Chrysler’s near-death experience in 1980 had a salutary effect on the company’s culture. Headcount was slashed by over 50 percent. By necessity, the old ways of doing business were consigned to the crusher. “New Chrysler’s” execs, managers, marketers, designers, engineers, union workers and suppliers all had to work together to find creative ways of doing more with less. With Lee Iaccoca at the helm, it was a seminal moment in Chrysler’s history: an opportunity for the once great American car company to thoroughly reinvent itself. 

Necessity was the mother of all platform sharing. Introduced in ’81, Chrysler’s “K” cars offered seemingly endless variations on the same mechanical theme: Plymouth Reliant, Dodge Aires, 400 and 600; Chrysler LeBaron, Town and Country and Executive; and on and on and on. By the time the K stopped being special, Chrysler had produced nearly 40 variants.

It worked. With lowered overheads, interchangeable parts and Iacocca’s salesmanship, Chrysler was soon back in black. 

After paying back Uncle Sam, Chrysler’s accumulating cash cache began to take its toll, allowing the automaker to slip back into kicking back. Even worse, the money burned a hole in Lido’s pocket. A suicidal spending spree ensued.

Like other successful CEOs, Iaccoca coveted a Gulfstream jet. Unfortunately, he liked it so much he bought the company. In an ill-advised aping of GM’s purchase of Hughes and EDS, Chrysler decided to diversify. In 1987, Chrysler bought the floundering American Motors Corporation (AMC). Lido correctly saw AMC’s Jeep brand as the crown jewel. During the ensuing SUV boom, Jeep made Iaccoca into a genius.

The 1990 recession caught Chrysler flat-footed (once again). The company shot its cash wad on acquisitions instead of investing in competitive new cars and building a rainy day fund. Gulfstream was quickly jettisoned. Newly-installed President “Maximum Bob” Lutz refocused the company’s energies on new product development. Lido finally relented to the board’s increasingly adamant urgings to retire.

In the nineties, Chrysler experienced its final manic high. Having slashed the costs of new car development through the use of integrated development teams to 2.8 percent of revenue (GM: eight percent), a slew of new cars spewed forth: the Viper (’92), LH full sized sedans (’93), New Yorker/LHS (’94), compact Neon (’94), Ram pickups (’94), mid size Cirrus/Stratus (’95) and all-new mini-vans (’96).

By 1997, the new product barrage pushed Chrysler’s market share to 23 percent (shockingly close to GM’s current market share). Chrysler was hailed as the model for the American automobile industry's incipient revival.

Affable, mild-mannered Chrysler Chairman Robert Eaton saw towering clouds on the horizon. In a 1997 speech, Eaton described a “perfect storm” involving global over-production. Eaton’s cowardly solution: sell Chrysler to Daimler and walk away with nearly $100m in his pocket.

In all likelihood, Eaton knew that Chrysler’s manic success was built on a weak foundation. In [what’s become] classic American style, Chrysler's flood of hastily-spun new products was far from perfect. In an echo of Chrysler’s 1957 fiasco, quality problems were rife. Rubber-band transmissions, blown Neon head gaskets, ever-cheapening interiors and a general prioritization of flash over substance were the all-too prevalent ingredients of the “New, New Chrysler”. The “model for the revitalization of the US car industry” was not a robust formula with which to take on the Asians.

Rather than disappoint investors (and spoil his own stock options) by plowing profits and dividends into improving product quality, Eaton made it someone else's problem. If Daimler had done its homework and checked the corporation’s medical records, they would have known that Chrysler crashes like clockwork every six to ten years. In fact, the acquisition by Daimler only accentuated Chrysler’s all-too-soon next crash, because of the clash of cultures and Eaton’s increasingly disengaged leadership (seller’s remorse?).

Daimler paid $38b just before the inevitable collapse, and sent Dr. Z to minister to the sickly patient. But the German executive administered the usual prescription of happy pills: slash costs, cheapen the goods and rush out some new product (Chrysler 300). The result was a classic dead cat bounce: a $1.7b dollar profit in 2005, followed by an endless sea of red ink.

The perfect storm that Eaton had tried to detour gathered strength. Instead of addressing Chrysler’s underlying pathology, the shot-gun wedding only exacerbated the disease. In every category, Chrysler was attacked by competitors, and its products were inevitably found wanting. No wonder Daimler practically paid Cerberus to take the ailing automaker off its hands.

Chrysler has had nine major crashes. “Doc” Nardelli is desperately trying to find a pulse, hoping there’s a tenth life left in the once proud company. But it’s looking more and more like he’s got a corpse on his hands. At least it came with a signed organ donor card.

Suicidal tendencies can be pathological, inevitably recurring. Chrysler’s current self-destructive phase, as chronicled by TTAC, is hardly its first. From its very beginnings, the patient has suffered from symptoms of bi-polar syndrome. Chrysler’s biography is a nothing less than a roller coaster ride of giddy highs punctuated by disastrous crashes and self mutilation.

Chrysler’s birth and euphoric immediate success is unparalleled in automotive history. Walter P. Chrysler had a brilliant career in the early automobile business, turning several ailing manufacturers into successes. By 1919, he’d earned $10m ($130m in today’s money) from three year’s work transforming Buick into GM’s early powerhouse.

