The sale of Chrysler in depth (updated 5-16 pm)
Cerberus took ownership of about 80% of Chrysler Group, including Chrysler Financial, in return for a guaranteed investment, assumption of liabilities as well as assets, and a token payment that appears to be less than the transaction and sale costs. The deal was incredible, considering that Chrysler + Chrysler Financial appeared to be running at a net profit for most of the recent past, and the terms appear to reflect leaked statements by DaimlerChrysler board members (and public statements from stockholders) to the effect that Chryler was less than worthless.
The details: Cerberus pays $7.4 billion, $5 billion of which goes to Chrysler Corporation LLC and $1.05 billion to Chrysler Financial Services; Daimler gets the remaining $1.35 billion, but loans back $400 million of it. Daimler retains all debt from Chrysler Group, costing Daimler a net $650 million plus prepayment compensation of $878 million and transaction costs. Chrysler’s pension fund is currently overfunded but the health care costs are a major issue. Closing of the deal is expected in the third quarter of 2007.
The five key reasons for choosing Cerberus were "a sustainable, successful future for Chrysler; minimal risks and liabilities for Daimler in the future; the certainty of the transaction; speed; and the value of the transaction." Other reasons suggested by Allpar readers include being able to keep a chunk to continue to profit from Chrysler; realization that Mercedes would never integrate money-saving Chrysler technologies, outside of certain assembly processes adopted early on; that Mercedes was unwilling to share any current technology, and that Mercedes-priced components and architectures made cars below the $30,000 level uneconomical; needing the cash; wanting to be free from the health-care liabilities; and realizing that Daimler was completely unable to run Chrysler, any more than BMW was able to run Rover.
Chrysler does owe Dieter Zetsche a debt of gratitude. It would have been easy for him to continue in the footsteps of Juergen Schrempp, and to keep squeezing and downsizing and perhaps acquiring new companies to squeeze and downsize and merge together. It may also have been easy for him to sell Chrysler for more cash - for example, to Kirk Kerkorian (not that we can say for sure whether that would have been bad, especially as Kirk was talking employee ownership and has Jerry York on his side). But we suspect that he actually protected Chrysler as much as he could, given his possibly tenuous status at DCX - with Juergen Schrempp & Co still very much active on the Board - and did try to create a soft landing.
What Daimler gets out of the deal
DaimlerChrysler can change its name to Daimler AG (what happened to Benz?) and run their bus, van, and car companies without distraction, while raking about 20% off of Chrysler’s profits. At the same time, Mercedes’ dependence on Chrysler for volume discounts and royalties on less than ideal parts can continue for the near term, at least; joint purchasing and drivetrain development will continue, and no doubt Chrysler will keep paying royalties for five-speed transmissions while Mercedes will get free access to next-generation V6 engines. A Joint Automotive Council of board members from each company will be established so both sides can decide on new and current projects.
The new company
An affiliate of Cerberus, Chrysler Holding LLC, will own 80.1% of Chrysler Holding LLC, while Daimler will own 19.9%. Chrysler Holding LLC includes Chrysler Corporation LLC and Chrysler Financial Services LLC. Tom LaSorda, Eric Ridenour and Tom Sidlik will leave the Daimler Board of Management, which will go down to six members.
Cerebrus gets a company with a history of profitability, next-generation technology waiting to be implemented, some of the world’s most advanced, flexible auto plants, a huge number of dedicated, experienced, intelligent employees, and the consistently-profitable former Chrysler Credit (which may actually have a surprise loss soon due to a number of less than ideal loans in the recent past), all for agreeing to put reasonable sums of money into their own businesses and for making a relatively small payment to Daimler.
Unfortunately, the downsizing plan is still in effect, cutting over 400,000 vehicles per year and closing at least one factory (as well as investing in others). This will increase the percentage of cash paid to retirees vs current employees; there will be fewer vehicles sold and fewer people working per retiree.
Some reasons we’re happy Daimler will be history
The problem with Chrysler since 1998 has been running the company for the benefit of Mercedes, not for the benefit of DaimlerChrysler as a whole. Getting out from Daimler is unquestionably a plus; Chrysler has been cut to a third of their prior size and have been constrained in what they can make. The question is never "what would make a good profit," it’s "what can Mercedes use and what can use Mercedes parts" (with a huge dose of “no, that might take away Mercedes sales.” Money was spent on a Crossfire replacement when we need a Neon replacement, and building the LX and JS to Mercedes architectures no doubt increased their weight and cost. The Mercedes five-speed automatic is more expensive and less reliable and lower performing than the ZF automatic, from what I’ve been told - not to mention Chrysler’s own five-speed truck automatic, which is eminently usable on cars (having been developed from the ancient TorqueFlite).
Though (as of May 16, 2007) we’re sure there are plenty of strings attached to this deal, Chrysler will be run by people who want to make money, not transfer profits to another division’s budget line and pretend they’re losing money, as it appears Daimler has been doing. Just as you wouldn’t want Toyota to make the Corolla a downsized Lexus LS, you don’t want the Sebring to be a downsized S-Class just to lower the component costs of the S-Class. That’s one of the things that killed GM - according to DeLorean anyway - was when they lowered Caddy and Olds costs by making Chevy and Pontiac accommodate them. Yes, it lowered the total number of parts in inventory, and yes, it made parts cheaper for Caddy and Olds, but it also made Chevys and Pontiacs too heavy and expensive to make!
Another good thing to come out of this is, hopefully, the removal of the German (and American!) "cost-cutting experts" who have made Chrysler’s cars less competitive. Maybe Chrysler can start to add back in all those things that made their vehicles special to their owners - things like comfortable seats and windshield wiper de-icers for minivans, not to mention four-cylinder engines that produce some torque at low rpm. One particular rapid cost-cutter is certain to remain in Stuttgart. And we’re probably not going to see any more "German engineering" ads!
