By on September 29, 2006

dieter.jpg On April 3, 2005, this website began the General Motors Death Watch. Few industry or media types credited the possibility that the world’s largest automaker could be on the ropes. By this August, when the Ford Death Watch series began, it was clear to all and sundry that GM is in a fight for its life. And, of course, that Ford was in the same position. That left Chrysler as the sole domestic automaker whose fortunes weren’t in deep decline. And then, two weeks ago, Chrysler announced that it will lose $1.52b in the third financial quarter. Does that mean its time for a Chrysler Death Watch?  First, a little history…

After staring down the barrel of bankruptcy in 1979/1980, Chrysler tapped into Uncle Sam’s wallet to make a remarkable recovery. The automaker tossed its moribund product line and milked their new K-car like a prize cow. At the same time, they sought out niches other companies had ignored. The Voyager minivan was a smash hit, and the company’s convertibles revived a dead genre. The ‘93 Ram pickup was another major score. In ’98, Daimler-Benz completed its takeover “merger of equals." With a transfusion of German money, management and engineering, Chrysler’s future looked brighter than ever. The ensuing 300, Magnum and Charger found plenty of willing buyers. Once again “Hemi” was on the lips of power-hungry pistonheads both young and old.

But past lessons– both good and bad– were forgotten. Despite the badge engineered departure of their Plymouth and Desoto brands, Chrysler is once again diluting its appeal by selling cheap imitations of its own products. After building reasonably distinctive, commercially successful vehicles from the same platform (300, Charger, Magnum), Chrysler is trying to pass off a tarted-up Durango as an Aspen (a name that brings it no honor) and a hideous Caliber clone as a Jeep. The former will find no friends and the latter degrades a venerable brand. The money spent on both “new” models could have paid for a much-needed refresh of the august PT Cruiser, or other aging products.

When gas prices skyrocketed, sales of Chrysler’s gas guzzlers tanked like everyone else’s. But instead of curtailing production of the slower-selling models, Chrysler continued pushing them off the assembly line. According to PR flack Jason Vines, the automaker’s dealer network is currently sitting on 600k unsold units. At the start of this month, DCX dealers are holding 36,500 unsold Chrysler 300s. At the current rate of sales, that’s an 84-day supply, when 60 days is considered a healthy “pad.” The inventory situation is so bad in general that dealers are refusing delivery of ‘07’s, further choking Chrysler’s chicken.

It is, in fact, a scandal. Peter DeLorenzo over at Autoextremist.com recently quoted a Chrysler “insider” who reported that “upper management has been building cars without dealer orders for close to two years in order to keep the factories open and the truth of their financial situation hidden… DCX 'sells' the unassigned units to their business centers and books the profit from these sales when necessary to prop-up quarterly profits.” On Monday, Automotive News reported that the company paid dealers as much as $750 per unit to take extra stock after its supply of unsold inventory reached 92 days.

Group CEO Tom LaSorda now says that the company will cut both internal costs and production. To that end, Chrysler recently asked the United Auto Workers to match the health care “concessions” given to GM. The union’s refusal doesn’t bode well– which could change once Chrysler starts shuttering factories and offering buyouts a la The Big Two. One wonders how Chrysler’s plan to import Chinese-made economy cars will affect that equation. Meanwhile, Chrysler has matched the Big Two’s zero percent financing to anyone who can make it through the dealer’s door, and added incentives on slow-selling pickups and SUVs, including some 2007 models.

DCX Chairman Dieter Zetsche has been curiously silent through the recent PR storm. The last time we heard from dear Dieter, he accused the UAW of being “irrational” in their resistance to healthcare concessions. Market analysts have been a bit more vocal, though. Jochen Gehrke of Deutsche Bank AG states DCX should sell Chrysler Group, which he says will “unlock” the value of Daimler’s stock.

Even with the $1.5b hit, DCX is in relatively good financial shape. But just like their cross-town rivals, no company can survive that kind of fiscal hemorrhage forever. In fact, it’s now clear that the business basics dragging down GM and Ford– a lack of investment in established products, the introduction of lackluster vehicles, the union strait jacket, burdensome health care and pension costs, dishonest or oblivious management, top heavy bureaucracy, a bloated dealer network– are also hobbling Chrysler. Perhaps it's time to combine all three automakers into a Detroit Death Watch.

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66 Comments on “Chrysler Death Watch?...”


