Could there be light at the end of Chrysler’s tunnel?

First, let us begin with this - Chrysler Corporation, and even Chrysler Group as most of us know it, is as dead as AMC.

Now that we’ve gotten that over with, let’s look at how Chrysler Group is likely to fare in the future, and what’s behind the current insanity.

Juergen Schrempp and his supporters appear to be the German nationalists/ethnocentrists behind many of the actions that infuriated Chrysler loyalists and probably more than a few other Americans - like the German Engineering ads running every few months, the renaming of the American arm, and the continued use of DaimlerChrysler to refer only to the Chrysler Group in the US (with signs in front of every factory shouting DAIMLERchrysler at us).

His group is still in power - not necessarily in charge, but in power - and includes German bankers with a lot of sway; union officials; and probably government officials. The goal and method of this group is to buy other companies, preferably foreign ones, suck them dry, and divert the funds to making Mercedes appear profitable. It is probably this group that has been insisting that Chrysler has no value, and is dragging Mercedes down. It is probably this group that has been behind the accounting tricks that intensify or even create Chrysler’s financial problems, and the engineering trickery that lift the cost of building Chrysler vehicles while reducing the cost of building Mercedes vehicles.

On the other side we are told that Dieter Zetsche has been converted to the Chrysler Way, which incorporates the AMC Way. He has certainly put his weight behind flexible manufacturing, and has invested much more into Chrysler than we are told he was supposed to. He must have known about the ME412, the vehicle that reportedly turned Schrempp’s face bright red and brought forth a flood of profanity. (As we were told. We weren’t there.)

The Dieter crowd is not pro-Chrysler, but they do see that Mercedes has no future as an independent automaker in a world where everyone else leverages mass-market vehicles (except for BMW, which has been working with ZF and GM, and possibly others; and which actually does make two relatively mass-market vehicles, the 1-Series and the Mini). Lexus is after all a Toyota with all the trimmings, as Infiniti is Nissan and Acura is Honda and Cadillac is Chevrolet and Lincoln is Ford. The Schrempp vision of Chrysler selling old Mercedes technology could never work; Mercedes does not engineer components to be efficient in the mass market, and the costs are just too high. In addition, the stigma is too strong - the Crossfire died from the brilliant marketing ploy of “Buy this old Mercedes with a Chrysler name-tag!” And then there’s the problem of competitors like Toyota outfitting their Toyotas with the same current technology as their Lexus. They would not hold onto their laser-guided cruise control as a Lexus technology, and demand that Toyota stick to four speed automatics because Lexus was still using five speeds; handicapping Toyota that way would be alien to them. Likewise, not handicapping Chrysler would be alien to Schrempp. Chrysler could far too easily show up Mercedes by making a better (or too-close) car at a lower price. They’ve been known to do it before.

The Dieter crowd wants to see DCX like Toyota or General Motors - with different brands selling different looking cars that are practically the same where customers can’t see it. They’re looking forward to a time when the E Class and LX are much cheaper because they only have to be engineered once - and have enough shared parts to achieve economies of scale for Mercedes, but not so many as to make it obvious. In short, they want to be where General Motors was in the 1950s in terms of brand differentiation, and where General Motors is now in terms of technology and parts sharing. I’m sure with the huge number of variants Mercedes makes, they’d also love to see Chrysler’s flexible manufacturing technology in Mercedes plants; it would save them a fortune.

Where I’m not sure of intent is things like using the best engine or component at Chrysler, regardless of the benefit to Mercedes. The diesels going to Chrysler (aside from the Cummins in trucks) are all Mercedes, not Detroit Diesel or VM Motori, and they might not be the best choices; indeed, the V6 diesel is almost certainly not best for Chrysler, but that’s a decision made under the theorized Schrempp/Zetsche power struggle administration.

What will happen if Zetsche wins the war and the Schrempp faction leaves?

