By on June 29, 2006

gate.jpg“Small is Beautiful” was released immediately after the ’73 energy crisis.  German economist E. F. Schumaker’s collection of essays tapped into the prevailing gestalt: a growing fear that the institutions that defined capitalism’s success had become economically and environmentally unsustainable.  Contrary to popular belief (i.e. the people who used the book’s title as a mantra without reading it), Schumaker wasn’t predicting or recommending the end of big business.  He simply believed that large organizations work best as small, independent groups acting in harmony.  Someone ought to tell Dieter Zetsche.

"We are convinced that DaimlerChrysler provides [Chrysler with] more resources [and] know-how [than its competitors] in many areas," DCX' CEO pronounced at yesterday’s US launch of the German-engineered Smart two-seater. In case you missed the point of Dieter’s diatribe, the carmaker is launching an advertising campaign tomorrow that touts the fact that Chrysler products benefit from German – American cross-pollination.  In short, a Chrysler is a better car than a Ford or GM vehicle because it’s got Mercedes DNA.

There are some obvious problems with this strategy.  Mercedes’ reputation for bullet-proof build quality is long gone, squandered in the relentless pursuit of growth and cost-paring profit.  (Proclaiming that a Chrysler is built like a Merc will cause many a previous gen S-Class owner to smirk uncontrollably.)  Toyota, Lexus, Honda and Hyundai have a far more credible and accessible claim to mechanical reliability than the three-pointed star.  Besides, the American public considers Mercedes a luxury brand (even if it doesn’t boast Lexian quality).  DCX’ new campaign risks an association that whispers to its target demographic “Hey Mac, wanna buy a cheap Mercedes?”

Best case: advertising a garden-variety Chrysler as a Mercedes-under-the-skin raises the “domestic” brand above Ford and GM’s growing pile-‘em-high-and-sell-‘em-cheap reputation.  But the ad campaign also threatens to trigger a worst case scenario.  Connecting a luxury brand with a mass market manufacturer (not that Mercedes isn’t a mass market manufacturer, but we’re talking about perceptions here) may alienate Mercedes’ US customers.  Cadillac almost died for the sin of dragging the brand down market, and they didn’t even advertise the fact that their cars shared greasy bits with their less mechanically gifted GM counterparts. Psst.  Hey Buddy, want to buy an expensive Chrysler?

Of course, the line between uplift and collateral damage could well depend on the ad agency’s execution.  Apparently, Dieter will be a figure of fun, which is both surreal (fun Germans?) and appropriate.  After all, this is the same foreign-owned automaker whose outspoken PR Supremo has repeatedly and pointedly blasted Toyota for daring to suggest it was an American company.  And the campaign began when a Birmingham barber asked Herr Zetsche what Mercedes had to do with Chrysler (“Ve ate them.”). But even if DCX’ German – American shtick works, the campaign reveals a fundamental flaw in Zetsche’s business strategy, and the strategy of all his competitors: synergy.

In case you forgot, synergy is the concept that replaced Small is Beautiful, once the oil supply (and public anxiety) eased.  Synergy says it’s OK to be big, as long as the “whole is greater than the sum of the parts.”  Supposedly, synergy creates “economies of scale” that makes huge business conglomerations more efficient.  Modern car companies?  Efficient?  Anyone who’s dealt with one on any level ever may beg to differ.  In fact, Schumacher had a thing to say about that back when jeans had bells: "The most striking thing about modern industry is that it requires so much and accomplishes so little.  Modern industry seems to be inefficient to a degree that surpasses one's ordinary powers of imagination.  Its inefficiency therefore remains unnoticed."

In all the talk about domestic automakers’ market share, union contracts, legacy costs, production capacity, rebates, incentives and product quality, no one seems to be interested in the fact that American[ish] car companies could well be the most inefficient enterprises on planet Earth.  I’ve received dozens of emails from people inside The Big Three describing their employers’ Kafka-esque bureacracy.  The reason these companies can’t stay on top of market niches, or update their existing vehicles to fend-off the competition, or maintain brand differentiation, isn’t money or will.  It’s sheer size. And the fact that their corporate cultures are entirely antithetical to genuine decentralization.

