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After the Takeover: Observations on Daimler's Purchase of Chrysler

Q-How do you pronounce DaimlerChrysler?
A-Daimler. The Chrysler is silent.

Early observations (1999)

From easy communication to secrecy

An employee who asked to remain anonymous wrote:

Today DaimlerChrysler announced officially that it would end sales of the Plymouth brand in Canada, effective April 1st.

The way it was announced really typifies my fears regarding this takeover. One of the more innovative things about the old Chrysler was that we were one of the first auto companies to have satellite news hook-ups at every facility (And thus video-conferencing). There was an employee news show on an internal network called CEN (Chrysler Employee Network). This was a great service because it kept everyone abreast on industry news, and it reported the good, bad, and ugly within the company, not just propaganda.

However, with the coming of Daimler, CEN has disappeared. Now we see occasional news blips, but only if they're positive. Of course, if four vice-presidents left DCX for Ford and GM, (within 3 months) I doubt if I'd be bragging about it either.

The replacement for CEN is called DCTV. It mostly runs video of old Mercedes cars competing in open-wheel race events. Other fare includes pre-made videos showing our glorious Truck, Bus, Train and Plane operations overseas. (They're all money losers).

No more reviews of competitors vehicles, no more industry news, no feeds from other facilities showing improvements to be implemented elsewhere. That was CEN.

In fact, just a few months ago we were subjected to a near constant video extolling the virtues of the Mercedes Smart mini-car. They have not mentioned that just yesterday production schedules were cut for the 2nd time, reflecting the cars’ disastrous sales in Europe. They were cut from 140,000 to 100,000 and finally to 80,000 projected sales. At these sales numbers, one has to wonder what the break-even point was.

Rebuttal: Communication is similar

Ean Orsel wrote:

While working in the Bramalea plant for a year, within the DaimlerChrysler management (4 months before Daimler), I've seen my share of DCTV... When there wasn't a good game on.

I recall seeing reviews of all sorts of cars, and plant info. True it was cut back, but that's to introduce the Daimler content into the system.

I've heard that different changes are from Daimler ideas. Well sure, but they are from all kinds of auto and other industrial companies and factories. I remember in 1995 some people from Mazda taking notes on our car fuelling system. BAP (Bramalea Assembly Plant) will have people in other factories doing the same thing. This isn't a bad thing. Ford helped Jaguar make a dependable car, and even showed them it’s easier to build the car if you take the doors off. And remember, it's not like Mercedes Benz can't show us anything.

Mercedes arrogance and ignorance of the Chrysler heritage

(Writer’s name lost)

In spite of all of the postering that the merger was a "merger of equals", I believe that the marginally greater percentage of Daimler than Chrysler (for whatever reason) will surely result in German dominance of the organization for no other reason than “they can.”

From talking to associates who had been in the Mercedes parts and service area of dealerships for many years, they concur on the items of engineering greatness and a certain arrogance in this respect. Irregardless of what changes might need to be made, they are the ones to decide when they are made. For example, I understand that all Mercedes air conditioning systems did not get enough cooling capacity to really handle the southwestern US summer heat until the early 1990s. American vehicles were capable of this in the early 1960s!

And then there were the press reports from Germany seriously questioning why Daimler would even think about merging with such an "inferior" manufacturer such as Chrysler. And the related comments that they perceived Chrysler to be a maker of boxy and unappealing automobiles. Item 1 -- if the last Chrysler product they remember is the K-car, they are definitely behind times! And what of the cars from GM and Ford of the late 1970s and early 1980s? Item 2 -- just what do they consider Mercedes Benz automobiles to be??

If the Daimler people will put their egos in their pockets and listen to what the Chrysler people have to tell them (and also look at their impressive track record!), good things can happen from the "merger". But if they do not do this, the innumerable great things that Chrysler has accomplished will end up in the dumpster over the next few years (not to mention the loss of the people who helped put them there as the competition takes advantage of the situation).

From the early days of the Chrysler Corporation, it has been one of the engineering leaders and innovators of the American automotive industry. And when Chrysler leads, everyone else follows! While there have been some ups and downs, Ford and GM typically follow suit soon after Chrysler's up cycles (and their products design and orientation reflect this). GM, being the reactionary organization it is, is usually the first to follow Chrysler's leads in product and features--their current products are living proof of this, but with a GM flavor.