In 1924, whilst running Maxwell, Chrysler launched his eponymous line. The cars sported a perfect blend of advanced engineering and style. It was a home run that catapulted Chrysler to number four out of a crowded field of 49 domestic manufacturers. The subsequent launches of low-price Plymouth and upper-mid priced DeSoto, and the purchase of mid-priced Dodge, firmly established Chrysler as a charter member of the Big Three.

Chrysler’s first crisis came in 1934, with the failure of the advanced Airflow. The model adopted the latest aerodynamic principles. The company also repositioned the engine and body further forward on the frame (foreshadowing “cab-forward”), delivering major advances in comfort, quietness and handling. While similarly avant-garde vehicles found favor in Europe, the Airflow’s startlingly blunt “waterfall” front end styling was too radical for America’s more conservative taste.

The American car buyer's wholesale rejection of the Airflow taught Chrysler (and GM and Ford) a painful lasting lesson: avoid the risks of extreme innovation. The fiasco helped shape Detroit’s enduring elevation of popular style over genuine innovation.

Chrysler revived, and made enormous profits during the WWII era. But the development of the critical all-new 1949 models was haunted by Chrysler’s lingering Airflow insecurities. Whereas GM and Ford confidently introduced longer and lower models designed to knock the socks off of exuberant post-was buyers, Chrysler President P. T. Keller insisted on tall, boxy and boring cars– specifically designed so that a man’s fedora wouldn’t be knocked off upon entering.

In that post-war buyer’s frenzy, Keller’s stolid tanks sold well enough– initially. By the early fifties, Americans were in the mood for more: horsepower, automatics, power steering and brakes, style and flash. Unlike Chevy and Ford, Plymouth offered none of those; the market punished it unmercifully. In 1954, Plymouth was kicked out of its long-established number three spot by Buick, and dropped to number five behind Pontiac. The mood pendulum had swung too far; it was due for an (over) correction.

Chrysler hired designer Virgil Exner to inject vitality into the company’s products. The 1955’s were an improvement. The radical 1957’s were set to be the great leap forward (“suddenly it’s 1960!”). But in the rush to revolutionize, the dramatically finned ‘57’s suffered from atrocious build quality. Water and dust leaks were notorious.  Upholstery split. Springs came up through seats. And the cars started rusting on the dealer lots.

The flashy new product sold, but word spread quickly. Plymouth’s 1958 sales plunged by no less than 41 percent. Despite a rep for engineering prowess, Chrysler would have to dodge a reputation for spotty build quality from then on, deserved or not.

Chrysler nursed itself to health once more, only to be deeply wounded by a staggeringly idiotic act of self-mutilation.

In 1960, Chrysler president William Newberg heard a rumor at a cocktail party that Chevrolet was working on a dramatically smaller 1962 model (the compact Chevy II). In a colossal blunder, Newburg assumed this downsizing rumor referred to ALL the full-sized Chevrolets. Newberg immediately killed development of Chrysler’s best-selling full-size 1962 Plymouths and Dodges, and initiated a crash program for substantially smaller replacements.

In what some historians consider a calculated act of revenge for this folly, chief stylist Exner responded by creating bizarrely-styled 1962 Dodges and Plymouths. When these ugly, truncated cars were first shown to dealers at a convention, they created an uproar. Twenty dealers cancelled their franchises on the spot. Plymouth crashed to ninth place, while GM picked up the pieces, swelling its market share to an all-time peak of 52 percent.

Newberg was shown the door. Chrysler hastily restyled the ‘63’s, and went on to enjoy a relatively long spell of good health. From the mid-sixties through 1974 the company thrived, in part thanks to its successful performance image. But with a portfolio [literally] heavy with large rear wheel-drive cars, lacking the foresight, will (and capital) to invest in new efficient compacts, Chrysler was flattened by the one-two punch of the energy crises.

By 1979, the Pentastar was back on the critical list, saved from bankruptcy by taxpayer funded life-support in the form of a $1.5 billion bail-out package of government guaranteed loans.

"Are we bankrupt? Technically, no. Operationally, yes. The only thing that keeps us from going into bankruptcy is the $10 billion investors entrusted us with." Another milestone: Chrysler CEO Bob Nardelli used the “b word’ in public. What’s more, Boot ‘em Bob told the Wall Street Journal (WSJ) that he’s on a leash so short he can feel the hot breath of his Cerberusian owners tickling his neck hairs. Why’s that then? Because all Hell's about to break loose.

More specifically, Chrysler is about to follow GM and Ford’s lead and break loose anything that isn’t nailed down and sell it. This forthcoming “Staving Off Bankruptcy” sale should come as no surprise; this fall, Nardelli announced his intention to flog bits of the biz just after Christmas. His “operationally bankrupt” shocker is PR hyperbole, preparing Chrysler's camp followers for the divestiture to follow. 

Saying that, Nardelli's “backs up against the wall” spin is a double bluff; or, if you prefer, the truth. Chrysler really is “operationally bankrupt.” Have a look at their new product plans. What product plans? Well, exactly.

While $10b is a lot of money for you and me, that’s the amount of cash GM needs just to keep the lights on. Ten billion bucks ain't enough money for Chrysler to make the long-term investment in the new product designs and technology it needs to compete for the American car buyer’s customer AND keep the company going. Period.

So what? That was never the plan. Chrysler’s new owners didn't have any intentions of investing their hard-earned money in the bottomless pit known as a product-lead turnaround. Whether or not Cerberus planned to keep the Chrysler dealer network as a kind of K-Mart store front for outsourced products, Cerberus' purchase was all about stripping and flipping. 