  • avatar

    I’d be interested in your thoughts as how this problem will affect the Mercedes line? They seem to be doing pretty well. As a Benz fan, I worry Benz quality will continue to suffer if they have to funnel profits to prop the Chrysler side.

  • avatar
    dolo54

    does that mean we can get 300s on the cheap? hmmmmmm.

  • avatar

    I think it is too early to call out the “Watch”…

    edspider – you may recall that Benz had some struggles recently and the Chrysler side of the house provide some much needed bolstering….

    As for concessions from the UAW that request was not recent. That question was a long time coming…

    Finally…i think the folks in Stuttgart, Montvale and Auburn Hills have moved beyond the us and them dialogue….

  • avatar
    Frank Williams

    Edspider,

    I don’t think DCX management would allow this to go on long enough to negatively impact the Mercedes side of the house. They’ve been fighting hard to rebuild Mercedes’ reputation after the quality debacle of a few years back, and they don’t want to jeopardize that. I think you’ll see heads rolling at Chrysler Group or see the American operation up for bid on ebay before they’ll let it pull the European side under.

  • avatar
    Kevin

    Little too late for a death watch. Chrysler died years ago!

    As for that German company that now uses those brand names … gotta say that Chrysler group is probably the only American brand I’d even consider buying, and the only one that doesn’t make me want to hurl when I go look at the dealer lots.

  • avatar
    1984

    Can you do Mitsubishi too!? Yay!

  • avatar
    Frank Williams

    Jerzjt,

    The request for concessions from UAW wasn’t recent (i.e. in the past few weeks) but as reported in today’s Detroit Free Press, their refusal still stands. From their report:

    DaimlerChrysler AG CEO Dieter Zetsche again called the UAW’s resistance to health care cost concessions “irrational” on Thursday.

    It was the second time in two weeks that Zetsche publicly expressed incredulity and frustration with the autoworkers union for refusing to provide the same mid-contract financial breaks to the Chrysler Group that workers at General Motors Corp. and Ford Motor Co. approved.

    But labor relations experts said Zetsche’s rhetorical tactic is more likely to strengthen opposition than win sympathy.

    “The UAW won’t reopen its contract simply by being called irrational,” said Harley Shaiken, a professor at the University of California, Berkeley, who specializes in labor issues.

  • avatar
    Glenn

    Actually, I’d surmised that DCX was “all smoke and mirrors” in their financial “stability” when a couple of years ago, the company absolutely refused to bail out it’s Japanese partner, Mitsubishi, which ended up leaving the DCX fold and “running back to mom & pop” for money (i.e. it’s original corporate parents, Mitsubishi Bank and Mitsubishi Heavy Industries).

    In fact, Mitsubishi may have been in a position to assist DCX at some time in the future when DCX’s fortunes were down. I thought this was the purpose of these tie-ups.

    DCX refused to help, which spoke volumes to me about their “REAL” financial position and prospects.

    Plus, DCX was “politely asked” by then part-owned partner Hyundai (which itself owns 50% of Kia) to leave Hyundai’s Chinese partner to Hyundai – DCX ignored this (despite having their own Chinese partner already) and so Hyundai then asked to buy back the portion of itself that DCX owned, as in “get out of my life, I want a divorce.” Doesn’t make DCX executives look like church choir material, does it?

    It may not be time for a Chrysler Death Watch just yet, but if fuel prices peak over $3 a gallon again next summer and DCX haven’t fixed their product mix, (and haven’t brought out the promised Caliber hybrid), then it may well be by then IMHO.

    As for the UAW, well DCX is not an American company, and so it may well find itself being “forced” to move more production to low wage areas. This is the problem with multinational companies – no ties to any particular nation. The UAW rank & file will probably pay for their stupid union’s heel-digging intrasigence with a loss of jobs over the next decade.

    Dr Z: “Hallo? Chery Motors? Ya. Ve vant to muf more produktion to China, ya? Ah, gut. Ya. Gut prices, danka. OK, ve vill fire dez irrational fool UAW people. Ya. OK ve move ze tooling next veek.”

  • avatar
    Jonny Lieberman

    This might actually be a post-mortem.

    70% of Chrysler’s portfolio is comprised of Trucks and SUVs, and despite what Sajeev thinks, there ain’t that many boats in need of hauling.

  • avatar
    jazbo123

    It’s quite obvious that a Detroit Deathwatch won’t make sense unless they all merge into one company.

    If one or two of the big 2.5 goes down it will be party time for the remaining one(s) at least for the short term.