Before the Neon, all American small cars had been loss leaders. GM and Ford typically leaned on their Japanese partners to help in this matter with vehicles whose nameplates were changed. Chrysler did a totally North American vehicle that made money and sold well. They did it by engineering labor hours out of the assembly process with efficient design strategies, innovation in engineering and design processes, and the resultant shorter gestation periods.

While Chrysler is the undisputed leader in cupholder design, this is only one of many areas of "user friendliness" that Chrysler seriously upstages the competition. These are things that you do not notice until you see them. For example, the Chrysler product's fog lamp switch is typically on the same switch as the headlamps. The "exciting" Pontiac Bonneville had the fog lamp switch on the overhead console. The new Pontiac GrandAm's trip odometer reset button on the inside of the speedometer pod of the instrument panel where you have to reach through the steering wheel to use it. I could list more, but you get the idea.

As always, the current Chrysler products are typically designed and engineered to a greater level than GM desires to pay for and Ford seems capable of obtaining. Similar in concept to German vehicles and oher European vehicles. In that respect, Chrysler and Daimler can be considered "equals". Both companies have long stood on excellent engineering foundations.

But I believe that if you look at all of the engineering innovations made in this century, a disproportionate number will have their roots with the Chrysler Corporation than in any other single manufacturer. Many will be for things which happened when Mr. Chrysler ran the company and many will be in more recent times, but the trend is definitely there and continues to present times.

Unless the Daimler people fully understand what great things they got with Chrysler (other than light duty trucks and profitable economy cars) and build an organization with great synergy, everybody will lose (although they will probably never admit it).

It has been reported that it would be several years before any German-influenced designs would appear from DC in the North American market due to what was already in the supply line. What happens later is fully open to discussion. Although I will not hold my breath, I hope the current greatness will continue and be worthy of the Chrysler nameplate.

While it is inevitable that the Daimler people will put their mark on the Chrysler organization, they need to have the good sense to not mess with success irregardless of if they understand or appreciate its workings.

In the meantime, we all can reflect on the Chrysler Corporation that was and the great things it accomplished in its somewhat short history. And the memorable vehicles it produced, many of which we love, cherish, and own. Many times, great memories of the past provide comfort as we travel toward an uncertain future. I hope the trip is a good one.

Mr. C-Body: Chrysler was on a roll, and didn't need Daimler

With all of the departures, etc. from what was the Chrysler Corp.,it seems that some of what was going on has seemingly increased in intensity. When I got my Mopar Perf catalog, I was astounded at the crate engine program--best in the industry (blows the highly ballyhooed GM (i.e., Chev.) program over the fence before it even gets to the weeds). Other things are picking up speed as well in that program. Like a new agressiveness suddenly took hold.

The new product people seem to be acting similarly for some reason. It remains to be seen how much of this is influenced by Daimler and how much was already set to happen that they "allowed" to happen.

I suspect that Walter P. would [not] have approved of what Eaton, et al, did to his company or the demise of Plymouth. He might have liked "Chairman Lee" for what he did, but Eaton's activites (while building the corporation back to greatness and treating it like a stock and "selling high" for personal gain might be a little suspect). But I was pleased to read that the North American operations chiefs decided on "The Chrysler Group" as their official nomenclature. And that new museum!

Irregardless, the two remaining marques of the original Chrysler Corporation (Chrysler and Dodge) seem to have enough substance and product to keep them running for many years. There is good name recognition (at least over here) also. And if they will let the new group run with what they have left and keep the momentum they have built continue and grow, I suspect good things can happen.

It make me proud that the previous Chrysler group accomplished what they did. They will be remembered in history for what they did just as Eaton's history can be tarnished for his basic giveaway of the company.

One automotive analyst stated that it was only a matter of time before the previous Chrysler Corp would fall on hard times again due to not having a large global presence and new products from Ford or GM. Personally, I feel that that guy is somewhat off-base.

Item 1-- Just as in the past, it is the Chrysler products that fueled much of GM's products currently on the road (back-date the Intrigue and it hits squarely to LH introduction time). Buick LeSabres and Regals now ride and handle more like Chryslers than ever before.

Item 2-- Chrysler was reported to be looking at a "developing country" site but backed away from it just before that country's political environment exploded. GM's presence in China has been questioned as being viable, but it is establishing a foothold as the Regal plant also is adding a Buick version of the GM minivan platform. Still, how many are they selling? Chrysler had several international partners in the 60s which looked good on paper but probably added little to the corporate profits.