That’s why the smartest guys in the room installed Nardelli, who’s about as much of a car guy as I am a numismatist. The Home Depot despot was charged with cutting costs and stabilizing the company until such time as it could be sold; which was to be sooner, rather than later.

Unfortunately, the private equity boys knew sweet FA about cars. They failed to realize that Chrysler’s German owners had left behind a mortally wounded automaker. Perhaps the incoming execs were dazzled by the new minivan and upcoming Ram, or the company’s total turnover. But they didn't understand that carmaking is a consumer-driven– not cost driven– business; an enterprise whose survival depends entirely on brand strength and an endless stream of class-leading products.

Cerberus never imagined that Chrysler would get this bad this fast– because they didn’t know cars. Nor did they clock the fact that the overall U.S. new car market was headed dramatically south. Cuts or no cuts, bad intelligence and bad timing have destroyed any possibility of stabilization in Auburn Hills.

Needless to say, none of this does anything more than accelerate Cerberus’ original time lines. Nardelli will continue to wield his axe even as he begins the inevitable process of dissolution. To that end, the Chrysler CEO told the WSJ that “the company will move very aggressively to dispose of about $1b in land, old plants and other assets, even if it has to sell them below book value.” 

Don’t be fooled by the implications of that list. The only thing Chrysler has to sell that’s worth a damn are its MOPAR parts operation, its production facilities and the Jeep name. The “book value” of these “assets” is a Hell of a lot less now than it was when Cerberus bought them, and falling. Given the dizzying pace of vehicle production technology, unless the Chinese, Indians or Canadians (Magna) want to buy Chrysler’s U.S. production facilities, they're worthless.

Where does that leave Chrysler? Nowhere. Ten billion dollars isn’t enough to do anything more than pretty-up their current products’ dreadful interiors ("260 line item improvements") and help the automaker hold on for another year or so– albeit cutting every step of the way in the face of diminishing market share. Meanwhile and in any case, Chrysler will either sell itself to someone “below book value,” or its private equity masters will throw in the towel and file for Chapter 11.

If we had any doubts before, Nardelli’s "operational bankruptcy" remark leaves no doubt that Cerberus is prepared to cauterize its Chrysler wound and use Chapter 11 to amputate the automaker from its portfolio. Cerberus will hive off Chrysler Financial, take their tax write-off and call it a day. And consign one of America's greatest automakers to the scrap heap of history.

How in the world did the United Auto Workers (UAW) boss Ron Gettelfinger think he could get his Chrysler members to ratify their proposed contract without providing job guarantees? Did he seriously believe a $3k signing bonus would convince his otherwise carrot-less union brothers and sisters to surrender their right to graduate into cushy “non core” jobs? Or was Gettelfinger blindsided by his own ego; figuring he could yell “roll over” and “play dead” at 45k well-paid autoworkers and make it so? Either way, the question must be asked: what the Hell is going on?

First, the latest point in our connect-the-dots sequence: a so-called “secret handshake” deal between the UAW and Chrysler. Reuters reports that UAW VP General Holiefield told Local leaders he made an unannounced pact with Chrysler to keep certain U.S. plants open if members ratify the new contract. Assuming Chrysler workers will believe Holiefield– a stretch given the rancor surrounding the po-faced contract– it’s a clever play. But is it true? 

If Chrysler owner Cerberus offered their UAW members job guarantees, surely BOTH sides would want them in writing to ensure the new contract’s ratification. There are two possible reasons why the union would hide assurances of job security. Either the UAW knows that this alleged job security is highly selective (i.e. they realize that Chrysler’s about to shut plenty o’ plants) and therefore divisive, or there wasn’t any “secret” deal. It’s just a desperate UAW officer blowing smoke up his members’ collective asses.

No matter how you look at it, the UAW leadership has rolled onto its back doggie style, their members aren’t buying the new deal and the union brass are growing increasingly desperate. To wit: not only did the International approve the contract by voice vote, but they aren’t reporting ANY member voting totals. The Locals are playing fast and loose with the numbers as well. The Detroit News says that three quarters of their yes/no stats arrive as percentages, rather than precise numbers.

Could the UAW cheat their way to ratification? Sure. And if the subterfuge is discovered, there will be Hell to pay– within the UAW, relative to Chrysler and, lest we forget, over at Ford. And what will happen if the rank and file reject the contract? The key to this conundrum, indeed, the explanation for this incipient chaos, lies within the UAW’s six-hour strike with Chrysler. 

It’s critical to note that the Chrysler strikette represented a split within the union, rather than a united push for more concessions. After the UAW walked out, they did not return to the bargaining table; they simply signaled Chrysler that they were ready to sign. Lead negotiator Bill Parker’s immediate and public opposition to the deal is proof positive that the UAW was of two minds. And the bit that said this is as good as it’s ever gonna get won.

Think of it this way: Union boss Ron Gettelfinger understands that Chrysler is a company staring down the barrel of Chapter 11. He also knows Cerberus stands ready, willing and able to let its 45k union employees go on strike– and break it. He must have figured it’s better to capitulate now and make it look like tough negotiation, rather than face Cerberus’ nuclear winter. And he may have been emboldened by his success at GM.  

But there’s one thing Gettelfinger didn’t/doesn’t understand: his members’ ignorance and militancy.