    Of course they could always screw that opportunity up with…

    lack of investment in established products, the introduction of lackluster vehicles, the union strait jacket, burdensome health care and pension costs, dishonest or oblivious management, top heavy bureaucracy, a bloated dealer network

  • avatar
    Mike

    I don’t think Chrysler is ready for a “Death Watch” yet. They have too muich inventory, yes, which translated into working captial that isn’t working, which costs money. But I don’t think that the Germans will let it get to the point that Chrysler is dragging down Daimler-Benz. When Daimler-Benz leaves Chrysler on its own, then it will probably be time.

  • avatar
    gfen

    Why not sum up your thoughts and feelings on all the major automakers out there in one Lollapalooza of deathwatchs, a sort of State of the Automaking Union as told byTTAC?

    Otherwise, I’m going to lose count of which company is at which step of which deathwatch.

  • avatar
    tms1999

    Problems:
    – internal stocks are running horribly high.
    – dealer stocks are running horribly high. So high they won’t take any more stock.
    – UAW won’t budge on anything (surprise)
    – cutting down production doesn’t save anything.

    Solution:
    Unilateraly cut benefits to UAW member, provoking the following cascade of intended consequences:
    – UAW strike. You strike, I don’t have to pay you squat, and no benefits too. UAW take care of paying personel.
    – Factories don’t produce cars that don’t sell. (U.S. factories I should say. Canada and Mexico still making cars)
    – Dealer stock eases.
    – Internal stock eases.

    Then cave in and negotiate a slightly cut down benefit for UAW members, everyone goes back to work, cars are being built again, DCX saved a bundle on salaries, benefits, cleared their inventory.

    Everybody wins.

    I’m so evil.

  • avatar
    guyincognito

    If one of the big 2.5 goes down, I don’t think it’ll be party time for much of anybody in the auto biz, as they’ll likely take more than a few suppliers with them.

  • avatar
    jazbo123

    I’m not saying it would be good for the country, but it would increase sales of the remaining cos. There are alot of people who just won’t buy an import.

  • avatar
    JJ

    Can you do Mitsubishi too?

    Yeah, and Volkswagen while you’re at it…Although they seem to be rescued by Porsche buying a 20 % stake…for now at least.

    If Porsche goes on with introducing new models that aren’t sportscars with volkwagen underpinnings their brand value will eventually lower so much they won’t be able to sell 911’s anymore, and a deadwatch will will be necessary for even the most profitable automaker of today.

    My Point; I think deadwatches are only for the cases where the patient has no hope of regaining (full) health anymore and IMO at the moment that’s only GM and MAYBE Ford. Chrysler/Dodge/Jeep still has a shot I think, especially when Mercedes decides not to give up on them.

  • avatar

    tms1999 has the right idea. Let the Union get their dues back for a while. Except I’d shutter a few factories while they were out standing around the burn barrel.

    OK, this “watch” series calls for a Dead Pool. Wagers on who goes down first?

    As for the above (tms1999) plan, whoever pulls that off first will likely be the survivor.

    –chuck

  • avatar
    1984

    How do you define death?

  • avatar
    Joe C.

    Chuck & gfen – I like it!

    The Bankrupt 500 – The Race to Insolvency

    “Coming around turn four, GM’s got a healthy lead, with Ford making a strong gain. Don’t discount DCX, which isn’t out of the race…”

    Not a finish line anyone really wants to cross, though.

  • avatar
    Jonny Lieberman

    Why is it the UAW’s fault that more than 2 out of 3 cars Chrysler produces are not cars at all but dirt haulers and SUVs that no one wants to buy?

    There are no bad workers, just bad managers.

  • avatar
    CliffG

    A Chrysler death watch may make sense, but a DCX deathwatch doesn’t because of the peculiarities that exist in any German based company. Think about GM with even less financial clarity, the state of Michigan owning about 20% of the company, and the unions having a large contigent on the Board of Directors. While, unlike VW, a state does not hold a substantial position in the firm, the requirement of German “stakeholder” positions on the board make for some rather interesting corporate decisions. If I was the UAW I would panic about Chrysler because there is no one in management who cares about manufacturing vehicles in the U.S. Note that DCX has never even contemplated for one second the idea of manufacturing Mercedes Benz’s in any C plant, they build completely seperate entities…. Did somebody say something about synergy?

  • avatar
    noley

    While all the death watches are (a) entertaining, (b) satisfying, (c) discouraging, and more maybe a reality check is in order.