Reason for hope
We have reason to hope. Perhaps Wolfgang Bernhard does know how to do something other than slash jobs, close factories that later turn out to be needed, and make specialty sports cars. Tom LaSorda might be a pretty good leader when his leash is taken off; he’s getting to be well liked, at least. We know that Chrysler still has many good, dedicated engineers, and we also suspect that many employees will work much harder for an independent, American Chrysler than for an amorphous, money-sucking, abusive DaimlerChrysler.
I think anyone with the cash to buy Chrysler would be nuts not to, and that they don’t need to strip the company to turn a quick profit - particularly if they plan to resell when the record profits return.
There’s not much left to cut, anyway. They could sell factories, but there’s only one plant that’s underused right now; the others are all very much needed. Even the under-used plant could be used to build the cars they need to be selling, the Corolla/Neon class that was abandoned in favor of the cute-ute Compass/Caliber/Patriot. The basic research departments were decimated by Daimler already. Anything they cut now would just eliminate their profits later, unless they plan to move everything to China, and that’s been turning out to be less than ideal lately - a short-sighted strategy if ever there was one (not unlike Daimler’s providing Hyundai with the one key technology, engines, they needed to become a real threat).
The Players
Cerberus has profited from its ties to key Republicans, and in one case, a timely $110,000 donation to suspect congressman Jerry Lewis was almost instantly rewarded with the renewal of a controversial $1 billion contract and the firing of US Attorney Carol Lam fired, who was investigating Lewis’ contributors (presumably including Cerebrus). Steven Feinberg himself is a "paper guy," who rose up through the ranks of the buy-and-sell Wall Street crowd.
Cerberus appears to have set itself up as a member of the “pay to play” politically-based contracts game; Dan Quayle is in charge of European operations, and the chair of the company itself is former Republican Treasury secretary John Snow. But that doesn’t mean they’ll hire some ex-Party hack to run Chrysler; we need not fear seeing Randy "Duke" Cunningham or Mark Foley in the President’s chair. The moral concerns we have about Cerebrus (and for that matter the "all that matters is short-term profit" reputation of some private equity firms) do not necessarily affect their ability to run Chrysler, and in any huge company, there can be some highly moral and some highly immoral divisions. A few bad apples doesn’t necessarily poison the entire farm, and it’s a huge farm.
There’s even a lighter side to the political machinations. They might be able to buy Chrysler some military contracts for Jeep and Dodge trucks; and they are putting serious money into the company. What’s more, they are getting Chrysler Financial in the deal, which should make Chrysler profitable without slashing.
Tom LaSorda is reportedly to remain CEO, but Wolfgang Bernhard, the slash-and-burn, flashy Mercedes man, will most likely be running the show from behind the scenes. On the lighter side, Bernhard is "a car guy," which might mean more enthusiasm for the company; on the darker side, there is no reason to believe he is steeped in Chrysler history or has any better ability to run a mass-market automaker than DCX did. Though Chrysler might see Firepowers and Tomahawks, it might not see the Reliants and Spirits that sold in huge numbers (or, in modern terms, Corollas and Camrys), and it can’t keep the factories running with exotics.
Also in Cerberus’ stable is David Thursfield, who ran Ford’s highly successful operations outside the Americas before joining Cerebrus in 2004.
Cerebrus does appear to have a record of turning companies around and being in the game for the long run; they’ve sometimes been contrasted to the standard slash-burn-flip private-equity firms. Cerebrus already owns 51% of GMAC Financial Services and is buying out Tower Automotive, a parts supplier; it also owns Guilford Mills, a large American auto-seat supplier in the U.S., and Peguform Group, a German auto-plastic maker.
If you know more about Cerebrus and the players, please post it here in the comments.
An alternative that might have pushed DCX to go faster
Even as Cerebrus was buying Chrysler, Kirk Kerkorian was apparently meeting with the plant workers in Toledo who wanted to take Chrysler over in an employee buyout. They would have raised investment funds using Kerkorian and the sale of stock to buy Chrysler from Daimler. The plan was moderately far advanced, but it appears that Daimler would never have agreed to sell to the employees, Kerkorian, or both, and the UAW and CAW provided no support for the plan, preferring to back the private equity firms (even Magna was working with a private equity firm, albeit one with a solid reputation).
Looking to the future
Chrysler is likely to do much better under Cerebrus than under Daimler. New products should be lighter and cheaper to build without the need to build to Mercedes specifications, and without the need (at least on future vehicles) to use Mercedes components even when they are sorely outclassed by cheaper ones. The horrific German Engineering ads which decimated sales will disappear, and Chrysler will not be publicly criticized and dragged into the dirt by their new owners. The anonymous leaks from Mercedes directors on how terrible Chrysler is (ignoring the fact that Mercedes gets lower quality rankings in just about every survey) will end, and the stigma of owning a Chrysler will fade. We hope, incidentally, that in addition to the destruction of the myriad of DaimlerChrysler signs, that by 2009 we will see the first new Plymouth rolling down the lines.
We are much more optimistic than we were before we started to investigate Cerberus; at that point, the chief issues that popped up were the sleazier aspects of the company. As we delved deeper, though, it seemed more and more that Cerberus succeeds not by strip-and-flip but by rebuilding companies that have been terribly managed. Chrysler has been terribly managed for most of its life.
We are disappointed Canada did not finally get its own auto company, but it’s good to have Chrysler back on American soil. Maybe with all the government connections Cerebrus has, Chrysler can even get a nice fat military contract and start building Army vehicles again. We just hope they never bring up any controversy - that they do what they did in the 1940s, not what Cerebrus did in the 21st Century.
Being an American company again means that if they DO go public again, their stock will be purchased by index funds again, and that’ll be good for an instant boost.
Only the future will tell us what will happen with Chrysler, and that future is still far off, in the third quarter - and we might not know what’s really in store until 2008. Let’s hope it’s good news and not bad news. I, for one, think it would be hard, though not impossible, for Cerebrus to be worse than Daimler.