The average Chrysler worker doesn't believe that his or her employer is about to go under. They don't appreciate the fact that Chrysler’s lack of a foreign sales safety net makes it especially vulnerable. They don't understand that one of the world’s richest private equity firms will hang the company out to dry in a New York minute if they think it’s an irredeemable money pit. All they know is that someone’s getting screwed and it’s us. As usual.

Gettelfinger’s mob forgot to sell union members on the idea that Cerberus holds all the cards. Saying that, how could they? Big Ron couldn’t risk calling a “real” strike to get his members in line– because they would have lost. And he couldn’t tell the truth about his position, because he would have been considered weak, and the members might not have bought it anyway. But the truth is neither Gettelfinger nor his members can avoid the truth. 

If Chrysler workers are allowed to reject the contract, the UAW goes back to the bargaining table. Chances are nothing much will change. The leadership will re-present virtually the same contract and hope the members have “got it out of their system” and approve the deal (a la National Steel in the early ‘90’s). If Gettelfinger’s regime can’t withstand the fallout and/or gets caught cheating, the new leadership will call a strike. And lose.

[Interview with Greg Shotwell of the Soldiers of Solidarity below]

Kids love to play connect the dots. When the dots are numbered sequentially (with a few outlining details thrown in to keep 'em focused), it's easy to do. When the numbers are missing, it's hard to see anything more than random points on a page. And so it is with Chrysler, an American automaker that's generated enough bloggable news during the last six months to keep Google News-alerted surfers away from their designated job for hours at a time. Even though only Chrysler's new owners know their real game plan, there's been enough new "dots" to form a recognizable pattern. What it reveals is a company on the cusp of a major revolution.

The first dot: DaimlerChrysler dumping selling Chrysler. Several companies showed interest in buying Chrysler early on, but most industry analysts expected Canada's Magna Corporation to be a shoo-in. Magna had the balls; Chairman and founder Frank Stronach is the personification of unbridled ambition. Magna had Chrysler-specific auto building experience; they held the contract to assemble Chryslers and Jeeps in Europe and run the paint shop at the Jeep Wrangler plant in Toledo, Ohio. And Magna had the money.

But before the Chrysler deal went down, the automaker announced it was moving production of Euro-spec Chryslers from the Magna-Steyr plant in Austria to Chrysler's plant in Brampton, Ontario. Magna wasn't happy. The Canadian Autoworkers Union (CAW) loved it. Dot two.

Third dot: the private equity firm Cerberus came from nowhere to grab the golden ring. It was the union's turn to be displeased. United Auto Workers (UAW) president Ron Gettelfinger and CAW president Buzz Hargrove both suspected that Cerberus was about to "strip and flip" their meal ticket. They saw storm clouds gathering over Auburn Hills.

And yet, after just one meeting with the three-headed dog's masters, both union leaders did a complete 180. Gettelfinger said the sale of Chrysler to the private equity fund was in the "best interests of our members." Hargrove, who had said he was "pissed off" over the sale, suddenly decided "Chrysler is better off under Cerberus ownership than they would be under Daimler." Dot four.

Fifth dot: after taking over Chrysler, Cerberus revamped the company's upper management. Union-friendly CEO Tom Lasorda suddenly found himself shuffled aside to a vice president's position. Former Home Depot CEO Robert Nardelli took over as Chrysler CEO. Toyota's Jim Press moved in as co-vice president, to run sales and marketing. Both came from companies known for their decidedly anti-union stance, yet the UAW and CAW were both uncharacteristically quiet about their selection. 

Then came dot six: negotiating a new UAW contract. In return for ponying-up a bunch of billions for a health care VEBA superfund, the UAW's leadership agreed on a contract radically different from the GM deal. The Chrysler agreement doesn't include job guarantees or commitments not to close or sell plants. If the UAW's members ratify this agreement, it leaves Cerberus free and clear to shut down whatever plants they choose, whenever they choose. OR… sell those plants to someone else.

Last month, Magna surprised everyone. The fiercely anti-union company suddenly opened its plants to the CAW, inviting them to organize their employees. Owner Frank Stronach said the company "would embrace the union" under the "framework of fairness."  He claimed an epiphany: Magna and unions need to work together to save North American auto industry jobs and create new employment. Dot seven.

Dot eight: Chrysler has announced it's [finally] ready to trim models across all three brands. The executions could mean a Chrysler plant now building several variations of one model for three divisions would build one model for one division. Although the divisions might share some components (e.g. engines or transmissions), the new regime will tie a specific production facility to a specific brand.

Connect the dots. As we predicted when Cerberus assumed control of Chrysler, the money men are getting ready to sell part or all of Chrysler to Magna, or, at the least, outsource production to them. This they can do because Chrysler’s unions have been well and truly appeased, paid off in billions and granted access to Magna’s expanding worldwide empire. This they will do because they’re a private equity firm that has always preferred right-now cash cows to long-term plays. 

Magna is also on board because, well, it’s what Frank wanted then, it’s what Frank wants now and Frank’s got the cash to do the deal. Ah, but is this a picture of resurgent automaker? Nope. It’s an abstract image; one that allows both artist and onlookers to see what they want to see. One thing’s for sure: it's still very much a work in progress.

