partnership model before the merger.

Plants continue to be shut down and sold to suppliers, and it seems each month brings another mass layoff, sometimes of factory workers, sometimes of managers, sometimes of skilled workers. At this point, it becomes clear that Chrysler is being bled, and that efficiency is not the name of the game any more. Chrysler has succeeded most clearly when it invested, not when it cut back.

Some other major problems of the merger include people who will no longer buy Chrysler products because they are not American; a perhaps larger set of people who, finding that Plymouth is no longer around, shop elsewhere; the demolition of workers' trust in Chrysler management; the demolition of customers' trust; the erosion of the Chrysler success aura that lived so briefly in the 1990s; discord between Chrysler and suppliers; the loss of talent at all levels; the loss of employee empowerment and involvement; and the horrific marketing and public relations, including terribly botched product launches, that followed the merger, making Chrysler's previous ineffectual marketing and PR actually look good.

Let's talk very quickly about one result of the merger: the emphasis on Chrysler's new German ownership. Ad campaigns and press materials revolve around having a car with German technology. Well, if German technology is really superior, why buy a 300 or Magnum, which are only 20% German, when I can get a Volkswagen or Audi, which is all German? For that matter, the Crossfire is only 40% German, yet gets better reviews from most publications than the Mercedes on which it is based. And what about minivans? They are not German at all, so they must not be any good at all. I'd better buy a Toyota or Honda, because I know Japanese engineering is almost as good as German technology, right?

Add to that the inane, obssessive addition of the word Daimler in front of Chrysler - it's everywhere, even on the 200,000 mile club license plate frames - and you have a good way to annoy current customers, drive away enthusiasts and "buy-America" loyalists, and confuse potential new customers.

Benefits of the merger

On the other hand, we are also seeing benefits in the merging of three major automakers, with the ability to pool knowledge and components for cost savings in design and construction. Chrysler PR has told us every time a Mercedes part is used, it seems, but very quietly, Mercedes will also be incorporating Chrysler and Mitsubishi pieces.

The new design model is essentially an electronically enabled "fit the pieces together" system. Electronically, the system is backed up by a powerful extension of Chrysler's old computer systems. Indeed, Chrysler's IT people are not only in charge of corporate IT, but in charge of Mitsubishi IT now.

Even the supplier partnerships seem to be continuing - Chrysler's only board representatives are both from the supplier arena. Despite Dieter Zetsche's macho stance, supplier relationships seem to be returning to the innovative partnership model, with Chrysler people in charge for the whole corporation. Some vendors were booted out, but this process of removing suppliers and concentrating on a smaller number of better vendors began when Chrysler was still in charge.

Chrysler really has saved a good deal of money from some partnerships. The Crossfire, though it is a past-model SLK, has been getting fantastic reviews, with the consensus being that it is better than the much-more-expensive SLK itself. The LX will indeed benefit from Mercedes transmissions, and if we believe the PR folk, the prior electronic architecture would not have supported the nav system or active suspension. The E-class suspension apparently brings benefits as well, and Mercedes does have a state of the art wind tunnel (as does Chrysler).

There are actual economies of scale in some cases - the shared engine with Mitsubishi and Hyundai, shared bolts and bushings and things, and being able to share telematics and other technologies. Chrysler's promising fuel cell research seems to have been abandoned, but its hybrid program is continuing, and moving fuel cell efforts to Mercedes may well save a good deal of time and money. Mercedes has more experience with active suspensions and other luxury items, as well. Unfortunately, Mercedes quality has been moving downhill fast - we can only hope this doesn't affect Chrysler, especially with the German-built Crossfire.

The future - not as bad as we thought?

The good news is also that Chrysler is not being made a simple re-branding outlet for old Mercedes and current Mitsubishi models. While platforms will be shared, it is important to realize what exactly a platform is - as Gary wrote, "a basic dimensional design. On the K platform, the frame, suspension and drivetrain mounting points and firewall were common. The platform determines body width, firewall height and to some degree the length because of front suspension points being located an established distance from the driver position."

Both of Chrysler's current front drive car platforms are being replaced by Mitsubishi platforms, and that has been a point of contention, with the LX getting a sizable number of Mercedes bits. Dan Minick, however, pointed out that it is the newest design, already engineered for four wheel drive, and very flexible - and may appease Mitsubishi, which has faced the largest cuts.

This jibes with reports from others that Chrysler is indeed doing a heavy amount of engineering in the small and medium sized cars. In short, while perhaps the cosmetic differences between the Dodge and Chrysler LX models already shown are very slight, the differences between the Mitsubishis and Chryslers will extend beyond sheet metal and suspension tuning.