Chrysler already has production facilities in Europe for minivan production and some others also. These could have been used to fuel expansion into other areas in an evolutionary fashion.

Item 3-- There seems to be little evidence that a downturn in product innovation would have taken place anytime soon. The culture had been set in place and was building synergisitically with each new product. Few companies brought so many new platforms to market as soon and made as much money doing it as Chrysler did. GM does a new platform, lets Pontiac (for example) have it first and then generates "all new" models for the other divisions in the following years. Same car, different sheet metal and then uses that platform for about 7+ more years. The GM management seems to want to adapt what they have to products perceived as "new" in the marketplace. To do otherwise results in higher costs to do something new. Chrysler proved that it does not have to happen that way--quite profitably too.

Now that many of the Chrysler employees that know how they did that now work for Ford and GM, they too can benefit (if they do not bury these people in their corporate "political" hierarchy). The Chrysler successes stem from people who care about cars being able to "make it happen". And management getting a culture in place that encourages such things and offers the facilities and empowerment to support these activities.

Item 4-- I am not of the opinion that Chrysler needs to be in developing contries. To do so would take too much away from their main markets--North America, Europe, and hopefully Japan. These are the prime markets and will generate the most sales. With a fixed amount of dollars to spend, they need to be spent where they will do the most good and reap the greatest return. This is where the new plants are needed to free-up the supply of vehicles so they are not limited by assembly line production capabilities (as in the immediate past).

These profits could fuel an evolutionary expansion in Europe to include these developing markets when and if they become viable. They may have vast opportunities now, but until their standard of living will support new vehicles for the masses, it would be better to be ready than to jump in right now.

Maybe I'm getting a little conservative in my advancing middle age, but there are some things that are based in reality and historical fact. At the time of the "giveaway", they were on a roll that could easily have continued for many more years. The culture was there, the money was there, and the products were there. Chrysler "changed the rules" on many "games" and Ford and GM (especially GM) GM followed as they had no real choice. The little guy was doing great things and getting increased sales as a result. Granted, Chrysler could never be a threat in total numbers to GM or even Ford, but that Ram Truck (which sold better than Chrysler expected) set the tone for the industry although its production numbers were modest compared to Chevrolet. Similar with most everything else Chrysler has done (with the exception of the Eagle Vision that should have been a Plymouth Fury!). And each new model basically doubled the stock price when they appeared.

When the Ram fell out of the ceiling at the initial introduction, stock went from about $16/share to about $32/share and then doubled again with the LH cars were introduced. Yet Kerkorian was not pleased with the dividends.

End-of-2000 observations

Webmaster notes

Most of Chrysler's current problems stem from Lee Iaccoca's out-of-whack ego. Consider that, during the 1980s, Iaccoca controlled the stodgy styling of the company's offerings, demanding that vehicles have (for example) a straight line along the bottom of the windows. Concepts were built but kept under wraps for the day Iaccoca would be replaced by the highly regarded Lee Iaccoca.

That day never happened. Iaccoca grabbed GM regular Bob Eaton from out of nowhere, ostensibly because Eaton had built up GM's European operations, and Chrysler would need his offshore expertise. In reality, Eaton was much less threatening to Iaccoca's image and ego. Lutz was too popular, too strong.

1992 Chrysler executives

Eaton himself was never comfortable with Lutz, either. After the initial negotiations with Daimler-Benz, Eaton kept Lutz at a distance, though Lutz was the only member of the team who spoke German! Eaton must have known Lutz could kill the deal, because Lutz knew what none of the analysts did: that there were almost no synergies to be realized, that Daimler-Benz would not acquiesce to a true merger, that Chrysler would be used as a cash cow, with its assets quickly stripped.

James P. HoldenNext to go were most of the leaders of the independent Chrysler - Thomas Stallkamp being a notable example. Being honest was cause for dismissal. James Holden, a man with little spine and apparently little brain, took over the reigns, and began promptly to do Mercedes' bidding. Had Holden continued, Chrysler would no doubt have been stripped to a shell. Fortunately, Juergen Schrempp took the opportunity to make his grip on Chrysler total, installing 26 German executives (actually, 25 - Chrysler CEO Dieter Zetsche is Turkish).

