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Chrysler and Cerberus Q&A with Bob Sheaves

On June 8, 2007, Allpar and hosted a Q&A session with RW (Bob) Sheaves, president and CEO of catNET Solutions. Mr. Sheaves is a 30-year veteran of the automotive industry and the driving force behind the 4×4 suspension design for the 1994 Dodge Ram, Jeep Motorsports racing vehicles, CATIA v4 advanced design techniques, and other military and civilian vehicle designs at Chrysler, Isuzu, GM, and other automakers. Mr. Sheaves was interviewed for his personal reactions to the proposed Cerberus purchase of the Chrysler Group from DaimlerChrysler.

The interview was part of a "live chat" event, but have been translated into a Q&A format for ease of reading by Jim Choate of All opinions are those of Mr. Sheaves and are not official statements of any kind from DaimlerChrysler or Cerberus; they should not be quoted out of context.

Q: Will the new Chrysler Corporation be able to bid on military applications?

A: Since the takeover of Chrysler by Daimler, they have been prohibited from being a prime contractor to the government military forces, due to the "Buy USA" act. The only way Chrysler could supply military hardware is as a Tier 1 or 2 supplier to a US company. As an example, the MB Gelendewagen, made by Magna in the EU. DCX sold these vehicles to an American company, to which they added various components, such as armament, ballistic protection, and uprated suspension. The major issue with this is that DCX is NOT the prime contractor from this sale of some 100 vehicles. Now that Chrysler Holdings, assuming the sale is not stopped by any regulatory bodies, owns the assets of Chrysler, there CAN be direct sales, provided the contract requirements can be met. There is one other issue that eludes Chrysler at this time however, that is the fact that there are no current contracts of future (meaning between now and 2010) that Chrysler can even come close to competing in. These contracts that are coming up are for vehicles Chrysler has, not only no experience in, but simply DEVOUR cash like the proverbial lion.

Q: Does the fact that Daimler will still own 19.9% of Chrysler prohibit them from getting any such contracts?

A: No, not at this time. As long as the total is less than 49.9%, the letter of the law is met.

Q: Are government contracts THAT important to the survival of the company?

A: Not at all, in my opinion, that is one of the WORST businesses to attempt at this time, due to the minimal amount of money available to fix what else is wrong with the company and advance it in product, quality, and customer acceptance. As an example, to modify a Wrangler 4 door into a true military vehicle would cost about $2 billion by itself, simply because the vehicle does not fit into any currently planned vehicle need. A total redesign would be required to meet the current needs for, as an example, a replacement for the IFAV (the aforementioned Geleandewagen.) The question then becomes "Can Chrysler afford a $2 billion investment for a total purchase of 100 new vehicles?" At this time, obviously, not.

Q: Will the World (GEMA) Engine be modified to run on E85?

A: First, regardless of my personal "heartburn" with E85 as a reasonable alternative fuel, public opinion and governmental decision making is tending towards the expanded use of E85. This, in itself, leads me to believe that there will be internal pressure to modify these engines, especially if sold in Central America and South America, to use E85. However, I also believe that this work is going to take time. My opinion is that you will not see any results, if ever, (remember-this is opinion ONLY) no earlier than 2009/2010, due to the lead times for developing and obtaining production level parts that are certified by EPA, allowing them to be sold in the US.

On the original flex fuel vehicles, done at JTE while I was there, took almost 24 months to get to the EPA testing stage. The HEMI however, due to its popularity, would make more sense as its usage is on a broader base at this time (meaning more vehicles use the HEMI today, when compared to the World). Given the current state of affairs with the gasoline prices at the retail level (I paid $3.59/gal here in Portland today), the best bet, regardless of numbers, would still be the World, when compared to the HEMI. I believe the general trend in purchasing is going to continue to swing (barring any disruptions) towards the World at a percentage of 15% per year. This means that, of the total production in a given year, the number of flex fuel engines used will increase by 15% of the engine models sold the previous year. The HEMI is starting to flatten out, while the World is just starting it's overall production life.

Q: Isn't E85 basically racing fuel?