It’s true. The United Auto Workers (UAW) six hour strike against Chrysler was nothing more than a bit of empty posturing, some meaningless moaning and a quick and unsatisfying climax. Oh I’m sure the union bosses are basking in the warm afterglow of successful pattern bargaining; safe in the knowledge that Chrysler will render unto Caesar the same plunderiffic health care deal as GM, as they look fordward to their next payout. And Chrysler’s new masters must also be happy with the deal. (Ipso facto.) But anyone who’d hoped that someone in Detroit would have the balls to finally shaft the UAW has been left high and dry.

Truth be told, I was one of those observers who assumed that a switch from public stockholder to private equity ownership would help Chrysler grow a serious set of stones. With no one to answer to but their free-spending wives, ex-wives and children, with pockets deeper than an Icelandic ice core, Cerberus' directors could do what The Big 2.8’s erstwhile guardians had never done (if the thought even occurred to them): walk. Hey Ron! You want job guarantees and a bazillion dollar health care VEBA? See you in China. Anyone want to buy Jeep?

That said, my belief in Cerberus’ ability to upset the union applecart disappeared long before the UAW negotiations began. A few weeks after Chrysler’s overlords installed former Home Depot CEO Bob Nardelli into the top slot, I suspected Cerberus couldn’t get wood. There was only one good reason to hire the Prowler-owning auto industry virgin, a man whose largest contribution to his previous employer was self-checkout terminals (for which he paid himself $210m). To cull the deadwood and strip Chrysler like the Grinch looting Cindy Lou Who’s house.

This he didn’t do. If anything, Nardelli’s added complexity to the system. First, he failed to fire Chrysler Prez Tom LaSorda; the exec that helped the Germans run the ailing American automaker into the ground. Next, Nardelli appointed his office manager as his new turnaround titan. Then he hired Toyota’s Jim Press as Chrysler's car czar; a self-professed "servant leader” whose consensus management style poses no threat to Chrysler’s dysfunctional bureaucracy. These are not the actions of a revolutionary intent on a destroying a busted business model.

I know: it’s hard to believe that Cerberus would allow Chrysler’s new management team to adopt the same “steady as she goes” strategy that’s helped GM shed huge chunks of market share and drop billions over the last 17 years, and led Ford to mortgage everything up to and including their logo. With bankruptcy’s long shadow hanging over Detroit, how could anyone with even the gentlest grasp on recent history assume that tweaking overheads, products, sales and marketing is a recipe for success?

And yet, where’s the game changer? 

The weird thing is that Chrysler seems to know what it should be doing to reinvent itself. They made a head fake in the direction of cleaning their dealers’ clocks, looking to trim a bloated dealer network Chrysler can’t afford. And then they backed off. They talked about killing overlapping, brand-defiling models and refocusing their product line. And then added more complexity: a new hybrid-building hothouse. AND we're still waiting for the Pacifica, Durango, Aspen, et. al. to die. Chrysler hinted that a GM-style union health care VEBA superfund wasn’t for them. And then they agreed to it.

Perhaps the UAW agreement is simply Cerberus’ attempt to buy some time. Let’s get the best union deal we can, keep the dealers’ doors open and the factories humming a while, and THEN we’ll blindside them. THEN we’ll close factories, kill models, import Chinese products, cut deals with other automakers to retail their products, sell off brands, face the dealers in court, etc. It’s a heartening thought for those who see Chrysler’s re-invention as the key to its survival, but the facts don’t fit the theory.

Cerberus’ is famous for implementing a “100 day” plan on their new acquisitions. The 100 days have come and gone; if they were going to kick out the jams, the jams would be kicked. Aside from adding new management, the carmaker Cerberus owns today looks strikingly similar to the carmaker Cerberus purchased on May 14– new union contract and all. 

In fact, the day before the UAW strikelet, Chrysler announced they were cutting 415 full-time white collar jobs from their Auburn Hills HQ, and saying sayonara to 1000 temps. The bloodletting was part of LaSorda’s pre-Cerberus turnaround plan, which dictated that the automaker shed 11k hourly and 2k salaried jobs over three years. So the “old” turnaround plan was/is still chugging away behind the scenes, even as Cerberus headed into and out of UAW negotiations. That ain’t good.

It’s time to face facts: Chrysler’s new boss is the same as the old boss. Same game plan. Same results. The UAW non-strike strike proves that the real indecencies are yet to come.

Since Cerberus removed Chrysler from German control, the crisis corporation’s modus operandi appears to remain unchanged. Other than some relatively minor dealer antagonism (since smoothed over), there’s been none of the slash-and-burn stylings formerly attributed to ex-Home Depot CEO Bob Nardelli and his new, private equity employers. Perhaps a companywide excrement – fan collision awaits the conclusion of United Auto Workers negotiations. Meanwhile, Chrysler better start getting its you-know-what together on the product front, ‘cause the cupboard is almost completely bare.  

In the last year or so, Chrysler has rolled out over a half-dozen new models. Only one can legitimately be called a “hit”: the Wrangler Unlimited. Yes but– much of the buzz surrounding the vehicle can be attributed to low supply. We’ll have to wait for the initial rush to end before we'll know if the Jeep model has "legs:'" sufficient staying power to match increased production and become a corporate cash cow. 

Elsewhere, the bloom is off the 300 and its derivatives. Sales are down 15 percent year-to-date. The good news: Chrysler has the relatively affordable, large-and-in-charge American sedan market to themselves for a while longer. And the “niche” is generating a cool quarter million sales per year. The bad news: the previous regime pushed 300 production well past consumer demand, and then dumped 44 percent of total production into fleet sales. Owners are heading for a major hit at trade in time– which will do neither 300 sales nor the brand any favors. 