Schumaker’s central precept was easily understood: quality above quantity.  Growth isn’t everything.  Perhaps it’s too much to expect a huge company owned by shareholders to sacrifice the prospect of every-increasing earnings on the altar of personal fulfillment and environmental responsibility.  But Schumaker was right about the dangers of excessive size and centralization.  Meanwhile, DaimlerChrysler, GM and Ford are busy talking-up international platform sharing.  And Porsche, the quintessential “small is beautiful” sports car company, is trying to take control of Volkswagen.  Sometimes, the more painful the lesson, the more important it is.  

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15 Comments on “German is Beautiful...”


  • avatar
    vallux06

    Who’s in charge of marketing in the US at DCX?? It must be the multi-talented, recycled garden gnome from internet booms past!!

    On one (1) occasion going to Europe via Italy, out of curiosity I rented a (cough) SMART fortwo at Leonardo Da Vinci airport. You think MB dropped the ball, quality/material wise with the introduction of the 230C coupe, wait till you get your hands on the (cough) Smart.

    Now, I grew up in Germany and are not “above” driving small cars. After I totalled my father’s (ahem)loaned out 5 series, the rest of my college years were spent in a MG Metro turbo, as sort of punishment…. but I digress.

    I had clammy hands and hyper ventilated long before I hit the autostrada. Conversation from pedestrians could be heard in the cabin unmuted and unfiltered of the SMART to the point where I checked several times if the doors were really closed or the windows rolled up. “Splendid isolation” it is not.

    Wind buffeting from passing (!!) rigs made my neck hairs stand up on a case by case bases. At about 60hp you can only expect so much. After 3 1/2 hours of driving I met up with my folks at Lago Maggiore at the foot of the Piedmont mountain region.

    Now, I am a certified, bonified car nut. If someone told me a couple of years back that I would one day be GLAD to get out of a vehicle, any vehicle, no matter how torturous the traffic or the journey, I would have called him crazy!! The (cough) Smart did just that for me!!!

    After the meet and greet swapping family reunion stories, my mom and dad (ahem) borrowed the pint sized roller, with THAT glint in their eye, reliving the glory days, before I was born when they roughed and braved the road with a 4-stroke ’57 250cc BMW Isetta Tourismo all the way from Frankfurt to (you guessed it) Lago Maggiore…………

    I hoped against hope that I would never encounter a (cough) SMART of American roads. For almost a decade MB resisted the urge!! The car(?) has yet to drive into profitability in europe. Nobody in their right mind wants one. I can forgive Bush much of the current goings on in the world and here at home!! But that the current energy prices emboldened the germans to give the micro car a try here is unforgivable.

  • avatar

    I’m starting to think the Germans don’t have a clue about beautiful.

    Saw a production 2007 Sebring in Birmingham MI yesterday. The photos don’t do this car justice–it’s much uglier in person. In fact, I think it might just be ugly enough to single-handedly snuff out Chrysler’s lingering reputation as a design leader.

    This would never have happened with Bob Lutz and Tom Gale running the show.

    I’ll have to drop Farago a line, see if he wants a full design analysis…

  • avatar
    mistercopacetic

    Mr. Karesh,

    -I’ve seen the photos of the new Sebring, and it looks pretty good. If you’re right, it seems like Chrysler has another PT Cruiser. I always thought they looked great in photos, but seeing one for the first time up close at a car show, it was horrendous. Too small on the inside, too big on the outside, backside sloping way up in the air, incomprehensible trunk/cargo shelf. Eye of the beholder, perhaps.

  • avatar

    Mr. Karesh, you are clear for take-off. We look forward to reading your deconstruction.

  • avatar

    “Modern industry seems to be inefficient to a degree that surpasses one’s ordinary powers of imagination. Its inefficiency therefore remains unnoticed.”

    I completely agree with this statement. I am floored, daily, by the gross inefficiencies of the corporations I work with. I don’t know how they get anything done.

  • avatar
    Frank Williams

    I’m waiting to see how the PR minions of Rabid Rick and Bold Moves Bill spin this as Chrysler comes out of the closet and starts openly proclaiming their German (gasp!) ownership instead of being 100% red, white, and blue. Will they still include Chrysler’s workers when they start bragging about how many people the “American” car makers employ, or will they (correctly) count them in the work force from Toyota, Honda, and other foreign-owned manufacturers?