A: E85 is only comparable to "racing fuel" in that it is 85% ethanol. Indy car racers, for example, use 100% methanol (M100). By latent heat, ethanol only contains roughly 2/3 the latent heat of gasoline, hence its worse fuel mileage. [Jason Rogers, a former JTE employee, noted an error, now fixed, in this statement, and also added that E85 isn't as corrosive as methanol, so only minor tuning changes are needed to optimize operation with it. Methanol is much more corrosive and major changes would be needed to materials for long-term use.)

Q: Do you think that "FlexFuel" is just another marketing ploy?

A: Depends on your outlook. If it is a choice between moving and walking, no it is not a ploy. Otherwise, it is simply an option. The consumer has to make their own mind up on whether it is viable.

Q: As long as gasoline is available, is it wise to invest to develop E85-only engines?

A: E85 only is a compromise itself - there is no such thing as an "only E85″ engine at this time. If you are going to use alcohol, you "should" primarily concentrate on that. The direction has to be based on forecasting and crystal ball gazing, unfortunately.

Q: Are there any plans to bring more diesel-powered models to the North American market?

A: Based on information in an Autoweek article, there are discussions on more diesel models for North America. However, there is one BIG bugaboo here - the use of MB diesels. These are expensive engines to purchase, stock parts for, hard to service, and not as durable as truck engines. In their defense, they run acceptable well within their design parameters. The question becomes "Can Chrysler afford to continue to use them?" In my opinion, no they cannot. There are better options, and less expensive options, and more durable options….just not necessarilly all at the same time. This is going to be a big balancing act. Chrysler has, in my opinion, the chance here that no other manufacturer has…that is, to become known as "the automotive diesel king." [Editor's note: Automotive News has started to refer to the "Mercedes 3.0 V6 diesel" as "engineered by Bosch."]

Q: We know they are using VW diesels in the Caliber and Avenger in Europe, and they used the VM Motori in the Liberty for North America. Does Chrysler have sufficient expertise to develop their own? Or is it cheaper/more beneficial to outsource it?

A: In a word, no. Cheaper to take an existing product, provided it meets Chrysler's needs, and use that. You have less initial investment and potential problems that way…at the expense of an initial greater component cost. [Editor's note: Chrysler was working on a four cylinder diesel in 2006 and it appears that this has now been approved for eventual production, probably after 2010. We have no details on this engine, its origins, and DaimlerChrysler companies' contributions to it.]

Q: What is the relationship between Chrysler and Cummins with the Cerberus buyout?

A: Cummins is a separate company with a purchase contract with the Chrysler Group, which will transfer (I hope without "renegotiating anything") to Chrysler Holdings. The V6 (2009) and V8 (2010) Cummins are still scheduled to be installed in certain Chrysler vehicles - light duty at this time. The 6BT will continue in the HD models.

Q: Does the size of the diesel powertrains in the trucks prevent them from being used in the LX or in the future LY?

A: Of which engines? If you mean the 5.9L I6, yes - it is too big. If yo are speaking of the "new" V6 and V8 models as mentioned above, no comment.

Q: If the Cerberus deal goes through, would they be able to use VM diesels instead of the MB ones?

A: The VM would be my personal preference, BUT they still would have to be certified per vehicle, not the engine by itself.

Q: With regards to diesel engines, wouldn't it be more appropriate for the government to make a honest push of biodiesel instead of E85?

A: The government cannot make a "push", in my opinion, without screwing up the fragile (today) infrastructure for biodiesel in any blend up to B100. Biodiesel is accepted by the US military today for everything except aircraft - and this is undergoing changes. That kind of push (meaning from market demands) is a better method of promoting the use of biodiesel. Remember, however, biodiesel is not a magic bullet. There are limits on the amount of fuel that can be "grown." It is basically a balancing act - select enough variation in fuel feedstocks to ensure a nationwide supply that meets the customer needs. For example, in WW2, there were several countries in Europe that created a method to utilize a charcoal brazier to create "gas" to power vehicles to move about, grow crops, etc.