Also read: DaimlerChrysler era editorials
May 16 update
According to a source at Chrysler Group, Tom LaSorda, Dieter Zetsche, and Cerberus managers (including CEO Steve Feinberg) met with senior management last night to clarify the future. The name of the company will be Chrysler Holdings; the Pentastar will be the corporate logo again, saving a considerable glazing fee for the Chrysler Technical Center. Tom LaSorda seemed very excited to be free from Daimler; Dieter on the other hand was bittersweet, saying that his years at Chrysler were the best years of his career and his life. He said he realized that the differences between Mercedes and Chrysler made real integration impossible, and that both had to do what they did best. The two companies will continue to share items like diesel engines, 4×4 components, hybrids and fuel cells, and electronics.
Steve Feinberg called his company a blue-collar capital investment firm that stresses long term growth, calling Chrysler a once in a lifetime opportunity and saying he wanted Cerberus to have the legacy of helping Chrysler to flourish. He did not provide a clear role for Wolfgang Bernhard, who was present, and said he would quickly trade in his Chevy pickup for a Ram. He did not see any vertical integration with Cerberus suppliers. He also noted that naming the company after the dog-guard of Hell was a huge mistake.
Questions we’ve been asked
What will this mean for Dodge Motorsports? Answer: we don’t know. I personally hope it means the NASCAR money goes into bringing back Plymouth or Viper racing or something else that isn’t professional wrestling.
Will they bring back Plymouth? Will the make the ‘Cuda and Imperial? Answer: I don’t even know if they know! Plymouth is certainly a long shot, even long-term. I don’t think they people there necessarily understand or care about Chrysler’s history and what has worked before.
Will they make the Dodge Challenger? Answer: yes, it’s too far advanced to be playing with now.
Will they sell Sprinters and Ram 4500s? Answer: I don’t see why not; after all, GM sold Toyotas for quite a while, and Chrysler sold Mitsubishis. Ford still sells modified Mazdas and Volvos.
Dave:
I know the politics of Cerberus irk many. However, almost all companies have chosen “side” in politics, so regardless of who was the new master, somebody would have been politically displeased.
Good things about Cerberus. They do get out of the way. They may play with the management team in place, but they do not get personally involved in their acquisitions.
Chrysler Holdings LLC will be a PRIVATE organization — no shareholder meetings, no quarterly pressure on reports, etc. Cerberus (and other private equity companies) use this to allow management to focus on the core business and long-term strategies. That should translate into better brand identities (creating a legacy for each brand) and continuation of the development of flex manufacturing.
Cerberus will also own Dollar-Thrifty Group (via another acquisition), the major fleet buyer of Chrysler Group vehicles. This vertical integration will be interesting to watch if it can be tried differently than when Chrysler owned Dolllar-Thrifty.
Absolutely watch for Chrysler to make a move for military contracts. A strong Jeep and Dodge Truck brand should be a great fit for military procurement (although I have read that the Dodge Truck Group will remain a large part of Daimler).
These are interesting times for Chrysler, but I think the Cerberus buyout may be the best thing to happen to Chrysler in the last 20 years.
I ALMOST JUMPED OFF MY CHAIR THIS MORNING:
When i heard at the radio that Chrysler was Free Again, but in less than a second i fould fear in my heart when hearing CERBERUS was the new GUY, i know most of us if not ALL are happy that Daimler will be left behind, how ever this new leader, could not be much better, perhaps it can´t be any worst, but that does not mean it would be better, I dont know what to expect, im just reading and bitting my nails.
Agreed. Daimler had to go. I just hope we didn’t just go from the frying pan into the fire.
I am full of hope of a brighter future. We’ll see if it comes to pass…
Since Cerberus in lore is the three-headed hell hound, someone at Huffington Post suggested that Daimler had now crossed the River Styx. :)
I think the sale of Chrysler to Cerberus is ultimately positive news and while we’re not guaranteed that Chrysler will return to it’s glory days, there is certainly a light at the end of the tunnel.
As you’ve pointed out in your blog, Cerberus has a few black marks against them regarding their political dealings and other ethics but does that mean they’re any different than the rest of Corporate America (or the capital world for that matter)? Afterall, 9 years ago we were sold on a “Merger of Equals” and looked what the true meaning of that was.
I see things as either turning around for the positive relatively quick or getting very negative. Cerberus’ intentions seem to be that they intend to return the company to profitability. That’s a great sign to me. While that may change, that is the message they’ve been sending at present. I get the impression that they realize they have a key player in the US auto industry in their portfolio and can repoise the company to be an even bigger player. The opposite would be them taking it over, cutting out everything and everything they can and selling a very lean brand or two to another company. Cerberus’ being responsible for pensions and benefits means they will have at least some accountability.
I am also sure that there is probably some part of the agreement that will make Chrysler semi-dependant on some Mercedes’ technologies but I don’t see a privately held firm agreeing to that without looking to see if there are better alternatives. For instance, transmissions… When someone says “We’re paying X for these Mercedes Trannies but we have a design that was scuttled before but can be built for less, will be more reliable and result in better fuel economy.”, someone in management will be listening. That, again, is because they need Chrysler to succeed. In the previous marriage, so long as the big company’s bottom line was in the green, it was easy to dump on Chrysler and make Mercedes look good. Now Chrysler’s bottom line is its own bottom line and you can bet your you-know-what that Cerberus isn’t going to be playing around to make another one of their brands look good.
Being privately held will further eliminate the pressure to report strong numbers on a monthly or quarterly basis in favor of putting forward a long-term plan that will result in continued profitability. This could certainly result in initiatives to reduce Chrysler’s dependancy on light trucks in favor of smaller, more fuel efficient cars. Looking at consumer-behaviors, it’s easy to see why Chrysler, despite constant warnings of a fuel crunch, continued to rely on trucks. If they’re cheaper to develop and produce more profit, well, roll the dice and hope gas prices aren’t too high and you should have an ok quarter which is good on Wall Street. Such shortsightedness may seem foolish to the average Joe but.. if you look at how much more successful Chrysler had been than its Detroit rivals in recent history it kept them looking positive until the 2/14 bomb fell. Cerberus won’t be placing bets on how the stock market will react to its decisions. Instead, it can focus the right, long-term plan, even if it means jumping a few initial obstacles.