First, in about a month, DCX will have refused to sell Chrysler Group to anyone. They will start talking up its value and importance to Mercedes. (Or more likely they won’t, but if they did, it would sure help investor, employee, and customer confidence, and sell more cars as a result). Then we wouldn’t hear directly about all the sharing, but some people would hint at it. The bad-mouthing of Chrysler would slowly stop, and a new optimism might dawn. The idea of selling Chrysler will disappear. New factories will open in China to build Chrysler vehicles and export them to the US; Chery will become a partner and will make vehicles with Chrysler engineering under its own name, for the US and other markets. Dodge sales in other nations will increase.

While Plymouth won’t come back and the number of nameplates will be cut - along with the number of platforms - the interiors will start to get better and long lost features like wiper de-icers will return. The cost cutting will stop being so obvious. Ergonomics will improve as Mercedes loyalists get less of a say in how Chrysler Group vehicles are made.

If DCX is really smart, they would talk up the value of Chrysler Group, what they are gaining from it, and how good the cars are - as they did before the takeover, when the opinions of Americans mattered to more than the mere success of the company - and take down the DaimlerChrysler signs, renaming the Chrysler Group holding company to Chrysler Group. If they were really, really smart, they’d cut back on the number of Chrysler brand cars and restore Plymouth, making all three brands very limited in the number of offerings to have a clear, simple branding message like that of BMW.

The future will tell.

Followup on Allpar sale (Satire, not for real!)

Even though we are exploring all possible options, we continue to invest in allpar.com, and advise all employees to remain calm or accept one of our buyout plans - we are currently providing employees with the option of a check for $100 towards Allpar advertising, as well as a Commodore 64 computer.

Regarding news stories of our private lunches with other web site owners, they were just a friendly meet with the competition. I can’t say for sure what the results will be, we haven’t not decided not to negotiate anything. The future of Allpar hasn’t been decided. [Thanks, dana44]

In the meantime, we are planning to change the name of the site to ValiantAllpar. While the domain name will remain the same, our events will now be referred to as ValiantAllpar meets, and our staff will be ValiantAllpar meets. The correct pronunciation of this title is “Val-yee-ant.” The Allpar is silent.

We will be investing in a new server operated out of China. This will not displace any server staff in the United States, as we would normally only operate a single server. The server in China will be a joint design with Happy Friendly Chrysler Web Site Company, pending approval of the Chinese government. We may be providing the content using their basic software architecture. Or we may be putting our logo onto their existing site, if we decide it is high enough quality. Some people have pointed out that the English on the site is less than perfect, having been translated via machine from the Chinese, with phrases like “The Chrysler Sebring is a rabbit having heads four and a motor of six Vees.” No final decision has been made.

Please continue to visit our ValiantAllpar sites and enjoy the fine valiant.org craftsmanship there.

NOTE - Based on people taking this for real, I must note - this is SATIRE AND NOT FOR REAL.

Allpar re-org and/or sale plan

Recently I have been disappointed with the performance of allpar.com. After taking out money for my various expenses, including the new Rolls-Royce and house in the Hamptons, I have found Allpar LLC’s allpar.com division to be losing considerable money, forcing valiant.org - our original site and one of the very first car sites on the Internet, one might even say the CREATOR of the Internet car site - to subsidize allpar.com, which has been unable to maintain the viewership figures of January 2006 and, more important, has been sustaining consistent losses despite everything valiant.org could do. We tried bringing in moderators from valiant.org, but oddly enough, each time we did that, viewership fell. We tried some “Valiant engineered” advertising, but viewership fell. So we tried it again and viewership fell. So we tried it again and viewership fell. So we tried it again and viewership fell. But we’ll try it again next week and see what happens.

allpar.com has used a great deal of valiant.org engineering, including its style sheet, basic format, javascripts, menus, and some images (royalties and consulting fees were quietly paid by allpar.com to valiant.org in partial compensation. Coincidentally, valiant.org has had record profits in recent years, because after all valiant.org is the pinnacle of the automotive web site. Competition from dodgedart.org can be ignored.)

We have therefore decided that we will cut allpar.com’s staff by 20% and shut down one of its web servers, which should greatly grow its revenue base and viewership. In addition we will share more with valiant.org, for example having allpar.com design valiant.org’s new slant six engines section, which will increase allpar.com’s profits (though we don’t know how). We are also searching for buyers for allpar.com, which is really a worthless site that actually detracts from the value of valiant.org, and has no actual assets other than a used server nobody else wants and some employees in fields that are already crowded. We are asking $26 million for allpar.com, but at the same time we are working on fixing it using our valiant.org expertise, which has helped to generate record losses - I mean to prevent even greater losses.

