Chryslertakeover

First off, there’s a great editorial here

http://www.allpar.com/ed/chryslertakeover.html that has inspired me to write. I remember chryslertakeover.com, and thank Mr. Vitale for his work. I remember feeling this was a ‘bad idea’ in 1998. There was a time, not long ago, when Chrysler was busy saving Mercedes’ bacon and Zetsche was the toast of Detroit, that I thought this whole DCX thing might work out long term.

I believe I was mistaken.

It’s clear now that if Chrysler stays within the clutches of Daimler, it will slowly but surely be completely absorbed with only Jeep and Dodge Trucks left. Every “turnaround” seeks, supposedly, to grow by contraction - a short term answer intended to impress those looking to make a quick buck on the stock rather than actually grow the company long term.

There’s another angle, the one that suspects this is all a ruse to soften up the UAW. It’s a mighty sophisticated ruse then, as this has all the earmarks of really being an effort to sell. I used to place more credence in this idea than I currently do, but given what we’ve seen with DCX so far I hesitate to completely rule it out.

It is also possible that they simply will not get their asking price, and will eventually take Chrysler back off the market. In my opinion that is the least likely scenario, as they have created many, many wounds that they would then have to heal, a difficult task when they already have a plate full of those.

Key elements in Daimler want Chrysler gone. That also has been made clear. This not only makes a retention of Chrysler by Daimler seemingly unlikely, it also makes it undesirable in the extreme. For, if you cannot sell that which you want to be rid of, you can always dismantle it, jettisoning that which you don’t want and only keeping the bits that you still value.

Chrysler - as a company - ceased to exist in 1998. If Daimler does not find a buyer (and of course, maybe even if they do), Chrysler could very well cease to exist as a brand as well.

Work hard and do your best though we dislike you

Work hard. Contribute your all. Sorry we don’t care about you.

That’s the message coming from DaimlerChrysler for its American employees.

Tom LaSorda urges employees to remember that Chrysler Group is investing in the future, to work hard and try to pull the fat from the fire after all those people from Stuttgart put it there.

Unfortunately, the DaimlerChrysler Boards keep undermining that message by making it clear that anyone who gives them enough cash will get the Chrysler Group. There is no apparent concern for the thousands and thousands of Chrysler Group employees in their actions and statements; indeed, they’ve (probably not Dieter) made enough sleazy off-the-record statements to the press about the Americans to show that at least some of the Board apparently would like everyone at Chrysler Group to lose their jobs as part punishment for trying to taint Mercedes with what we can only describe as higher quality.

Some of the buyers for Chrysler are clearly not good in the long term for Chrysler employees’ jobs. General Motors poses a serious risk, depending on what they would do with Chrysler after acquiring it. Would they simply take over the flexible manufacturing, minivan platform, Jeep name (and perhaps engineers), the upcoming automated-manual transmission, Phoenix V6, and a few other technologies, and can the rest of the company? How about the various private equity firms? Some of them seem fairly sleazy while others seem very above-board, but that doesn’t seem to be a factor; everyone gets the same financial packet, as far as we can tell.

Those waiting for a sign from above only hear “all options are open.” There’s no BMW-style “we’ll give away Rover complete with a billion or so of our cash to help you keep it running for a while.” No symbolic gestures are being made for the Chrysler employees. Instead, it’s a constant stream of insult and innuendo from the cowardly masked board members countered only by Dieter Zetsche’s references to the skills and expertise of Chrysler’s engineers.

Whatever happens, it should happen quickly. This chapter should close as soon as it can. Among other things, I can’t believe this attitude towards employees motivates people to root out and fix quality problems, to stand up to managers and demand that problems be fixed, to put in that extra time to get it right - or even to give Chrylser another chance instead of sending off that newly polished resume to Toyota. I hear they’re hiring.

The sleazy leakers of the DaimlerChrysler Management Board

It’s been said that the mark of an effective leader is being open and honest with those they are leading - as much as they can be, at least. (Nobody really wanted FDR to tell the American people where and when the Allies would land in Europe on D-Day.) There are many reasons why openness is considered a mark of integrity - not the least of which is that you cannot challenge someone’s assumptions or conclusions if you have no idea where they stand.