Corporate parts model

For the moment, components can still be labelled according to their source - the Mercedes transmissions, the Chrysler engines. The new joint-venture "world engine," though, is the shape of things to come. Dan Minick again:

Global Four, for example. I would guess a "hemi theme" or "magnum" theme to Chryslers version, a "rally theme" for Mitsu's version, and a "smooth, quiet" theme for MB. Same basic engineering, but different cams, valving, induction, compression ratios, etc. Dimensions, such as bore center to center, crank journal size, crank castings, etc. would be common to ensure same line production.

All the divisions work together on a common component, develop a basic framework that will match all needs, then use different tuning to get what they need. Mercedes, with its higher cost tolerances, can go all out for quietness and level power output. Dodge can let the exhaust and intake scream, and go for maximum acceleration, perhaps with an emphasis on torque, while Mitsubishi opts for horsepower, and Chrysler goes somewhere between, with quiet torque but not quite at the Mercedes level. New components are being designed cross-company. Dan pointed out that this is really the old Chrysler Corporation model: Chrysler, Dodge, and Plymouth shared basic engine designs, but they modified and renamed them for their own needs. Chrysler might use hemi heads to raise power, Plymouth poly heads to save money.

Take the basic hard points (firewall, floorpan stampings, front fender understructure, and mounting points for powertrain cradle), these are all key areas in crash development. The designers can use existing parts bins in CAD design, to use on shelf parts and find the best fit automatically from existing stock, or resize and suggest parts (all done automatically). Any skin, front clip, length, height, etc. can be done this way - any suspension using any combination of parts, any powertrain. Just plug in the appropriate engine cradle for straight or sideways configurations, front wheel drive, rear drive, etc. Think K-car, minivan, C-body, Daytona, etc. all from the same basic parts chest, except we've got a much bigger toy chest to choose parts from now. Brand specific parts that need to be brand specific for feel, ride, execution, are chosen with that target in mind. Since the original goal is to make it flexible, it can be designed in from the beginning to be flexible.

In the case of the Lancer and Galant, these are used as the root, but only at the very basic minimum level, and tweaked to be more flexible. Very little is actually common, then, between all variants, and Chrysler can have a true role and contribution - even before its work in designing the actual pieces such as engines and suspensions.

The problem is that the Mercedes people seem to have a three-ton chip on their shoulder, and seem to always insist that their part or way of doing things is better - and the Chrysler-loathing executives in Stuttgart and at Deutsche Bank always agree with them. We have heard that Dieter Zetsche's future in the company, and in the German auto industry as a whole, is dead, because he's been standing up and demanding resources for Chrysler instead of simply liquidating all the assets and turning it into a front end for Mercedes, smart, and Mitsubishi. We applaud Dieter and can only quietly hope for a major shakeup in the probably-broke-but-it's-hard-to-say-with-German-accounting-laws Deutsche Bank and, for that matter, at DaimlerChrysler AG.

The model line

Chrysler and Dodge will indeed be differentiated more, even though the LX series has very similar Dodge and Chrysler models. Dan Minick wrote, "If you took a hard look at the future, there are NO clones between divisions. None." The days of the Reliant/Aries/LeBaron are thankfully over. There will not be any Chrysler economy cars.

Chrysler did well for a time with a large variety of models from a few basic platforms: in the 1960s and 1970s with the A and B bodies contributing most sales, in the 1980s with the K and L. However, in the 1990s, the excesses of the K-car days were countered with a worse excess - having only a single style of each platform, an expensive waste. The Neon had a single basic engine with one cam or two (second generation had two variations of a single-cam engine), and two doors or four (second generation only had four). The LH series was always a four-door sedan, admittedly with a variety of wheelbases, tuning, and trim lines. The JA and JR were four door sedans with a single convertible. Meanwhile, everyone else seemed to have a choice of door count and wagon/hatchback style.

Chrysler is returning to the plethora system, with each platform spawning a crossover/SUV style vehicle, sedan, wagon, and coupe. That can only increase sales, and at moderate extra cost. The LX series will be spread out over more models, most of them going to Chrysler; the small and medium cars will spread out across Dodge and Mitsubishi.

Ongoing problems

Most ongoing problems are bad management, coming from a mindset that assumes all decisions are best made at the highest possible level.