At the same time, the company’s REAL profit centers are rotting on the vine and taking it on the chin. The Dodge Durango and Chrysler Aspen (a TTAC Ten Worst Automobiles Today (TWAT) winner) are both down by double digits. And again, Chrysler sent its “extra” units to bulk buyers. Some 33 percent of Durangos and 31.2 percent of Aspens sailed with the fleets.

Ye Olde Ram pickup is also in dire straits. The Ram was always going to have problems keeping up with the refreshed Chevrolet Silverado and “newer than thou” Ford F-150. With the slump in the building trades and Toyota jumping in and playing price war games with their Tundra, the Ram is on a hiding to nowhere.

Chrysler’s “new” introductions are also lost in [dealer lot] space. Though let down by poor reliability, the designs that fueled Chrysler’s pre-merger renaissance were daring and innovative (e.g. the cab-forward line and the Neon). They kept their competition awake nights and wrote the tickets for more than a few former Chrysler hands (one of whom has been chasing the magic at GM ever since). 

After the 300, Chrysler’s new models landed with a gigantic thud. Jeep Commander excepted, they weren’t “bad” designs; just incredibly bland. The much-anticipated Sebring hit the market and went straight to rentals. Even the nicest of the buff books could find little nice to say. The Caliber was an interesting idea that can only dream of the old Neon’s volumes. And the lack of a model priced beneath the Caliber is crippling.

The Pacifica has been cut and reprieved several times. At the moment, as Chrysler supposedly considers paring down its offerings, there isn't even an update on the drawing board. As Chrysler’s only entry in the hot large-CUV market, the Pacifica should be capturing some of the more profitable parts of the SUV refugee and people-hauler business. The Pacific wasn’t quite good enough when it was new. It’s less so now.     

Other than their new minivan, Chrysler has one– count it one– more new vehicle on the near horizon. The new retro-styled Challenger has been getting good ink, but it’s diving into a shrinking pool (Mustang sales are tanking) and competing directly with Chevy’s new Camaro.

At least Chrysler doesn’t share GM’s and Ford’s worries about trying to eke out a profit from imported Europe-designed models. Chrysler don’t have any. One of the main “reasons” behind the now-abandoned DCX merger: Chrysler had no overseas presence. Their European subsidiaries were dogs, and got sold off during Iacocca’s reign. Chrysler Europe isn’t a great drain, but it sure isn’t going to be the company's savior.     

Worse, Chrysler’s old “partner/contract designer” Mitsubishi has been twisting in the wind for the last decade. Historically, designing and selling parts/designs to other manufacturers has been Mitsubishi’s path to success (such as they’ve had). Surveying Mitsi's equally aged line of lackluster models indicates that a last-second hook-up with Chrysler won’t help either of them.

Whatever the new regime has planned for Chrysler, it looks like DCX shot their wad before handing over the keys. The new minivan better be “number one with a bullet," 'cause it’s the only one Chrysler's got chambered. Meanwhile, the lack of bold decisions on the new/refreshed product front may indicate management indecisiveness, a secret plan to tie-up with foreign automakers or an equally covert op aimed at stripping and flipping the core business (loans). Or, perhaps, all three.

Poor-quality car dealers. You know the score: dodgy facilities, salesmen you wouldn't trust with your pet rock, F&I guys who nickel and dime your paycheck into oblivion and service departments for whom "bilk" isn't just a word- it's a way of life. Industry analysts and desk-chair pundits alike condemn many (if not most) auto dealerships as a cancer on the industry. Believe it or not, car manufacturers share your distaste. Hence the reason the newly excised Chrysler LLC flashed its private equity muscles, threatening to close "underperforming" dealerships. Is that legal? 

The short answer is: there is no short answer. Franchising laws come in 50 flavors. These state laws are extremely complex and vary enormously from jurisdiction to jurisdiction. If there's an overarching theme to these statutes, it's that they tend to favor (i.e. protect) the franchisees.

For example, in many states, a franchisor may not terminate or refuse to renew a franchise agreement without legally demonstrable "good cause" for doing so. Franchisees may also sue franchisors for injunctive relief (e.g. a court order prohibiting franchise termination) or rescission (undoing the franchise sales agreement), PLUS damages. Oh, and the Federal Trade Commission can step in to enforce state laws.

So, in business terms, Chrysler can shutter its underperforming dealerships, but their legal bill is bound to be on the Orion's Belt side of astronomical. In fact, any automaker considering cutting dealer deadwood has one word on its mind: Oldsmobile. GM's December 2000 termination of its Oldsmobile franchise is example no. 3 in the OED under the phrase "cataclysmic meltdown." When all was said and done, this little exercise cost General Motors about $1b- not including various intangibles that corporate PR folks might call "good will" or "public image." 

Still, it's got to be done. Toyota has 90 American dealers for every percentage point of U.S. market share. General Motors has 300 dealers for every point and Chrysler is nominally better at 270. There is nowhere near enough space to detail all the reasons why this state of affairs is toxic for the American manufacturers. Suffice it to say, the end result is that the dealer bloat is stomping the life-support machine attached to Chrysler's sales numbers and wrecking what's left of Chrysler's battered consumer image.