Q: Could the New Chrysler Corporation bring back Plymouth or DeSoto?

A: In my opinion, Chrysler needs a division like what Plymouth used to mean, but just bringing back Plymouth would cost a minimum of $500,000 just for the name, no cars at all. DeSoto is a nonentity today, so that would be even MORE expensive. Chrysler doesn't have the cash at this time to do such a thing.

Q: Isn't $500,000 small change in today's automotive world?

A: That is just for legal services only. You would be looking at (assuming 3 cars and a minivan) a minimum of $8 billion to make a viable "Plymouth." The money simply is not there. There are more important things to spend the available cash on….like Phoenix. And like the new axle plant. Both of those are $2 billion programs.

Q: So the chance of seeing a new Plymouth isn't likely in the near future (2009-2012)?

A: As much as I hate to say it, no.

Q: With the Challenger coming back, could there be a "'cuda" return (maybe under a Mopar performance package?)

A: No 'cuda. EVER.

Q: Other than turning a profit, what should the primary focus be for the new company?

A: Profit is the primary reason for ANY business. But that is not the focus of vehicle engineering. In Chrysler's case, the primary focus SHOULD be, in my opinion:

  1. Focus on completing current R&D programs to industry topping levels (Challenger, Phoenix, and some other "stuff" not generally known.)
  2. Focus on repairing the marketing damage done by Joe Eberhard.
  3. Repair the styling damage done by DCAG interference.

Literally everything else is secondary. The Chery deal is a case in point of how this can be accomplished…oversee and control the parameters the vehicle has to cover.

Q: With the just-released new 'styling' (like Sebring and Nitro) wouldn't it be a bad time to start REstyling again? (In reference to the recent leaked word about sub-par styling on those vehicles.)

A: Styling is subjective, obviously….but remember cars are on a 4 year replacement cycle, so NOW is the time to start. What is in the pipeline, being built is a lost cause, but the ones for release in MY 2009 and up are fair play. The only problem is that you cannot completely restyle a vehicle past S1. It's funny - I sold 6 Nitros (to folks where I'm working)…2 to fervent Honda Element owners. Meaning that styling is still subjective and I cannot dispute the taste of individuals. The only thing that counts is those that ante up the money to buy one - and the Nitro has been selling well within the 100K per year mark. That is what the company is concerned with - passing the 100K mark.

Q: Wouldn't it seem to give the impression that the company had no direction if they started changing design cues/styles every few years?

A: Not at all, IF the intent was to create a CAR style, not a corporate style. Take a look at the old "Forward Look" designs. All of those cars were instantly recognizable as Chrysler products, BUT you could instantly also tell a Plymouth from aDodge, from a Chrysler, from an Imperial, and from a DeSoto. Case in point, the Dodge "grille" that many people complain about….personally, I HATE that look, I always have, since 1994 on the RAM. However, it was immediately identifiable on every car that they were all Dodges. The problem was, it was carried to extremes, that is what Tom Gale prevented, but other people since have left alone.

Q: Does Chrysler plan to do any production-based design work with The SkunkWerks? (ie; does the SEMA Sebring and the Jeep JK truck have a chance of seeing production?)

A: Let me answer that by asking a question myself - who just opened a design and fab shop a few miles from JTE? Here's a hint -remember the pics of a certain silver pickup before NAIAS this past January? AEV- American Expedition Vehicles….from Montana. SkunkWerks is a group of JTE people that play offroad VERY heavily…and…work closely with "certain" suppliers. Now I am not saying it WILL, I am saying the facts support that conclusion that AEV could have the capability to build "special" vehicles just like ASC (the convertible people) did for Chrysler in the past.

Q: Should the "Forward Look" type of design be brought back?

A: I do not think the Forward Look should be brought back as it was…however, I do believe that the time is ripe for a derivative. The PT Cruiser was a derivative of the 1930s and 40s and we all know how popular THAT turned out to be. I would dearly love to see a modern 1957 Chrysler 300C or Plymouth Sport Fury. The feel and touch of those old boats could be updated to a modern theme that would again do for Chrysler what the PT did.