We may also see some more quality improvements. Afterall, there is much less of a safety net with the new company. So if maybe that MB tranny is still cheaper up front, it might be more expensive long-term. If warranty repairs drive the cost of that tranny up or are deemed to have such negative perception issues that it’s hurting sales, then it may make more business sense to invest in an alternative. Again, the previous mindset was “Let’s use it to build more Mercedes brand awareness. Say Chrysler has a better car because of Mercedes technology. And yes there are problems with it, but we’ll get the sales boost up front, and can try to fix the problem later or in the next generation so long as Mercedes looks good.” New management isn’t going to give a damn about the Mercedes image. New management won’t be caring so much about meeting this quarter’s numbers if it means a bigger problem to fix the next 3 quarters. They are going to want consistent, repeatable positive results.
There is also the opportunity for many synergies between Cerberus-owned companies. For instance, GMAC and Blue-Bird busses. There may be the potential there for something down the road. Maybe not. What’s to say that there isn’t the chance for Cerburus to pick up Mitsubishi down the road and roll it into Chrysler considering their history? That’s more far-fetched but the point is, we now have a Chrysler being managed by individuals with one focus: profitability. That means any and all decisions that are made regarding how the company does business, and who they do business with, will be based on Chrysler becoming a profitable entity now and in the future. No more using it as a tool to make Mercedes look better.
And as for Dieter, I think he made the right decision. My impression is that he is a smart guy and knows cars. When he went to Chrysler, he was able to make it work for quite some time as he knew how to handle things in Germany and learned about Chrysler quickly. However, I think it was only a matter of time and he moved out and up at the right time before things ultimately took a plunge. I am willing to bet that while he is the head of Daimler AG and oversees Mercedes, his cutting Chrysler was the smartest decision. Would the board and German shareholders be willing to accept him coming in and saying “Chrysler does many things better than us and we need to follow their lead”, he’d be on the outside looking in very fast. In his announcement, he eluded to how Chrysler was a mass-market brand and Mercedes a premium brand. Thats how the Germans view now and have in the past and he realizes there is nothing he could do to change that.
One final observation is that this could bode well for all of the Plymouth fans out there. A new Chrysler is going to need to be efficient to survive. It’s also going to want to grow as much profit-generating revenue as possible. Additionally, economies of scale are going to come into play even more. Mercedes wanted Chrysler to buy their parts so they could produce more, cheaper, further creating more profits for every Benz that was sold. Well, now that Chrysler is once again at the top of it’s own foodchain, having a Plymouth, or entry-level brand in place to help mass produce parts and keep factories churning may be in the cards down the road. Daimler did help push the Chrysler Marque upscale somewhat (though it obviously was holding it back). What’s to stop the new Chrysler from trying to drive it further upscale? Sell a few less cars but with a much higher profit margin while selling a ton of Plymouths that are making less profit but further driving other costs out of the business.
In the end though while there are a lot of things that can happen, I think it’s overall, very positive news that the DaimlerChrysler marriage is over, due to irreconcilable differences and Chrysler is once again AN AMERICAN COMPANY!
Let’s not overlook the less than obvious. In its zeal to get rid of Chrysler, Daimler just made itself a nice, fat, juicy publicly-traded takeover target. Paging Carlos Goshn? Good luck Daimler, you’re not out of the woods yet. Not by a long shot…..
There’s a difference between making political contributions in general and making very specific ones intended to get a much-criticized contract renewed… and of course hiring hack politicians to get them onto the letterhead … I acknowledged that this happens with both parties, though one in particular has been rather brazen lately. The Big Three have generally been on the same poltical side, but without the particular issues involved in the Jerry Lewis scandal, (which is why it was a scandal and not business as usual.) That said, this could very well help Jeep’s military aspirations, if they can get a vehicle that meets / beats specs.
No matter what, the chances of Chrysler getting the Daimler monkey off its back are almost too good to be be believed. Stuttgart milked it for all it was worth, just about driving a great AMERICAN company into the ground while little was known about ACTUAL dollar doings due to byzantine federal German financial practices. Now, can the revived Chrysler Corporation head-hunt those car guys back from GM where they ran to when the takeover first occurred? If so, maybe the projected loss of American labor might just be staved off due to better sales when the again-feisty and tough Chryco rolls the American Road as in days of old. (Yeah, I know. I’m an optimist.)
Has there been any indication as to the name of the “new” Chrysler Company?
Yes, Chrysler Holding (or Holdings, in their press release they said “Holding”) which will own Chrysler Corporation, LLC and Chrysler Financial, LLC.
Well, I guess we will have to take a wait and see attitude…if Chrysler finally gets back to profitability, maybe we’ll see some great cars come out the factory front door…personally, I think we should bring back someting like the Omni and Aries/Reliant K’s…they were great, reliable, cheap cars, but I won’t hold my breath any time soon.
I think this is a wonderful new beginning. Chrysler has been through alot with Diamler and now their seperated, things will start to look up for them (Chrysler).
I agree that the “merger of equals” didn’t quite measure up for either side,but I hope that Cerberus has learned and looked hard at the outcome. Being privately owened now should be just what it takes for Chrysler to get back on it’s feet.
Even though it’s going to be sometime before we see an outcome of the merger and finally see some turn around, I eagerly await what’s next for Chrysler. Positive things abound, I’m sure things will finally come to pass and Diamler AG will get the recongintion it deserves.
Keeping my fingers crossed here………..
On a side note; on one of the Forum threads someone opined that part of why the Chrysler Group interiors have become so, uh, ‘bland’ is to avoid intramural competition with Mercedes Group.
For some odd reason……….the above rings too true for comfort.
I have a wait and see attitude, but otherwise I’m incredibly relieved to know Chrysler is an American car company again. I hope that the new people really take a long look at what went wrong and start making cars people want to buy again especially fuel efficient entry level cars. Now would be a good time to revive Plymouth with that in mind. It’s a bit like waking up from a long nightmare, just hope that things get vastly better over the long haul. Emphasis on long haul!