Chrysler's decision to prune its dealer network can only go two ways. The manufacturer can either simply pay the dealers to shut down or fight them in court. Although the word extortion comes to mind, a pay off would be the quickest and easiest way to make the problem go away. Alternatively, Chrysler's lawyers could say screw you, see you in court; lots and lots of courts. If Chrysler's army of high-priced lawyers loses at trial, it'll cost them a ton of money. If they win at trial, it will still cost them a ton of money.

Chances are they'd win some and lose some and pay through the nose for the privilege. Either way, the bottom line is the bottom line: there's no inexpensive way for Chrysler to trim its dealer network. 

There are more devious alternatives. Chrysler could reduce the amount of dealer "holdback." That's the money– roughly two to three percent of a vehicle's retail price– held by the manufacturers prior to sale. Dealers depend on this post-sale cash to book paper profits and make money. Chrysler could make the size of the holdback performance related, or simply drag their heels.

Chrysler might also say "Hang on; we've got some production issues. We've got to allocate our 300Cs very, very carefully. At this point, only five star Chrysler dealers can have Hemi-powered cars." There is precedent: SRT-8's are doled-out by corporate caveat.

While any such moves brings the threat of lawsuit, pretty much everything does. Chrysler can make life hard enough for "bad" Chrysler dealers that they'll have no choice but to send their dealership to the land of Plymouth, Eagle, AMC, De Soto, Nash, the New Yorker, Imperial, Cordoba, Daytona, Cirrus, Concorde, LHS, 440, Dart, Breeze, Spirit, Reliant, Omni and… well you get the idea.

There was one legal development of late, a silver-plated lining to the grey cumulus clouds filling The Big 2.8's sky. In Leegin Creative Leather Products v. PSKS, Inc., the Supreme Court overturned a 96-year old precedent that made any kind of vertical (manufacturer-set) price rules illegal on their face, without any other examination. 

Under the old rule, dealers could make patently senseless decisions with prices, like fleece customers for $10k over sticker on a Solstice or mark Trailblazers down so much as to utterly pulverize their residual values. Now that General Motors or Chrysler or Ford can call dealers out on the carpet, they have much stronger control over some of the more foolish moves they make. It can't hurt, but it won't really help. 

Aside from select Jeeps, Chrysler's sales suck. Given this inescapable fact, you'd think that the hard-pressed born-again domestic automaker would do everything in its power to keep the folks on the American front lines happy. After the sales bank debacle, after brazen "channel stuffing" (forcing dealers to take cars), after barring "under performing" Chrysler dealers from the company's life-sustaining used car auctions, after sending these dealers letters threatening to shut them down, you'd think Chrysler's corporate clowns would have run out of ways to alienate the troops. Wait! Here's a new one: exclude some dealers from the corporate Internet sales funnel. Way.

Automotive News discovered the Crisis Corporation's Internet shenanigans by searching online for Chrysler dealers within a specific zip code. They got a list of all the dealers in that area. When they clicked on the name of one of the dealers, they either did or didn't get transferred to the dealer's website. A decision made at the top level prevented some (if not most) dealers benefiting from leads generated (or now not) by the company's all-singing, all-dancing brand-specific websites.

Chrysler, Dodge or Jeep dealers who don't have the corporate "Five Star" dealer rating (Chrysler pentastar, geddit?) get screwed. If you select a Five Star dealer, you can request a quote, search inventory, schedule a test drive or set up a service appointment. If the chosen dealer didn't quality for the five-star designation, you get a message to call or visit the dealership. End of story.

What makes a Five Star dealership worthy of such consideration? According to www.fivestar.com, Five Star dealers must meet "specific requirements set by DaimlerChrysler." They have "strict facility requirements [so] you can expect a clean and pleasant place to shop for a vehicle or have your vehicle serviced" and employ "consistent, proven processes focused on satisfying every customer every time." 

Even better, they're staffed with "sales professionals [who] are product experts trained to make sure you find the vehicle that best suits your needs [and] service and parts professionals… trained by DaimlerChrysler to properly diagnose your vehicle, repair it right the first time, and get you back on the road quickly." At this automotive nirvana, "employees work together as a team to ensure that, once you purchase a vehicle from them, you have a seamless ownership experience that can only be called Five Star."

If you stop to think about it, a dealer answering to the above description is kinda what a customer has a right to expect from a "normal" car dealer. Chrysler's Five Star folk are only doing what any well-managed, customer-focused dealership should be doing. In that sense, maybe Chrysler's right to cut out its non-Five Star dealers from the cyber-loop. Of course, Chrysler dealers who don't have the Five Star rating don't quite see it that way. 

B.J. Brickle runs both a Chrysler-Jeep dealership and a Nissan franchise in South Carolina. Customers can access his Nissan inventory via Nissan's on-line services. Not so his Chrysler product. "I have a guy just handling Internet leads [at the Nissan dealership]. If you respond to me on the Internet, I'm back to you in an hour. With Chrysler, I don't have that option."

Chrysler's e-favoritism is a classic case of rhinectomy for facial spite. In areas where there are no Five Star dealers, customers looking for local inventory are denied a peek at Chrysler stock– unless a dealer with fewer than five stars wants to bear the expense of listing their inventory on their own site. Even if they do, the vehicles aren't accessible from the corporate mothership's site, where many buyers begin their car-buying adventure. 