    Does anyone really believe that GM is going to disappear? Or Ford? The hit on the U.S. economy would be too big for one thing, so government support of some type is a possibility. I don’t think it would work for long, unless backed by huge changes at GM/Ford, but it’s one scenario we could see

    But a more likely outcome as GM/Ford go spinning into the infield is outside investment and acquissition. I can see the Japanese or Koreans jumping in here as they acquire attractive brands. I can also envison a non-auto industry group of investors coming in, killing off or selling the unprofitable brands and running some Six Sigma programs on the rest to get the remnants of the companies in step with the rest of the manufacturing world. Then kill whatever is still not working.

    The brands likely to be killed have been discussed elsewhere in TTAC at some length, so take your pick. GM and Ford (or DCX for that matter) won’t die, but they also won’t be recognizable in another 5 years. I think the sell-off of brands will take place in the next 1-3 years and some will simply go away.

  • avatar
    Jonny Lieberman

    While GM disapearing is unlikely, I aon’t putting money on Saab, Buick, Pontiac or Hummer.

    Same goes for Lincoln/Mercury.

    Why do they exist again?

  • avatar

    Sorry Jonny, but the single biggest problem all three automakers face is the UAW. Even if they build great cars, the Big Two Point Five can't afford union wages, pensions, health care costs, working practices AND the stultifying effect on their employers' corporate cultures (which suck anyway). If you know a way for the Big Two Point Five to jettison their union obligations (sorry, but there it is) without declaring bankruptcy, clue us in. Foreign takeover? Still there. Sell a brand? Still there. Chapter 11? Gone.

  • avatar
    Glenn

    TV cameramen were outside the Studebaker Main plant gate in December 1963, where a TV reporter stopped a worker going home, to ask what he was going to do now that Studebaker was closing it’s doors? The disbelieving UAW stiff responded “Studebaker closing it’s doors? Hah. Studebaker will be here when you and I are dead.”

    Not forgetting Studebaker-Packard was one of the top 75 corporations in the United States at one point, so of COURSE it could never “go away.”

    But – newsflash – it did die.

    So also did Germany’s 2nd largest automobile consortium, in 1961. It was called Borgward, and it included Lloyd, Hansa and Borgward marques.

    Definition of death: non-functional. Kaput. No more. No work can be accomplished. Gone. (Someone wanted a definition of “death”). Like, Pan-Am, which also “would NEVER go away! It’ll be the #1 airline for EVER!” Not.

  • avatar
    mdanda

    Will DCX provoke the UAW into striking?

    Is the plan to build extra inventory now, so that they dealers have some product to sell for a while during the strike?

    Then use the strike to declare Chapter 11?

    Hmmm…I’ve been so focused on the Steve Miller vs. UAW fight that I didn’t see this one coming….

  • avatar
    FunkyD

    Other than the well-discusses subject of unions, the other big hurdle facing the American car companies is their utter inability to learn from their past fiascos.

    Chrysler is simply repeating, without even blinking, a major mistake that it made in the late 70s. That is, building cars without dealer orders. Lee Iacocca said that it was incredibly difficult to clear out their massive inventories of unsold cars and it made him “feel lower than whale s***”!

    These inventories won’t be cleared out without a massive fire sale to dealers and we all know what happens to resale values when that happens.

  • avatar
    starlightmica

    GM and Ford have attractive brands? to foreign buyers?

    A Chinese company buying up Buick for their domestic market mindshare once GM goes down comes to mind, but nothing else.

  • avatar
    Joe C.

    “This telecast of the BK 500 is sponsored by…Fannie Mae: Need a loan?…..The Pension Fund Guarantee Corporation: Who’s your Daddy?…..Toyota: Who else?…..and by Budweiser: Where does it hurt?”

    IMO, 5 year forecast:

    GM: Chevy, Saturn & Cadillac with heavy contribution from Daewoo, Subaru and Suzuki

    Ford: Ford & Lincoln with heavy contribution from Mazda and Volvo, Canada and Mexico

    DCX: Dodge & Chrysler will survive, with 70% product being shipped from China & Mexico

    UAW: Who?

  • avatar
    Jonny Lieberman

    Sorry Farago — I ain’t buying it.

    Money paid out Unions, including pensions and benefits is what? 6-8% of a vehicle’s cost?

    The companies are designing and building cars (and mostly trucks) that no one wants, that do not stack up to the competition and have/hold no value.

    It’s the product, not the people.