  • Lack of involvement and empowerment of lower-end workers reduces quality and innovation, and prevents sensible cost reduction
  • Cost reduction efforts have become obvious in the cars
  • Trust of employees and, in some cases, suppliers and customers was destroyed and no effort seems to be made to build it back up
  • Nobody seems to have been told the new strategy, vision, and mission of Chrysler
  • Quality is by flying squad and management decree, with no effort to duplicate Toyota's successful ground-up system (adapted and adopted by Chrysler with great success) - the two methods are by no means incompatible
  • Mushroom management
  • First reaction seems to always be layoffs at Chrysler, more investment at Mercedes
  • Ax is still hanging over several plants, which surely is affecting productivity and the retention of qualified employees, not to mention increasing stress for employees and simply being a bad thing to do
  • Marketing and advertising is horrible (but may change with new management)
  • Stuttgart headquarters is still making too many decisions
  • Perception (possibly correct) that arguing with a German manager leads to being fired - this can't help decision quality or innovation
  • The idea among managers and leaders that those who are currently acting to sabotage the union of DCX (or those who would at least prefer for it to go away) should be fired, ignored, etc., instead of considering them as potential change leaders
  • Deutsche Bank's desire to reclaim their money by selling all Chrysler's assets right now instead of waiting for investments to bear fruit
  • Stuttgart's alleged continued bleeding of Chrysler through dubious but probably legal (in Germany) accounting methods

Plymouth

The continued absence of Plymouth seems largely due to Stuttgart's desire to save money and concentrate their effort on a manageable number of brands - and their lack of understanding of the American car market. However, as Chrysler veers far away from their current model line and styling, and specializes their brands' images more, the argument for Plymouth only increases - especially to those who remember the pre-war Airflow disaster.

Consider the current lines:

  • smart - ultramodern city car
  • Mitsubishi - sporty, youth-oriented
  • Dodge - muscular, prototypical American, brash
  • Chrysler - entry-level luxury
  • Mercedes - luxury
  • Maybach - personalized luxury

Now, consider Plymouth's role as the affordable, reliable transportation provider. No, it's not exciting, and it won't get a lot of 18 year olds, but it reaps reliable sales every year, not unlike the Corolla. Given a good, focused, low-intensity ad campaign and a small number of models, Plymouth could make an incredible comeback with attractive, PT-style cars (with those 1940s Plymouth noses). It could have a version of the Dodge minivan, with conservative styling, in case the new look of the Caravan turns off mainstream buyers and leaves Dodge with a 5% market share. It could bring back returning Plymouth buyers - there were 250,000 Plymouths sold in its last year! (That's more than some standalone car companies.) It could also rid Chrysler of its sole remaining low-priced vehicle without sacrificing the rather high sales volume of the PT Cruiser - and, yes, that was Plymouth Truck, not Personal Transportation. If the only thing standing in the way of Plymouth's return is stubborness and refusal to admit a mistake, someone is doing themselves and their employer a great disservice.

It may well be that DCX will try to shove in smart as a Plymouth replacement. However, in the American market, size is important, and smart is small. Attempting to sell a smart minivan may simply confuse customers.

Either way, we don't expect a Plymouth revival for at least four years.

Strengths of various divisions

This is based on Dan Minick's comments, but with additions, so don't blame him if you disagree with it.

Chrysler Mitsubishi Daimler-Benz
Platform team concept Small cars Huge R&D program - much more invested than Chrysler
Purchasing skills Grasp of youth market in USA Experience with suppliers' telematics
Minivans Rallying Corporate structure
Jeep New platform designs Ability to build on high-end brand heritage
Trucks for North America Strong Asian presence Commercial vehicles
Liberty Group innovations Variable valve technology Worldwide network
Advanced internal computer systems Direct injection Experience with suppliers' active suspensions
Flexible, fast internal systems - -
Low-cost manufacturing skills - -
Quality enhancement systems - -
Arrogance Extreme arrogance
Susan Unger ? Dieter Zetsche
Upcoming manual-automatic

Conclusion

DaimlerChrysler is headed into tough times, and it still makes many decisions badly. The corporation has a bloated division in Mercedes, which has managed to lose money despite its high status, thanks partly to a steep decline in quality, and it tries to solve that problem with frequent, trust-eroding, productivity-killing layoffs at Chrysler. There don't seem to be any healthy DCX divisions, with Freightliner on the edge, Mitsubishi recovering, Chrysler floundering from bad marketing, PR, and management, smart still on an investment cycle, Mercedes apparently losing money and glamor, and other properties suffering from the economy and commercial-vehicle glut.

DaimlerChrysler's savior may well be Chrysler, even as the PR folk, executives, analysists, and apologists tell us that Mercedes is saving Chrysler. For it is Chrysler's computer systems which are being spread across the corporation; Chrysler's unified-company philosophy; and Chrysler's supplier partnerships. If only Stuttgart brass could wrap their heads around the importance of employees and a healthy organizational culture, and stop pretending that Chrysler somehow deceived Daimler-Benz rather than the other way around, Chrysler could probably make some heads turn.

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