I have worked for Chrysler dealers here in Canada for 27 years. And today I sighed a great sigh of relief after hearing the news of the sale of Diamler Chrysler. Not since the late seventies have I felt this much relief that Chrysler was sliding into oblivion. But know that Diamler will be gone there is really some hope that the company can get a new footing and get back to the buisness of producing marketable cars for the North American Market. Since 1998 when Dailmer bought the then Chrysler Corporation I have loathed mercedes and there money Sucking ways.As many people have
said they took over Chrysler Corporation to use and abuse the money and Profitability for their own money losing Mercedes Divisions. So I still look at todays happenings as being a good first step on the way to getting back to work and making some money for this awesome Car company that I have put so much time and energy into. I say good luck to the new Chrysler Corporation LLP.
“such as no dropping the less-than-stellar five-speed automatic from the LX”
“Chrysler is likely to do much better under Cerebrus than under Daimler. New products should be lighter and cheaper to build without the need to build to Mercedes specifications, and without the need to use Mercedes components even when they are sorely outclassed by cheaper ones”
Don’t these two comments contradict each other? If Chrysler is able to choose parts without needing to use/adapt for Mercedes parts, wouldn’t that include transmissions as well?
So, will the “new” Chrysler once again use the Pentastar as a corporate logo? I like the fact that since the mid-’90s, each division has had their own logo, but I think the Pentastar is one of the best unused logos out there. It would be great to see it again for the company as a whole, although I think that, since this Chrysler isn’t exactly a return to the original Corporation (R.I.P), they need it in a new color, something other than the traditional blue.
I am really relieved! After hearing all of the morbid possibilities mentioned on automotive TV shows, I’m really relieved. Maybe there is a chance Chrysler might pull off another rags to riches story. I have a feeling there are a lot of pent-up ideas waiting to see daylight. Hmm, I wonder if Chrysler can drop the Smart 4-2? It always made me nervous, and just dosen’t have enough going for it to be a reliable success after the 1st year.
It just so happens that today is my Birthday.
Hearing the news this morning, was the best kind of birthday wish I could ask for.
A Chrysler being run for profit, and hopefully with a free hand to act on it’s own behalf.
I know this is a long shot, But with fuel prices on everyones mind, Perhaps the powers that be, might consider that with various State & Federal grant programs, pushing for alternate fuels, and Chrysler products mated with diesel engines & powertrains Planned for European Markets, An independent Chrysler, might be able to use that$$ from grants, towards bio diesel, manufacturing & distribution Perhaps even use the vast dealership network, as a sales point for “green or alternate fueling locations, This would provide an excellent opportunity for dealers to gain cash flow daily, and get people on the lot, I don’t know what will happen with the bluetec engines, But if someone with a true sense of vision,in the Company could grab this and run with it. I’ll bet it takes on a very healthy life of its own.
Perhaps I will see it before my next birthday!
The hope is they WILL be able to drop the five-speed, the string is they might not be able to do it for a while, but for new cars…
I have the same feeling as Patrick Lynch and Mike Reed. It is a happy day, for sure. It is a day many Mopar fans can breathe a sigh of relief that the Biggest Mistake in Chrysler’s history is over. That said, it is best to be cautiously optimistic. I’m not a big fan of Cerberus mostly because of its history and because Wolfgang is involved, but this has to be better than staying with Daimler. And being an American company again is a great thing as well, although, this is no where on the same level of being Walter P. Chrysler’s company that died in 1998. At least my strong dislike for DCX and for the current Chrysler products can take a little rest from the doom and gloom I’ve been feeling all these years.
I’ll guess we’ll wait and see what Cerberus does. The ball (unfortunately) is in somebody else’s court and Chrysler will have to follow its new owners’ wishes. I wish it could be different, but that is what it is.
Chrysler getting fully global was not a bad plan for Daimler, the bad plan was Underscore so much Chrysler Brands, and Make Chrysler HAUL lots of costs, but if Cerberus keeps the World Wide Attitude, refreshing models interiors as a first step, and makeing money with the Financial Services from day ONE, we as Chrysler could become America´s Big Dog, now that current is hurten badly.
I, for one, will miss the Germans and their attention to the details. Between the unions and the dim-witted plant managers, this company will continue it’s death spiral. I just hope the MQAS system finds an on-going fan in this new company. I want to retire without ever stepping foot in another plant again!
Too many Jeeps. Not Enough Plymouths. They have to get into the small car race to give people an alternative to all the junk out there which is over-priced. It is good to know that German engineering couldn’t figure out the American car buyer because it shows our independence. However, we do need to sell in this and every market which is feasable to ensure our company will survive. What will become of my beloved PTCruiser? Will there be another version in the future?
My thoughts - THANK GOODNESS THE MERGER FROM HE** IS OVER!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! I can finally breath a sigh of relief knowing that this disaster of a “merger” has fallen completely on its face and is NOW considered a failure. Just think where Chrysler Corporation would be today if people would have been more pessimistic from the beginning and saw it for the failure that was it going to become.
I’m not thrilled with Cerberus buying Chrysler, but I guess it’s better than nothing (or Daimler). My only grave concern is that Wolfgang (a big time reminder of the merger) is going to be involved one way or another.
I like the optimism I’m hearing from the Mopar camp, but I hope it doesn’t turn to disappointment in a few years. I’m not that concerned about Cerberus tearing Chrysler to pieces if it does happen. That prospect no longer bothers me. If it happens, it happens.
I still have mixed feelings over this whole thing. On the one hand I wanted nothing more than to see Chrysler escape Daimler’s evil grasp and become its own company. On the other hand, I’ve become so indifferent to Chrysler and its products that I all of a sudden need to gain some enthusiasm toward them again. They’ve burned me too many times, but yet I feel the urge to come back to Mopar. I’ve written some nasty things about Chrysler over the last 8 or so years and have offended plenty of Mopar fans with my thoughts, but at the same time, I yearn to drive a new Mopar product. I just don’t know what to do because I’ve got a few future products (Shelby Mustang, Camaro convertible, and Lexus IS coupe) eyed for future purchases, so what do I do now? I’ve come to respect and admire Toyota, Honda, and GM at the expense of CG, so how do I come back to Mopar? At least this does give me the ability to walk into a Chrysler dealership and test drive the products again - I wasn’t about to touch their products under Daimler control.