By December 2000, sources within Chrysler's Auburn Hills headquarters described it as (paraphrased) a war zone. Though Mercedes and Daimler-Benz are grossly overstaffed, cuts are apparently being sought only at Chrysler. The high-performance IT group, which is a fraction of the size of Mercedes' IT department and yet has accomplished much more - indeed, has logged many firsts in the industry - is being hard hit.

Dieter Zetsche has expressed a desire to cut Chrysler's staff by thousands of employees, and indeed to shut down at least one factory. Meanwhile, plans are under way to convert Chrysler's plants to the Mercedes methods of production, though Chrysler's quality has recently seen dramatic improvements (particularly and ironically in the defunct Plymouth line), and Mercedes is not exactly known for cost effectiveness.

Not surprisingly, since Zetsche and his 24 new executives are all from Daimler-Benz, no mention has been made of reviving Plymouth, though much evidence indicates that the main reason for Chrysler's sales drop is the loss of that marque (as well as customer disgust with the way Daimler-Benz is handling the acquisition of Chrysler).

Kirk Kerkorian, the professional robber baron whose takeover attempt caused Eaton to run crying to Juergen Schrempp, is now suing Daimler-Benz and the principals involved in the deal to get it undone, and to restore Chrysler's $12 billion stockpile - now down to $2 billion (and not due to the company's third and fourth quarter losses).

Word around town is that much of Chrysler's financial problem is due to accounting tricks. Mercedes engineers are reportedly charging Chrysler counterparts for consulting time, and the retooling costs to use inferior and overpriced Mercedes diesels is an issue. Changes to dealer contracts in Germany are being opposed by German dealers, because they just about shut Chrysler out of the market (indeed, DaimlerChrysler revoked all German dealer contracts to sell cars directly). Likewise, switching to Mercedes financing hurts Chrysler sales and profits. It almost appears as though Chrysler was purchased as a financial support for an unhealthy Mercedes.

On the lighter side, Wolfgang Bernhard, new Chrysler COO, seems like a good catch. He keeps company witih plant workers, and insisted on working on each of Mercedes' twelve assembly lines for at least a few days each. He will be balanced by Dieter Zetsche, who seems to be liked by all he has spoken with (including dealers and people within Chrysler), but who is said to be trying to lay off thousands of employees and shut down at least one plant permanently.

We do not know what the future will bring, but it must weigh heavily on the head of the man who dropped Chrysler's legacy - Robert Eaton - and on the man who put him there due to his own outsized ego - Lee Iaccoca.

Bill Cawthon lent some needed perspective to my rant:

While Lee Iaccoca had a big ego, it was honestly come by. Iaccoca was the one who turned the Falcon into a Mustang at Ford, although his ego got him canned there. Iaccoca is a salesman, just as Walter P. Chrysler was a salesman. And a salesman was what Chrysler desperately needed. Years of being run by accountants had destroyed the engineering brilliance that was once Chrysler's pride.

Chrysler was building unappealing cars and quality was almost a foreign language. Sales were poor and the image cars of the early 1970s were long gone. Without Iaccoca and his charisma, it's highly likely that Chrysler would have folded. As my Dad said, "America can't survive without GM and Ford. It can get along without Chrysler." Iaccoca had the chutzpah to ask the government to guarantee loans that kept the company afloat until it could produce some products that people would buy in sufficent quantities to make money. He bought the company time to survive. Beyond that, he became Chrysler's image, the ultimate pitchman. And car buyers bought his message and Chrysler products. Heck, there was a big movement to have him run for President of the United States.

I'll agree that Lido had his problems and not every product was a winner. He has a huge ego and huge pasions. The "Sinatra" Imperial was not one of Chrysler's finest hours. On the other hand, the company was able to introduce the minivan. The shift from the dominance of passenger cars to the light truck can be traced to this one product. All of a sudden, it was fashionable for mainstream America, including women, to own a vehicle that didn't look like a car. The conversion of women's opinions was crucial. In 1999, the big three automakers made a combined profit of over $20 billion because of Lee Iaccoca. They lost $4 billion of sales of passenger cars.

I would suggest that Lee Iaccoca may not be a saint, but he certainly isn't the devil you portrayed. I would venture that the biggest damage Iaccoca did was to stay too long.

And I would agree with that perspective, too - if Lee Iaccoca had saved the company and then moved on or let the talented people he had empowered continue their work, saving only the task of leadership for himself, Chrysler would be much stronger. Indeed, with Iaccoca's leadership and Lutz's operational control, Chrysler could have been a true powerhouse through today.

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