  • avatar
    Glenn

    My LAST (as in NEVER AGAIN) Chrysler product was built in Mexico. After that utter fiasco of a car, I said “hmm, may as well buy an honestly foriegn car” – and since I’d already given up (permanently) on GM and DORF – I mean Ford, I pretty well “had” to buy something from outside the US manufacturers. I agree that the big 2 1/2 won’t be able to use the flag-wrapping methodology for selling cars once they finish exporting virtually all of the jobs now in the US, Joe C.

    So, I “gambled” on a Hyundai, which I bought about 2 years too early to get the “best” quality – but overall it has been an ‘above average’ car.

    Thing is? Now that I’ve had a new Toyota, I’ll never settle for ‘above average’ again. For my money, I want “EXCELLENT.” Right now, that’ll be a Toyota, or Honda.

    Have a peek for yourself, here.

    http://www.autooninfo.net/ReliabilityPercentrankAverages.htm

    Just to prove that this website is corroborated elsewhere, let me describe an article seen in a British “Parker’s Car Chooser” dated Feb-Mar 2005. “20 most reliable cars” (N/A online, unfortunately)

    20. Volkswagen Passat
    19. Volkswagen Golf
    18. Audi A4
    17. Honda Jazz
    16. Honda CR-V
    15. Nissan Almera (not sold in the US)
    14. Jaguar XJ (shock!)
    13. Vauxhall (aka Opel) Vectra (was sold as Saturn L300 here once upon a time)
    12. Ford Ka (not sold in the US)
    11. Honda Civic
    10. Toyota RAV-4.
    9. BMW 5-series.
    8. Ford Focus (this not being the same as the US car, unfortunately for US buyers)
    7. SMART (the ONLY DCX vehicle in the stop 20)
    6. Toyota Avensis (sold in the US in coupe form as the Scion tC)
    5. BMW 3-series.
    4. Toyota Corolla.
    3. Toyota Yaris.
    2. Lexus IS200.
    1. Honda Accord (this euro-Accord is sold as the smallest Acura in the US)

    Now, the top 10 car MANUFACTURERS for consistent quality

    10. Audi (they also had the TT listed in the “worst of the worst reliability section” in the article I might add)
    9. Mercedes-Benz (yet only one of their cars were in the top 20)
    8. Ford
    7. Skoda (as in, from Czechoslovakia – using VW tech, now)
    6. BMW
    5. Nissan
    4. Mazda
    3. Toyota
    2. Honda
    1. Lexus

    Anyone else see any trends here? The article was based upon FACTS as found in a reliability league table assembled from over 650,000 cars including 600,000 fleet cars. Fleet users are the hardest, most demanding users and don’t fudge facts – they buy cars based upon facts, not fiction.

  • avatar
    whitenose

    FunkyD: that was my reaction. Did none of these people read Iaccoca’s autobiography? You would think they’d show some interest in the history of the place they’re working for. My god.

  • avatar
    whitenose

    Farago: there is the possibility of a national universal healthcare plan that would make the healthcare part of the obligations irrelevant. The coming wave of politcal realignment, combined with the total fuckup that is Medicare part D and the exponentially increasing costs of healthcare in general will make such a plan inevitable. BUT it probably won’t happen in the next two years AND it wouldn’t fix the cultural problem, which I think is really the bigger issue.

  • avatar
    guyincognito

    I have seen labor (UAW) and overhead (US facility) add a 30% cost disadvantage over foreign (ie. Mexican) built components.

  • avatar
    Robert Schwartz

    Jochen Gehrke of Deutsche Bank AG states DCX should sell Chrysler Group, which he says will “unlock” the value of Daimler’s stock.

    To whom? The world is awash in automobile production. Why buy one? Especially one that has UAW contracts

    upper management has been building cars without dealer orders for close to two years in order to keep the factories open and the truth of their financial situation hidden… DCX ‘sells’ the unassigned units to their business centers and books the profit from these sales when necessary to prop-up quarterly profits.

    Stock fraud. Go directly to jail, do not collect $200.

  • avatar
    windswords

    Jonny Lieberman:
    September 29th, 2006 at 12:59 pm
    Why is it the UAW’s fault that more than 2 out of 3 cars Chrysler produces are not cars at all but dirt haulers and SUVs that no one wants to buy?

    It’s about time we tackle this whole car vs truck thing. The ratio is not as bad as it would first appear. First, it is not the public or any manufactures association, or even vaunted auto journalists that decide what is a truck and what is a car. It is the EPA. Yep, those charged with keeping our air and water pure and pristine also get to tell us what type a vehicle it is that we are driving. As in is it a truck or car.