  • avatar
    Frank Williams

    … and Jodi Tinson’s next PR stunt will be having 200+ DCX employees spell out “Deutschland, Deutschland Uber Alles” with their bodies on the front lawn.

  • avatar
    Martinjmpr

    But if the purpose of touting DCX’s German “DNA” is to differentiate them from the rolling crap-piles sold by GM and Ford, can it really be a bad thing?

  • avatar

    They’ve touted their German ownership before, around the time the German-built Crossfire was launched.

    The problem is, no one cares. Maybe they would if Mercedes had a stellar quality reputation, and hadn’t chucked its OCD engineers in favor of flashy stylists, but it doesn’t, and did. Yes, Mercedes engineering remains leading edge. But it’s not as thorough as it once was.

  • avatar
    Martinjmpr

    Mike:

    That may be, but it’s like the old joke about the two guys being chased by a lion, and one stops to put on his running shoes.

    IOW, DCX doesn’t have to prove to customers that they’re objectively good, just that they’re a semi-American car company that produces better products than Ford or GM.

    Kind of a low bar to get over, isn’t it?

  • avatar
    philbailey

    There is no doubt in my mind, since I spend my time repairing and test-driving all kinds of cars, SUVs and yes, even the infamous Chrysler minivans, that German engineers have made a profound difference to the reliability and general MECHANICAL excellence of Chrysler products. Mercedes itself has fallen afoul of its’ eagerness to install in its cars every circuit board that can be visualised or produced, long before their usefulness or desirability has been proven. But the mechanicals are as good as they ever were and Chrysler has benefited accordingly.

  • avatar
    Terry Parkhurst

    William Deming is another prophet who was not recognized by Detroit – or DaimlerChrysler. He was a business professor, who among other things, pioneered the idea of “just in time” inventory. In the mid-Fifties, he went to Detroit and they shunned him. So he went to the Japanese, who were then really beginning to think big about their auto industry. Professor Deming believed in true teamwork and empowering people on the line, so they could give good critiques resultant in needed change. Today, in Japan, the annual Deming award goes to the business that most espouses his policies and thinking.

  • avatar
    Glenn

    Bragging about Mercedes DNA is nothing. SsanYong of South Korea has that in spades, with decent quality (I’d venture a guess that it is better, and more consistent, than Chrysler even today) and sharp prices.

    Look for yourself if you don’t believe me.

    http://www.globalautoindex.com/model.plt?no=3398&ass=

  • avatar
    tom

    Mercedes and Chrysler are both so big, that each of them on it’s own would be way beyond the point where they ever could be efficient. So from that point of view it somehow makes sense that they concentrate their bureacracy, as they recently did by fireing thousands of people in administrative jobs at Chrysler and Mercedes and let DCX deal with payroll accounting and that sort of thing (instead of doing it twice).

    When it comes to German DNA in Chrysler cars, so far it actually does help. Where would the 300 be without it?

    And as long as Chrysler and Mercedes don’t share platforms, I don’t see a problem for Mercedes. I think Mercedes is going to hand down technologies, just like they do within their different lines. Usually the S-Class gets all the state of the art technology, a couple of years later, the E-Class gets them and so on.

    Of course if they’d start sharing platforms it would be extremely hard to convince people to buy the expensive Mercedes. But again, I think DCX knows that and won’t do it.

  • avatar

    Mark my words: full-on platform sharing is next.

    But there’s more than mere cost-savings or transfer of technology involved. It’s all about soul, character, individuality.

    A car that’s built by a company with its own identity, by engineers who can start with a clean sheet of paper, will ALWAYS be better than a reskinned version of someone else’s design sitting on a common platform.

    I like the 300C, I like the Hemified Charger. (And why wouldn’t I?) But the Charger has nothing other than its sheetmetal– nothing– to distinguish it from the Chrysler. It’s simply not a compelling proposition.

    I also reject the idea that engineering overlap is a bad thing. Volvo developed its safety technology on its own, all by its bad self. Now Ford can spread the result over its eight brands, but then all they’ll have is Volvo’s safety technology spread over eight brands. Which will take years and slow down the implementation of any NEW technology.

    Alternatively, you could have eight brands all trying to solve the same engineering problems. And that means you’d have eight potential solutions. You could then implement the best of breed. Nightmare? Or perhaps… survival of the fittest.

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