I guess we’ll see. The long time of suffering is over, but it also means the long road to admiration for Chrysler is just beginning for me.
Unfortunately nothing has really changed. UAW labor costs are still insane, U.S. tax and trade laws still give foreign based companies a great advantage ove U.S. based companies. GM, Ford and Chrysler all still are bankrupt until U.S. laws change.
JGribin Enterprises, my company, considered making Daimler an offer in the bidding,… [edited out anti-Chrysler, anti-Allpar chat because we discovered that though JGribin owns a Mercedes C-Class, there does not appear to be any JGribin Enterprises.]
KOG - UAW labor costs are apparently the same paid by Toyota in the US. GM, Ford, and Chrysler will be at a disadvantage due to tax and trade laws, but that’s not necessarily bankruptcy material. They have advantages, too, y’know.
I am so glad you have quickly deduced that my company does not exist :)
You are, however, wrong. It was incorporated in 2003 with private money from several large bio-tech firms. I own 15% of it and manage it. It includes numerous small companies, mostly directed at innovative uses for injection-molding.
There was too much momentary noise at my home when a TV newscast that said the UAW was going to fight the breakaway tooth-and-nail and MAINTAIN the D-C status quo. I damn near died ! Anybody hear the real details?
As much as I’m glad that Chrysler is finally out from under Daimler control, I also know that it’s going to be a long way back and will take a few years. The thing is how do they hold on until the new stuff comes out? How long do they hold on to current models and vehicles that are already green lighted?
Considering how much some of DCX’s German investors and management hated Chrysler, this move is a good one…..at least short-term. If nothing else, it buys time and the resulting shake out of where the money has been going will prevent Mercedes et al from being propped up with Chrysler money. The shell game finally comes to an end.
Eventually though, Cerberus will have to make some tough decisions on product, personnel, and which plants are the most productive and profitable. Despite LaSorda’s letter saying layoffs aren’t planned beyond what has already been announced I can tell you with some certainty that won’t be the case. Costs need to be cut further and shedding employees is one element of that. I’d also bet you’ll see an increase in outsourcing and/or temporary workers a la Toyota to provide more flexibility in sizing the workforce based on product demand at any given plant.
It will be interesting to see if any short-term product line changes will be made, perhaps discontinuing slow sellers like the Magnum or delaying the launch of niche vehicles like the Challenger. I hope Cerberus doesn’t take as long to do that analysis as it took the Germans, thus delaying new product or enhancements to current products.
The most disappointing aspect of this deal is that Daimler will retain 19.9% ownership of Chrysler. I hope that doesn’t keep Chrysler in a shotgun marriage for parts/components that are either inferior or more expensive than the alternatives. It also hurts to thin that if Cerberus is successful at getting Chrysler back on track that the Germans will benefit from it when/if it IPOs.
Finaly….maybe now will see a few of thoes revolutionary concept cars that made chrysler famous in the auto shows.
I love a good gamble and this is certainly one hell of a crapshoot. With all of the speculative details aside, we are left with two distinct outcomes to this situation. That is, we are either on the brink of the biggest revitalization the American auto industry has ever seen, or we are about to witness the final, tragic chapter of what was the fabled Chrysler story.
Until we know Cerberus’ intentions we don’t really know what is going to happen. The only thing we know for sure about the group is that their sole purpose is to make a profit, and mark my words, they will make a profit. This will either come from the dismantling and subsequent auctioning off of the respective brands and holdings, or by a major, long term commitment to the auto maker.
I am naturally inclined to hope for the latter especially because of all the pluses the situation would bring. Not having to pander to stockholders and Wall Street analysts would give the new Chrysler a real chance to live up to it’s heritage. That is the building of reliable, beautiful, thoughtfully designed automobiles that not only inspire lust, but brand loyalty to a whole new generation to Mopar lovers.
With Daimler’s supposed commitment to all current development, Chrysler hopefully has enough product in the pipeline to provide an adequate transition period until brand new American designs show up on the assembly line. Nevertheless I can say this is the most excited I have been in a very long time with regard to the prospects of an American auto maker.
No matter what 2007 should be an interesting year.
the news put a smile on my face, and a shout of he** yea
Tension in the Belividere Plant today didn’t seem to be much of anything. I’m not sure if the workers don’t really care or if everyone expects a total flop and are just done worrying. I have new hopes especially after being displeased with my Caliber and SRT4. It’ll be nice to buy a non daimler vehicle with my favorite pentastar on it and maybe I can pick up something from them made with some pride yet again.
The evil “merger of equals” is dead! Take that Bob Eaton! Now back to having a true American Chrysler Corporation(LLC). No more Chrysler “Group”, awful German engineering commercials, or most importantly sending our money out of the US.
Chrysler was better before the Germans, and they, provided the free reign can do it again!
Something is up…….Cerberus is not gambling at all. The “bought” Chrysler to get their financial services- I woudn’t be suprised if the rest will be sold off to General Motors.
The work ahead of them is huge- I don’t see them willing to put in that much effort- they are all about quick profits. You heard it here first……..Cerebus will not be building cars.
Some thoughts: New name should be Chrysler AFM,(after f***ing mercedes!) The new owners ARE getting a motivated bunch of employees,we want to kick Diamler’s butt! The press,with Daimlers’ lead, have continually cast us as “financial burdens”. It is less than the truth,specially when you look back to the number of years Chrysler Group contributed greater profit than Mercedes. It is sad to admit that it did take Wolfgang and Dieter to “fix” us. We were known as “nepotism-motors” by some. There were great things.. Like the meeting in which Wolfgang asked why we had 34 part numbers for HORNS for ONE model year. He then asked why. He then asked…”how many ways are there to say BEEP?”