Q: Does the hiring of Tom Gale by Cerberus foreshadow a return to a 'styling renaissance' like that?

A: It could, for 2 reasons. Tom Gale has a long history with Chrysler. He also is not under the same type of non-compete that Wolfgang Bernhard is. With the rumors (emphasis on RUMOR) of Trevor Creed being shifted around, it could allow more open minds to control the direction of the Design Office and Pacifica. Tom Gale has a very unique ability in that he can guide without being overbearing.

Q: With the reference to the product being lost causes, could some products be "fast tracked" to be revised or updated sooner rather than later?

A: "Could be" - absolutely. "Will be" - no comment. Remember that in some cases, other issues are involved, like the minivan for VW, the Bullet for Sterling, and some other contract manufacturing. Changing the corresponding Chrysler vehicles must incorporate those models at the same time.

Q: These other issues, are they partly due to the tied to the design of platforms to use MB sourced parts?

A: No - due to the complexity of manufacturing. There is no MB supplied part that could not be replaced at some point. Even so, if the MB parts would be the most cost effective (NOT the "cheapest") they could still be replaced, but not likely.

Q: Are the bean counters at Cerberus likely to cut minor costs like switch lighting and material surfaces more or less than currently?

A: Everything will be evaluated. The difference is that, in my opinion, engineering will be allowed to define the operating parameters to justify a higher cost part. It will not be just about money. If a solid business case can be made, money will be allocated. This is NOT going to be a fast process though….it will take a year or more for just one platform, depending on the people allocated. It is a continuous process change, not a "quick fix." Things like durability, fit, finish, scrap rate, holding the GD&T tolerances, etc.

Q: Is it your opinion, that Cerberus is indeed in this for the long haul, at least for the foreseeable future?

A: Forever, no. But they're not just going to be in and out.

Q: Any goal to create a sedan to replace Neon? (Like the rumored "Rebel"?)

A: No comment. Way too early in any program, assuming it exists, for a formal name.

Q: In your opinion, could the help of Cerberus put Chrysler on a solid track for the future, or will it still be a rollercoaster ride?

A: The automotive industry IS a rollercoaster ride. That is why I have been in it so long. But, that being said, yes, it will stabilize, IF things do not go "slack" and they get "fat, dumb, and happy" again, like was done under Eaton, and Dieter at times. I never recommend it to anyone as a career unless one likes the challenges.

Q: In your opinion, does Chrysler have the potential to be the top American brand?

A: No. Nor should they EVER get to that point. Quality, instead of quantity. Look at Porsche for a business model. Closely held, focused on their strengths, and dedicated. When they go off track, you get things like the Cayenne and Panamera and lose money by the basket. (They need to) be CONSISTENTLY profitable.

Q: It was commented that part of the reason for the "cheaper" interiors were so that things like heated/cooled cup holders and chill zones could be added to cars. Was this a wise thing to do and continue doing knowing what the publicly perceived view of interiors are?

A: In my opinion, no, But the decision makers thought it was. I believe the jury is still out as some of those features in Nitro I would not pay for, but all of those 6 people absolutely RAVE about them.

Q: Back to the topic of the interior 'gadgets' - Could those decisions be part of the re-evaluated portions? Or will the interiors just get updated on their 'regular schedule'

A: It will be on a schedule, but cost savings in trash and trinkets is needed now. Business case remember.

Q: Will there be a Viper to beat out the next generation Z06 or the "Blue Devil" Corvette, or is it affected by ASC being "on the ropes?"

A: No comment. However, note that McLaren Performance Technology is not on the ropes. They built all the 2 seat Mustangs, the Buick GNX and other specialty cars.

Q: Bob, your overall thoughts on the Cerberus deal?

A: Overall, I am greatly relieved. Chrysler has an opportunity that no other auto manufacturer has right now. That is, the ability to completely focus on product and put out the best iron they are capable of manufacturing. Regardless of my personal involvement with Daimler now, Chrysler has been, and always will be my first love.

Many thanks to Mr. Sheaves for his time and effort in participating in our Q&A interview.

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