    They also get to tell us what size classification it is. Got a car (or truck) that fits between your small offering and and your large offering? It’s a midsize, right? Not if the EPA says it’s not. Instead of going by where said vehicle fits in a manufacturers line up, the EPA decides based on interior voulume. They also decide how much volume a subcompact, midsize, and large car will have to make it a, err, subcompact, midsize, or large car.

    So how do our friends at EPA decide if your driving a passenger car or “dirt hauler”? Well it’s things like a flat loading floor. This is how they classify minivans as trucks. Now to be sure there are minivans used to haul cargo, but we all know what this vehicle was designed to do; cart around mom and the kids in safety and comfort. The kicker is they are all now built off of CAR platforms. But no, they are trucks – so sez the EPA.

    So let’s take a look at the Chrylser group’s current and near future lineup of vehicles and see how many of them are REALLY trucks:

    Dodge Caliber/Jeep Compass – Looks like a mini-ute but it’s really a car.

    Jeep Patriot – Don’t know how the EPA will rule on this one because it’s made off the Caliber platform. But I think we could get away with calling it a truck.

    Dodge Stratus soon to be Avenger/Chrysler Sebring – car

    Dodge Magnum/Charger/Chyrsler 300 – car

    Dodge Caravan/Chrysler T&C – They call it a truck, but it’s a car, the modern station wagon. They are designed off of car platforms (Stratus/Sebring). Every time they come out with a new version of these midsize cars the new version of the minivan follows. Everyone remember what made these vehicles popular in the first place? They handle like a car, they have front wheel drive, they have a low step up height. They are NOT trucks. They are cars shaped like vans. Can you imagine hauling dirt in a leather lined, climate controlled, DVD playing, navigation equipped, powered liftgate T&C?

    Dodge Durango/Chrysler Aspen – Truck. Even with the fancy trimmings an Aspen is still a body on frame truck.

    Dodge Dakota – truck

    Dodge Ram – truck

    Dodge Sprinter – truck

    Chrysler PT Cruiser – Car. The EPA says it’s a truck. Puh-leez. It’s based off the Neon platform which last time I checked was a car.

    Chrylser Pacifica – Is it a minvan? An SUV? A crossover? It doesn’t matter because it contented (leather, navigation system, etc.) and used like a car. It was never intended for or marketed to truck users. It’s a car.

    Jeep Wrangler – Truck. Looks like one, rides like one, used to do things that trucks do.

    Jeep Liberty – I’m confused opn this one. Yes it can do what other Jeeps do, but it’s a lot plusher, it’s marketed to women as a “cute ute”, and it was the first Jeep to not have the traditional Jeep (truck) suspension. I’m leaning car here, but I’m open to reconsidering.

    Jeep Grand Cherokee – Car. I know this is the most controversial. I am well aware of what this vehicle can do off road but consider that these vehicles almost never go off road. They cost almost $40k (maybe more now, I haven’t priced any in whaile) and they are crammed full of every luxury item short of an electric nose picker. Ever seen a GC towing anything? Substantial? Motorcycles or snow mobiles don’t count. Most cars can tow them too. Where do you find the most GC’s, on the farm or rural country, or at the golf club and rich suburban neighborhoods? I rest my case. It’s a 4 wheel drive car. It’s not even a body on frame vehicle.

    Jeep Commander – Car. See above. It’s a Grand Cherokee extra large.

    Ok, what have we got so far? 14 car and 7 REAL truck mocles. That’s a ratio of 2 cars for every truck. I would be interested in what the ratio would be if the sales figures were added up and compared.

    RF, I thought about submitting an article about this very subject. Looks like I just wrote it (844 words!). Guess I just blew my chance.

  • avatar
    Scottie

    meh i don’t see DCX going anywhere, they just shelled out alot of money to update their lineup at a rate of speed that is unheard of for US Automakers. Unlike GM or Ford, they have cars that people might actually want to buy. sure they have some uglies, but doesn’t every company. Sure it could happen, but i think you are about a year away from knowing what situation they are really in.

    btw. Isuzu still has “vehicles” for sale that are new in 2007.

  • avatar
    noley

    Jonny–
    While GM disapearing is unlikely, I aon’t putting money on Saab, Buick, Pontiac or Hummer.
    Same goes for Lincoln/Mercury.
    Why do they exist again?

    ‘zactly my point. The result may have some familiar brands but it will not be recognizable.