We hope you will understand when we tell you that allpar.com is the best auto site in its class, though financially completely worthless and run by incompetent editors, and ask you to purchase advertising on allpar.com and not to worry about the banker behind the curtain.

One last item - It is also possible that this entire post is sarcasm and not meant to be taken seriously.

The General Motors conundrum

According to the London Times, a fairly reputable paper, the CEOs of GM and DCX have indeed met over the possible $13 billion sale of Chrysler Group.

Why would GM be interested?

1. GM would be devastated if a Chinese company bought Chrysler. That would give a Chinese manufacturer access to state of the art automotive technology - despite what Mercedes loyalists claim, Chrysler is at the state of the art of computer design, flexible manufacturing, transmission engineering, and certain other key technologies. It would also give them recognizable brand names and a huge dealer base. Consider the impact on the American economy. Now consider how hard it would be for GM to compete with people who can rely on assembly plants with no pensions, no health care costs, and wages that no illegal immigrants would work for.

2. GM would remain the world’s largest automaker for a while longer, despite Toyota’s expansion, and despite cutting back on fleet sales.
3. GM would save a lot of money by being able to merge HR, finance, and other departments; and by getting bigger economies of scale in areas where GM’s sales are not especially large. Because there IS a lot of duplication between the companies, GM could eliminate quite a bit of Chrysler’s costs (or its own), without any visible changes to the buyers. It’s not unlike the plan to standard Chrysler and Mercedes on common engines, except that it makes more sense, because Mercedes will have to make a bunch of changes to pretend they aren’t sharing anything.
4. GM would, for less than the cost of engineering two new vehicles, get four new vehicles that they do not directly compete with: the Jeep Wrangler, Liberty, and Grand Cherokee, and the minivans. All are perennial good sellers, and would sell better if made by an American company that supported them in word and deed, rather than a German company that denigrated them as inferior to real German vehicles.
5. GM might just want to buy Chrysler out of a desire to see it back in American hands.
6. Bob Lutz might want to save Chrysler either to work on it himself - he was, after all, the best choice to lead Chrylser back in the 1990s, and the #2 man during the rennaissance.
7. GM could get a load of technologies that complement their own, such as a better MDS, six-speed automatics they wouldn’t have to share with Ford, automated-manual transmissions, flexible manufacturing techniques, and more.
8. It might give GM’s culture a quick kick in the pants that could save the corporation.
9. GM’s reach in international markets could really help increase sales of Dodge, Jeep, and even Chrysler vehicles.
10. Once the sneaky accounting tricks are eliminated, as well as the foolish “make ourselves look good” moves like the sales bank, Chrysler will probably be a profit powerhouse again.

Now, why might GM not want to do this?

1. It would be even harder to maintain the General’s many brands.
2. That’s $13 billion that could be spent elsewhere. That kind of capital isn’t free even for the world’s largest automaker.
3. Lutz just said minivans were passé.
4. Someone else might out-bid them.
5. It would bring leadership and management issues, cultural and process, financial and otherwise, that would be hard to deal with while still bringing the great ship around.
6. Nobody in their right mind would trust Daimler to treat them fairly in a deal like this.
   Of course, Bombardier did win quite a bit of cash after the AdTranz deal, so a company with a battery of smart lawyers might be able to take advantage of Daimler’s greed and alleged dishonesty.

As for duplication of product lines, there really isn’t as much as people have suggested. Jeep and Hummer occupy different turf; and there’s no GM equivalent for the Caliber/Compass/Patriot, or Chrysler equivalent of the Cobalt. The mid-size cars are an issue, but they can be eliminated - or kept for a few years if sales merit it. The rear-drive cars are also an issue, but again, they can be eliminated - or kept, since sales are high enough to justify having two rear-drive platforms, until they can be merged. Minivans are at Chrysler, not GM; CUVs are currently at GM, not Chrysler, except Pacifica. PT’s days are numbered, so that’s not an issue; that really leaves pickups, where the Ram sells enough to be kept on as a separate line (with slow sharing with Silverado over time), the Dakota has no direct GM counterpart, and the Durango is due to be axed anyway.