The Mercedes designed 5 speed transmission in the LX and JEEP product is better than what it replaced. The fact that the ones built at the Kokomo Indiana plant are of higher quality than the Stuttgart models is also great. The shame is that we can’t outsource the parts from some supplier other than the Mercedes one (can you say USA/Delphi?). I’ve seen 300C Convertibles, but sad to say we could not develop one as it would compete with our Mercedes brother to closely, now that has changed.The closing of the Newark, Delaware plant is not a bad thing, (Durango/Aspen assembly line), as that is also the property for the Newark Parts Depot. Now it can be expanded, as it is perfectly located by I-95, rail, and water. (That plant was originally building Sherman Tanks.) The real teller, though will be “FUTURE PRODUCT”. The industry works at such time-advance stages that we will need to SEE that Chrysler IS making INVESTMENT INTO FUTURE PRODUCT OUT PAST 2012. If you see that, then you can begin to feel that our new masters are really in it for the LONG HAUL. 39z
The unknown about Cerberus is the scary part of this deal. Are they just after Chrysler’s financial arm as some people suggest? Or are they serious about making a long term commitment to building cars and trucks profitably in America? I hope the latter. But I have a feeling there are going to be some painful moments for Chrysler employees and suppliers along the way. I just hope this doesn’t turn out to be the last gasp of Chrysler as it slips into the history books. For once I hope the company finally gets the chance it deserves to fulfill its potential as a world-class vehicle manufacturer.
First thing to do… BRING BACK THE PENTASTAR!!! This is the emblem that means Chrysler, Diamler hated it so much that they all but wiped it out, save for Mopar Restoration Parts. I would place one on every vehicle made, right where it belongs, on the fender behind the right front wheel. Thank god this 8 1/2 year nightmare is over!!!
Anyone hear any word on if Chrysler employees will continue to receive a discount on MB products considering the 20% ownership?
Why would you even consider a MB now???
That was exactly what I thought. I can’t believe ANY Chrysler employees would get a Mercedes after what they did to the company, never mind the quality problems.
I dont know, but this looks pretty darn good for Chrysler.
However, I do not want another K-car.
I look forward to buying my first new PLYMOUTH in many years. With any luck, it will be a BARRACUDA!
What the hell, the new Sebring IS more a Plymouth than a Chrysler, hopefully the new guys will open their eyes and realize that killing Plymouth was the single most idiotic thing that Daimler could have done, and they’ll move quickly to get an ‘09 line of Plymouths on the market.
I BET HE IS JUST BEING IRONIC … Dont you Dr. Dread?
Á bunch of Analysts are claiming variable future forecastings, and none of them are being clearely positive, aren´t those the same guys that TOLD us that DAIMLER CHRYSLER WILL BECOME THE LARGEST AUTOMAKER IN THE WORLD 5 YEARS AFTER THE MERGER?
I Lagh Out Loud at their Forecasts.
THE PENTASTAR! Yeah, I’m all for that. I’m surprised that Daimler’s German management didn’t have the pentastar window yanked out of the Technology Center and replaced with something else…..I’ll leave that to your imagination.
Putting a gold pentastar behind the right front wheel well would be a tribute to all those former Chrysler employees that were sacrificed along the way and can restore the slightly tarnished heritage of a soon-to-be-great-again company. Those “GM” badges that have appeared on their cars add a touch of class and a note of defiance that GM hasn’t succumbed to Toyota just yet. Let’s hope they never do.
Any word of what role, if any, that Wolfgang Bernhard might take in the “new” organization?
[...] Originally Posted by OliverK … let chrysler borrow engines, chassis, suspension/steering components, and then sell it for $7.5 billion. Actually, the borrowing of components was better for Mercedes because it allowed them to lower the costs of producing their cars while bringing up the cost of Chrysler’s cars. (Not something that is needed in the market Chrysler is in.) If Iacocca could/would come back, Chrysler would probably own the whole US market in a few years. Allpar Weblogs The sale of Chrysler in depth (updated 5-15) [...]
It was especially interesting to read that the Chrysler pension fund is extremely OVERfunded. The real cost issue to deal with is the healthcare expenses going forward for US employees.
Bringing Plymouth back seems highly unlikely and would serve no purpose except for nostalgia. Maybe DCX never should have axed it in the first place, but more divisions will not benefit the company now. GM proves every day the folly of all those divisions that compete with each other. There was a time when that structure made sense — and that time is past. Look at Toyota - 2 divisions handle it all. There is no market segment from entry level to near-luxury that Chrysler Corp LLC can’t cover. BUT, they need to stop competing with themselves first (e.g., Sebring and Avenger). For example, SUVs should belong to Jeep - period. From rugged trail riders to high-end luxury, Jeep can cover it. There is no reason for Dodge or Chrysler to have an SUV. Bringing back Plymouth would just cannabalize car sales from another division, most likely Dodge.
I think they should bring back Plymouth, just to show that Chrysler itself is BACK!
Plymouth should be the small car division of Chrysler, sold by all dealers. More Plymouth, less Jeep!
I also highly doubt Plymouth will come back, but I see the value in bringing it back. CNN Money has a great feature that is displaying the 12 Cars that made Chrysler
(http://money.cnn.com/galleries/2007/autos/0705/gallery.chrysler_history/3.html)
It has a great write up about the 1932 Plymouth PA which I think explains the importance of this brand. I know, I know… it is in the past, but when I read the articles about this car and Plymouth, I can’t help but think it was built under the same mindset and ideology of today’s Toyota and Honda. The thing these cars all have in common is that they were value-added car lines that any middle class citizen could buy and know it was going to be one heck of a car. I feel today’s Chrysler has nothing in the car segment that approaches or competes against Toyota and Honda. The Caliber doesn’t do it, nor does the Sebring and Avenger. They are simply unable to put a dent into the sales of those cars because the product offering is mediocre at best AND because Dodge and Chrysler are not the best brands to compete against mainstream brands like Toyota and Honda.