In typical Big Three Kremlin style, Chrysler says it's "studying" the problem. They say the selective electronic referrals are designed to reward Five Star dealers and encourage lesser stores to work toward certification. "We're re-evaluating all elements of the Five Star program and hope to have a resolution soon," said spokesperson Lidia Cuthbertson. 

This is beyond nuts. With precious few exceptions, Chrysler's sales are down across the board, with no immediate prospects of resurrection. At best, the company has a truck-heavy, mediocre lineup. While you can certainly understand Chrysler's general desire to trim its bloated dealer network, there are dignified ways to go about it (e.g. Chapter 11). Now is not the time to demoralize dealers struggling to put food on their table and, by extension, Chrysler's.   

One thing's for sure: Chrysler needs to stop "re-evaluating" their web policies and understand the number one rule in sales: make it easy to buy. Stupid moves like this serve no useful purpose. The two-tier internet strategy pits dealer against dealer, and dealers against the company. It may not violate the letter of their franchise agreement, but it annihilates the spirit.

New owners or no, Chrysler still seems Hell-bent on self-annihilation.

As top executive for a large manufacturing enterprise, Bob Nardelli was a tremendous success. As the man in charge of a gigantic retail business, not so much. Like any automaker, Chrysler’s survival depends on both its ability to manufacture class-leading products AND get its dealers to provide class-leading customer service. So, as Nardelli takes Chrysler’s helm, the question must be asked: is he half the man he needs to be? The answer is Six Sigma.

Navy vet and Motorola employee Bill Smith created the Six Sigma management system (a.k.a. the “Way of the Sword”) for Motorola in the 80s. Six Sigma’s goal: design and create products with no more than 3.4 defects per million. Like many such theories, its principles are enshrined in acronyms: DMADV (Design, Measure, Analyze, Define, Verify) for product creation, DMAIC (Define, Measure, Analyze, Improve, Control) for production. Its success depends on continuous, company-wide commitment.

GE CEO Jack Welch was an early accolade of Six Sigma. When Welch appointed Bob Nardelli CEO GE Power Systems, “little Jack” deployed Six Sigma with ruthless effectiveness. Applied to a division building and selling locomotives and power generators for other business (i.e. BTB), Six Sigma worked a treat. Excellent products were designed and built, and management limitations minimized (retarded innovation, inflexibility, group-think, insulation).

In December of 2000, Nardelli lost a bid to replace his mentor at GE. Despite a complete lack of retail experience, Nardelli landed the top job at Home Depot. Appropriately enough, Nardelli cleaned house, replacing Home Depot's top management and rationalizing every aspect of the business.

Seven years later, at the end of his tenure, Home Depot’s market valuation had declined by 40 percent. Much to the chagrin of stockholders, Nardelli floated away on a $200m golden parachute.

Nardelli’s over-reliance on Six Sigma lay at the heart of his troubles at Home Depot. As a system of measuring improvement, Six Sigma could work on a retail level— in the same sense that Darwinian principles of “survival of the fittest” could work as a political system. But just as social Darwinism isn’t flexible enough to subsume competitive belief systems, Six Sigma is not exactly what you’d call a people pleaser. For example…

Nardelli used Six Sigma to streamline Home Depot’s in-store staffing. By adding self-checkout technology and generally thinning the ranks of floor staff, Nardelli was able to correct a “defect” in the chain’s “production process.” The moves cut costs and, thus, increased the amount of money available for employee training.

The strategy reduced the number of employees on the floor, and turned many of the remaining employees into data measurers and desk jockeys, sapping time once lavished on Home Depot’s customers. Appropriate data was collected, but customers were not well pleased with the tumbleweeds blowing through the aisles of the big box home improvement store. You can do it, we can help, but you gotta find us first.

“Bump’em Bob” Nardelli also directed his [new] management team to apply Six Sigma principles to strategically re-position Home Depot’s displays and products. As you can imagine, the statistical emphasis robbed some of the “surprise and delight” from the Home Depot retail experience, in a genre where emotion is a precious commodity.

But more than that, Six Sigmatitis proved to be a demoralizing influence on Home Depot’s human infrastructure. Nardelli’s less than warm personality and his willingness to eliminate all those who opposed his methodologies cast a icy pall over Home Depot’s corporate culture. 

"Facts are friendly" is one of Nardelli’s favorite sayings. So here’s a handful. In July of 2007, Chrysler’s sales were down eight percent compared to July 2006, even while they spent an average of $4,082 per vehicle on incentives. Inventory is down 17 percent over last year, but it’s still an 81 day average supply (45 days being the goal, 60 the current American norm).

Obviously, Chrysler’s manufacturing operations could use stricter guidance. Strict defect measuring is always welcome in the world of car production. And despite the trail of broken careers at Home Depot, it’s also true that Chrysler’s middle management torpor could benefit from some pruning.

But injecting Six Sigma into the Chrysler culture is no long term solution. In the ultra-competitive automotive marketplace, where Toyota’s lean production system sets the standard for manufacturing efficiency, an automaker needs more. It needs strong branding and a spark of genius. Even Jack Welch knew that Six Sigma had to be balanced against the need for risk in order to foster genuine creativity.

But Cerberus didn’t hire Nardelli to return Chrysler to greatness. They hired him to prepare the company for sale. To slash and burn the automaker's production process, corporate bureaucracy and dealer network, so they can strip and flip the result. Nardelli is all the executive Cerberus– if not Chrysler– needs.

[For more info. on Six Sigma, go here .]