On the other side of the integrity pole is often placed the leaker, the person who snidely provides selected information to the press and keeps their identity secret. Sometimes that is required by common sense - if retaliation will mean the loss of a job and possibly the person’s life (as is all too often the case), and if the information being leaked is of real importance.

Unfortunately, in the case of DaimlerChrysler, the leakers are more likely snide, dishonest cowards - and they are the people who are running the company.

In Germany, as in most of the rest of the world, it is not normal to tell the world when you are planning a big business deal, especially when you are about to jettison a division that sells expensive equipment that requires long-term trust from customers - and especially when the brands involved are guaranteed to make headline news. But that’s what the management board members of DaimlerChrysler have apparently been doing, and they’ve been doing it on the sly. We’re always given “unnamed sources” who are telling the press that Chrysler is worthless and a drag on Mercedes. Never mind that the officials, on the record, tell a different story - that Chrysler profits balanced Mercedes losses a few years back, and that no money has been taken from Mercedes to pay for losses at Chrysler. Yes, the capitalization of DCX has gone down; that’s no big surprise, given the blatant incompetence shown in Stuttgart since the acquistion of Chrysler and certain other world events. The capitalization of Ford has no doubt fallen since they acquired Volvo, but nobody in their right mind would consider Volvo to be worthless. It’s a numbers game - emphasis on “game.”

But those board members - we have to assume that’s what they are, because they are privy to some very closely guarded information, and would have been hunted down and fired if they were not highly placed - keep telling the press that Chrysler is awful, a drag, and a danger to the great German institution, Mercedes-Benz, which claims (falsely) to have invented the motorcar and the truck.

Let’s consider the impact of these statements. They drag down sales as the condescending attitude reaches the general public. How can Chrysler increase its reach in Europe as the German press keeps insisting, based on the words of these board sleazes, that Chrysler is worthless? How can they maintain sales in America as the world watches Daimler ever-more-frantically trying to unload the company to anyone with some cash? How can Chrysler maintain any credibility as the newspapers are constantly fed misinformation about how the union pensions and liabilities exceed the assets? Why should customers buy from this obviously bankrupt company with no future? Why should anyone want to work there?

One outlook not considered in the articles I’ve read so far is the damage this is doing to Daimler itself. Assuming they really are serious about selling Chrysler, one would assume they want to get the best possible price. All these leaks have probably knocked a few billion dollars off the value of Chrysler to any serious buyer. The sheer number of buyout kits sent out, as reported in the press, and the inevitable “we’re not interested” replies by various corporations have also diminished the value of Chrysler, making it seem like an invalid.

Some have suggested that this is all a ruse to fight the unions. Well, again, it’s the sleazy way of doing it, not unlike the pattern of bribery that seems to characterize DaimlerChrysler on the world stage. If you want a deal from the UAW, open your books and make a case - if you have nothing to hide. All evidence shows that Daimler has a great deal to hide from the UAW. But really, any sane union leader - and there’s no reason to think the leaders of the UAW and CAW are no more insane than the leaders of DaimlerChrysler - would, when faced with the prospect of having Chrysler dismantled and moved to China or Russia, deal quite readily. So far as I know, the books have not been opened to the UAW or to anyone outside of Stuttgart, though a “financial packet” has been sent to just about anyone with a few billion dollars and some tenuous connection to the auto industry.

Perhaps Chrysler really needs to be sold - to any company that’s run by people less sleazy and more forthright than the DaimlerChrysler Board. Unfortunately, in a highest-bidder contest, the results of a sale might be disastrous. If the Board had the best interests of its stockholders, customers, and employees at heart, it would be very careful about who it sold to; however, its actions so far show that there’s only two things that matter to them, and that’s their egos and cold, hard cash. And before you start to tell me all corporations are supposed to only care about cold, hard cash - and you call yourself a human being! - I’ll point out that Daimler’s actions so far have been self-defeating in terms of that cash. If they really wanted lots of cold, hard cash, they’d have kept Chrysler going as it was before they started to mess around with it - generating billions in profits and increasing its market share, not incurring losses, overproducing, and losing market share year to year.

Postscript: according to Ron Gettelfinger, UAW representative, the Supervisory Board was given almost no information about divesting Chrysler Group from the Management Board.

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.

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.