It would work, and frankly, I’d rather see Chrysler under GM than under Mercedes any day. At least they’d be run from the nation they serve, and there would be less room under American accounting laws for the kind of trickery Mercedes has been repeatedly accused of.

Likely buyers for Chrysler

Now that Chrysler has been all but demolished by the tender hands of Daimler-Benz, the management board is looking for a buyer. Those with memories may think of AdTranz, which was eventually dropped into Bombardier’s lap.

Here are our thoughts. Ready?

Renault. These guys would be great in terms of irony, since they used to own AMC before Chrysler bought it from them. They still really want to sell cars in the United States, and Chrysler would be an almost perfect fit. The two make mutually exclusive product lines for the most part, and they could use each others’ expertise. Most Americans would, I think, also rather buy small cars engineered in Europe and built in Canada than built in China. Renault was reportedly working on a deal with GM; Chrysler would be a natural second place.

Hyundai. This up and coming company has already found ways to shoot to the top of the quality heap, but they are terrible at engineering engines. Chrysler, on the other hand, needs some help making light, comfortable, luxurious-looking bodies, but is great at engines and suspensions. The two would be a terrific combination, practically unbeatable on the world market. Hyundai could finally give Chrysler access to world markets in a way the snobs at Mercedes never could - namely, without bribery - and Chrysler could give Hyundai the last pieces it needs to demolish half of the Japanese auto industry.

Peugeot. They bailed out Chrysler once, buying its European divisions - admittedly it was a great deal for Peugeot as well as Chrysler. As with Renault, they used to sell in America and don’t now, and have mutually exclusive product lines.

China. A Chinese company could do a Lenovo/IBM sort of deal, immediately pushing Chinese auto manufacturing into the 21st Century and eventually demolishing the American auto industry pretty much completely. However, capital to buy Chrysler might be an issue, and we don’t think they could run Chrysler all that well, either. Cultural differences would be huge and Americans might reject a Chinese Chrylser even more than they rejected a German Chrysler. As factories moved to China costs would go down and cars would get cheaper, but Americans wouldn’t be able to buy them after a while because the auto industry’s death would take much of the rest of the economy with it. This is not as likely as the others.

Fiat is big in small cars and as I recall, commercial trucks, and their last linkup with GM didn’t end up giving them entrance into the US, which they have mentioned a few times. At the moment Fiat has little credibility due to the quality of the Spyder and such.

Honda could be far worse than Mercedes, because the same arrogance is in place, but their line almost completely duplicates Chrysler - the only unique Hondas are Fit and Civic - and Chrysler would end up being Dodge Truck and Jeep.

GM is near-total duplication and wouldn’t make any sense — why would they want ANOTHER set of undesirable brands and ANOTHER huge inventory problem? They’re also still trying to figure out how to get themselves working right. They might want to reunite Jeep and Hummer; they might even want some components and the minivan line, though they’d look silly making minivans after Lutz said nobody wanted minivans any more. But there’s nothing they can’t contract with Chrysler or others for. The Chrysler and Dodge brands have negative equity now, in terms of needing extra incentives for buyers. On the other hand, GM could do wonders for the brands - partly just by not talking all the time about how they’re going to rescue, fix, or improve them. But GM’s been rationalizing its own offerings, and adding more lines doesn’t seem like a recipe for success. Unless they want to make good and sure they stay the #1 automaker in the world. Crazy as it seems, being #1 does count for something. (And if they added Dodge trucks, they could claim supremacy over Ford.)

Kirk Kerkorian. Yes, he started all the trouble by threatening to take over Chrysler and raid the cash stockpile, but to be fair he had reasons to think new (or old) management was needed. He still wants an automaker, and has lots of cash. He could probably make Chrysler work as an independent again, at least for a while, assuming he wants to be a Durant and not an Icahn.