    Even though I’m a Saab fan (3 of them currently) I’m not at all convinced it will survive as part of GM, although it could possibly be sold–to a Euro or Asian company. Buick, Pontiac and especially Hummer are pretty much useless. I see Chev/Saturn as one line, Cadillac, and GMC. All trucks/SUVs would wear from GMC badges.

    Mercury goes the way of Plymouth. Lincoln could stay… Maybe. No trucks/SUVS, though.

    Again, not at all what we’re familiar with. But it’s all useless unless the cars are ones people want, and GM/Ford seem only able to build cars for a shrinking audience.

    And while the UAW is only a small percentage of hard costs, I think it really has to go away. Toyota and Honda and Hyundai seem to get along without it. The others can too.

  • avatar
    Kevin

    Whitenoise:
    Farago: there is the possibility of a national universal healthcare plan that would make the healthcare part of the obligations irrelevant.

    Right now, suckers who buy Chevrolets pay for GM’s healthcare plans. How does it help the consumer for us ALL to be coerced by threat of government force into paying for GM’s healthcare, even if we’d never TOUCH a GM car? (You do realize just because something is paid for by the government, doesn’t make it free. Some people need to be reminded….)

    I prefer the system the way it is now.

  • avatar
    Ar-Pharazon

    Kevin :-

    Lovely sentiment. It’s people like you who make me proud to be an American.

    Oh, and I’m also glad that you pointed out the fact that GM is responsible for all the uninsured people in the country . . . after all, if we were to have a government sponsored universal health care plan (like every other civilized country in the world), then if will obviously be for the sole purpose of bailing out GM. Great insight.

    From your preference, it’s obvious that you are either 1) employed at a company that provides your healthcare but has not yet run up against the escalating cost wall. Don’t worry, they will. Or they’ll stop offering it. 2) employed by a company that gives you minimal coverage, or self-employed and buying minimal coverage for yourself. And young, healthy, and without a family. That’s fine for now, perhaps . . . but it gets less OK as you age and gain dependents. You may sing a different tune then. 3) same as 2, or perhaps have no insurance at all . . . and your delusional in your belief/hope that you just won’t need it, or won’t be financially ruined if you do. Well, drive safely, look both ways before you cross, and hope that your kids are always healthy!

  • avatar
    Smsum2

    If you are going to do that then your gonna have to add Mitsubishi, Isuzu and Nissan to the list, just to show the least bit of objectivity

  • avatar
    Stephan Wilkinson

    DeSoto???? DeSoto died in 1960, long before anything relevant to the current situation ever happened, long before the article’s history capsule coverage.

  • avatar
    ktm

    Ar-pharazon, I am a professional employed by a rather large company, yet I contribute over 60% of my health care premiums. What most people do not realize is that health care premiums are deducted pre-tax much like your 401k.

    Now, how many union employees contribute anything (or just a token amount) to their health care?

    The answer is not to provide national health care (since when has the government ever instituted a national program that worked correctly – SS anyone), but to try and tackle the reason for the high health care costs.

    Source reduction, not reaction, which is the typical mind-set of most people.

  • avatar
    rtz

    If payroll and overstock are issues, how about just build vehicles every other week? Or two weeks on, one week off or reverse? “Strike” on the off weeks.

  • avatar
    crackity jones

    Aren’t you guys stretching your Death Watch(tm) franchise a bit thin?

  • avatar
    allen5h

    I believe Chrysler/Dodge/Jeep will eventually become toasted namebrands. It all boils down to the UAW and its horrendous legacy costs. When the UAW looks at CDJ what they see is a German parent Company with deep pockets. So even though there may or may not be some givebacks by the UAW, CDJ will never get the sizable givebacks that Ford and GM will be getting in the next 20 years or so as these two companies drift in and out of bankruptcy several times. Ford and GM’s remaining legacy costs will dissipate as their retired workers die off. CDJ, however, will be strangled by these legacy costs.

    The only real hope for CDJ will be sympathy from the UAW IF Mercedes files for bankruptcy in the next ten years or so, but I do not think bankruptcy will happen before a total collapse of Chrysler Mercedes.

    Even though there will be years of alternating profits and losses for CDJ in the near future, in the far future there will be consistent and increasing losses, to the point that maybe ten billion dollars a year in losses will be too much for Mercedes to continue to absorb.

    So the bigger question is this: Will Mercedes save itself by abandoning CDJ, or will Mercedes join CDJ in MADUAWS (Mutually Assured Destruction, UAW Style). Either way, CDJ is toast.