Chrysler should worry about Buick, Acura, and low level Lexus and Mercedes models. Chrysler should not have a product that sells for under $27,000 if it wants to have an entry-level luxury/luxury image. Frankly, the Chrysler brand’s engineering should be so outstanding that one would expect to pay a higher price.
If Chrysler handles higher markets, who will compete with the mainstream brands of Toyota/Honda/Hyundai? Dodge? Well, contrary to peoples’ thinking, Dodge is not positioned correctly to be a mainstream brand. Its bold in-your-face design doesn’t work too well in the mainstream market as evidenced by Dodge’s low car sales (in comparison to Honda, Toyota and others). Dodge does work well with the performance, in-your-face look, and is also a well known truck maker. Those are its strengths, not going after the average family.
That leaves a void where Plymouth could fit. A new Plymouth could offer flexibility and a new way of thinking that would push the whole corporation a notch higher. Right now, the Sebring and Avenger are priced in the same neighborhood, but don’t really offer anything different between the two. So… why not push the Chrysler sedan to an Acura TL/Lexus ES350 competitor, Dodge into the sport sedan role that it enjoyed with the Spirit R/T and which Mazda and Nissan do so well with their sedans, and let Plymouth handle the mainstream market?
These are my thoughts and opinions done only for discussion. In a perfect world I could see something like the above working, but in today’s environment I understand that it would be a very hard sell. That is why I don’t put much hope into my dreams (wishes) or all of the other dreams (wish lists) that I see on this site and others. There is a good possibility that this could be the very last chapter of Chrysler. If so, bringing back Plymouth, Imperial, Roadrunners, ‘Cudas, etc…. would be a moot point. It is best to remain calm and not get too excited for fear of having our hopes shot down in a ball of flames.
I think a lack of clear identity is the biggest problem for ALL divisions of ALL U.S. automakers, with the exception right now of Cadillac. Cadillac is the only make that seems to have a definite target audience in mind. Part of the reason the American auto industry is in the mess its in is because, over many years, they allowed their divisions to all lose their unique identities. Badge engineering has created the disaster that currently exists. Chrysler, certainly not alone in this, had probably one of the most flagrant examples of sharing models: 2 cars with the same name: Dodge/Plymouth Neon. They didn’t even pretend it was a different car (I guess that at least made them honest). For Chrysler Corp LLC to succeed, they need to decide exactly who they want to buy each make of car, and market to that segment. Chrysler Group certainly hasn’t been clear on that. It’s one thing to share a platform, another to put a new grille and slightly altered body panels on a car and call it a different model. The only way a “new” division would make sense is for every division to have a completely different market, with NO shared models. Keep in mind that, prior to DCX, Chrysler division sold a relatively low number of cars. If a new division was created, or even if Dodge was made more mass-market, it means they better be prepared to see Chrysler’s numbers drop again. Not necessarily bad for the company, if made up elsewhere, but it won’t make Chrysler divisional managers look good. Check out _Branding Iron_ by Charles Hughes and William Jeanes for an interesting look at brand identity, and who has done it well or poorly.
About time someone steps in, that is for Chysler, not Mercedes. Hope they bring back the Plymouth line, as I,m not a dodge Person. Would be nice to go and buy a new Plymouth, as I have always been a Plymouth man. My hope is that they can get rid of the Germans completly! Didn’t like the way the take over went anyway, seeing it was to be a merger.
In regards to the new acquisition of CHRYSLER by Cerebrus , this company also owns Remington Arms ,and they hasven’t gone belly up like that great old “Rifle mans Rifle ” Winchester Repeating Arms . I have a good feeling about My Chrysler Corp. I hope they Do resurrect Plymouth, And THEY build the IMPERIAL as an Automobile . Let Mercedes have to compete with that American Automobile . I have had Chrysler Prods. all my life, I have three at t5he present, A 2005 Chrysler T&C limited, a 2007 Dodge Caliber r/t awd, and the oldest, a 92 Dodge Stealth RT TT, , It is the most exspensive used car I have ever owned . I hope Dodge never teams up to produce a Turkey like this MoPars forever
The main reason you have shared models right now is that not all dealers carry the full line. You have stand alone Dodge dealers and also dealers that are Chrysler and Jeep. In fact in my area, there is still a stand alone Jeep dealer. If you are not going to share models then you have to make all dealers carry Dodge, Chrysler, and Jeep. This would mean forcing some dealers out. With the franchise laws in certain states, this would be a huge task.
Just to correct the record, Toyota has THREE automotive brands selling in North America, not two: Toyota, Scion and Lexus. Where GM and Chrysler (and to some extent Ford) went wrong in diluting seperate brand identities was taking badge engineering to the extreme. I think Chrysler is trying to fix that now by creating more visual diversity between Chrysler and Dodge vehicles. The Compass/Pariot and Caliber are another example. So different visually that I don’t recall anyone even bringing up the notion of badge engineering yet they share an awful lot of components. Even the Avenger and Sebring are significantly different when compared to the Spirit/Acclaim/LeBaron not so long ago or the Cobalt/G5 or Fusion/Milan today.
When the Neon was introduced, selling it as both a Dodge and Plymouth made a lot of sense based on how the dealer network was structured at the time. Now that so much consolidation has taken place and you have more instances of Dodges and Chryslers being sold under one roof it wouldn’t buy you much in terms of the number of outlets offering a particular vehicle.
I still believe that Plymouth has some potential much like Scion over at Toyota. The cost to resurrect the brand is probably staggering though. The problem I see today is that the Chrysler brand should be the “Lexus” offering, Dodge the “Toyota” and Plymouth the “Scion” and Jeep the “Jeep” icon it is. Instead, the Chrysler line-up is forced to offer vehicles at a Dodge price point rather than moving the brand upscale as has been talked about for years now. You could even make the case that even back in the Spirit/Acclaim/LeBaron days that the LeBaron was more upscale than the other two. Just like the Newport was “better” than the Fury/Polara. Today that would mean not offering ANY base 4-cyl Sebring models in favor of better equipped sedans and the uniqueness of the drop-top. (I’d call it a convertible but now with so many “top” options that