Problems. Any merger would be fraught with problems as Mercedes relies heavily on Chrysler for its revenue. There’s the consulting fees, the royalties, Chrysler Financial, and the engineering work done in Auburn Hills (presumably at no cost) for Mercedes. Daimler would collapse without Chrysler, regardless of what the Germans and analysts like to say, because it survives by sucking cash out of its American industries, and Freightliner is drying up fast. Mercedes’ thirst for ill-gotten dollars could be quenched pretty quickly, though, with another “merger,” and a deal could include some provision for a cash flow to Stuttgart via royalties for a certain number of years, as well as the use of DAIMLERchrysler Financial for a certain number of years, to allow the Daimler parasite time to find another host.

Obviously there will be problems at Chrysler for a long time. The current issues started, as Bob noted, before the takeover, when Bob Eaton fattened up the company at the same time he stopped investing in it. The Neon was a perfect example of a car that should be selling 500,000 worldwide units a year, but ended up at under 150,000 due to foreseen and avoidable quality glitches. After that a succession of incompetent brown-nosers presided as those who could leave, did leave. Through the ranks, those who were not dedicated enthusiasts (and many who were) left and ended up with Toyota, Ford, GM, and other companies, helping to build the Tundra, GT, and other vehicles. Chrysler management will require a lot of work to whip back into shape. Dealers are going belly-up, and the entire dealer relations department might need to be replaced by people who have the right priorities, who will be hard to find (hint: hire away the staff of TARP). Demoralization will take time to heal, too. And the customers… well, many of us have been bittered and have left the fold. (We own three Chryslers, all with the wrong badges - a Plymouth PT Cruiser, Valiant by Chrysler, and Eagle 300M, to be faithful to the original intent. All three were purchased used, though.)

Splitting Chrysler off and selling it? Well, it could mean disaster, but we have disaster now, too. The only road ahead is for Chrysler to get smaller and smaller, and more and more integrated, until it’s a truck and small car subdivision of Mercedes, which was the original intent. Eventually, when all that’s left are two American truck assembly plants and a bunch of facilities in China and Germany, Juergen Schrempp’s plan will have been fulfilled.

Or Daimler can listen to its customers and investors, and jettison Chrysler, now that it’s broke and broken. Thank you, guys.

[Overview: http://dialoginternational.typepad.com/dialog_international/2007/02/daimlerchrysler.html]

Valentine’s Day Massacre and auto-extremist

Peter DeLorenzo summed up most of our feelings:

http://www.autoextremist.com/page6.shtml

Then we have to add:

Daimler-Benz acquired Chrysler Corporation in 1998; Chrysler at that time was one of the world’s most profitable automakers, with a popular, critically acclaimed product line of cars, minivans, and trucks. Since acquiring Chrysler, Daimler-Benz has cut over 40,000 jobs; eliminated the company’s entry-level car; removed Chrysler Financial from Chrysler Group’s books; dropped the Plymouth division; chose several local CEOs who lasted only a brief time; boasted that they had lied about the acquisition being a merger; delayed the introduction of numerous vehicles; and saw the former company’s market share plummet.

And we quote “SportFury:”

When I read about the contributions of W P Chrysler and his company to this nation, I stand up and salute a great man and a great company with tears in my eyes for a company that it’s own nation would stand by and let a company based on foreign and once hostile soils come in and rape and pillage a company CG] and its people [employes] and carry the ‘booty’ home to Germany or any other counrty called home. People that sit at a desk and crunch impersonal numbers looking for the next gold star on their resume’ and the next job offer it brings them cannot see beyond their impersonal numbers to the consquenses of their “expert” decisions. Stuart, I wouldn’t know you from Adam’s housecat and I don’t know what lies behind your thinking as expressed by your comments. You appear to be Pro M-B and nationalistic with the German superiority complex as your mantra, to which I say HOGWASH! Could the world exist without M-B and Diemler? NO DOUBT!

I know the theories of ‘free trade’ and I acknowledge some of the benefits, but if our leaders don’t wake up to security issues that are looming just ahead and limit and control foreign investments we are in trouble. Chrysler Corp is just the tip of the iceberg.