  • avatar
    allen5h

    Windswords your vehicle by vehicle analysis of Chrysler’s car vs. truck lineup is very well thought out and informative. You point out that the EPA is at fault for this label that Chrysler is now getting as a “truck company,” and how this label by itself may be impacting sales.

    What you have to understand is how these EPA car vs. truck classifications came into being. Detroit WANTED and LOBBIED the EPA for favorable classifications that would allow Detroit to meet the more stringent CAFE (Corporate Average Fuel Economy) EPA standards. By classifying actual cars into “trucks” this would allow for the overall increase of their truck fleet gas mileage. This is, in effect, Detroit’s “loophole” around Congress’ CAFE mandate for better fuel economy.

    If Detroit wanted to argue with the EPA over these classifications, then the time for this was years ago. But this played into Detroit’s profit strategy of concentrating on trucks, and thus there was no argument.

    In a very perverse “turnaround jumparound” sort of way (Robert Farago, I knew you would like that :-)) this is now coming back to haunt Detroit now that the new car market is shifting away from trucks, and all of this talk of Chrysler being “70% trucks” may actually be reducing their showroom taffic and, perhaps to a lesser extent, the showroom traffic of Ford and GM as well.

  • avatar
    BigBucksT

    I live in Mission Viejo, CA and Chrysler’s problems really are worthy of a deathwatch. I have never seen so much inventory just sitting in my life. The dealers actually take up massive parking lots belonging to businesses to park their inventory. I have seen Durangos, PT Cruisers, and Magnums sitting for up to 150 days without being moved. It is truly shocking to see.

  • avatar
    Pahaska

    This article goes a long way to explain the large number of new cars and trucks I saw last weekend parked at a stone quarry across from a local C/D dealer. Their own lot was packed solid and there must have been at least 100 vehicles on leased space at the quarry.

  • avatar
    allen5h

    Oops – I forgot one other thing.

    If you want to go back to the very beginning of these “misclassifications” you would have to examine what happened when GB (the First) was the VP under Reagan and Detroit, as you may remember, was mired in operating losses. Reagan appointed his VP as the head of an auto industry deregulation commission to look at Detroit and come back with recommendations that would help Detroit.

    The most important recommendation by GB I (in terms of historic impact) was for the NHTSA to classify Chrysler’s new minivan as a truck. This allowed Chrysler to circumvent the more stringent safety standards of cars and thus reduced Chrysler’s production costs.

    These recommendations where highly controversial at the time. Many pointed out that years ago the station wagon was classified as a car, and as such they had to meet all of the safety requirements of cars. Minivans would be doing essentially the same thing as station wagons; they would be marketed and sold predominantly as family haulers. Nevertheless, the decision from the Reagan administration at the time was for “less regulation” of the auto industry.

    Unfortuantely, this also led to uneccesary carnage as these minivans would easily flatten themselves in crashes. More specifically, the car requirement that the entire passenger compartment be enclosed in a steel cage (ie… pipe-style or guard rail steel side-door beams) did not apply. The consequences of these decisions where horrendous, as these minivans where (as mentioned previously) being marketed and sold as family haulers.

    Personally, I think this is the worst example possible of Government and Industry banding together for the good of Industry, but to the detriment of society as a whole.

  • avatar
    windswords

    allen5h: I commend you for the background info on how this whole mess of classifying “cars” and “trucks” came about. I never said that Chrysler didn’t want particular vehicles clrassified as a truck instead of a car. Just that the classification does not have any bearing on the intended use of the vehicle. The minivans are a good case in point.

    What’s interesting to note is that although their crash performance was not the best their accident rate was low. This was due to the fact that they were primarily driven by moms and that they are a large and easily seen vehicle. So their insurance premiums were lower than say a Corvette of the time which had more in the way of safety devices.

    The other thing I find interesting is that because of demand by consumers and competition in the marketplace the DCX minivan as well as the other brands are among the safest vehicles on the road, with every manner of safety device. My prediction: when the new Caravan comes out next year or so it will have side and or side curtain airbags for all three rows if it doesn’t already. And they’ll probably be standard.

    Bottom line is a manufacturer has to make a vehicle that best suits its intended use. And if that’s a truck instead of a car or something that straddles the definition of the two so be it. What really matters is the sale.

  • avatar
    JustAnotherGMer

    GM Death Watch…
    Ford Death Watch…
    DCX Death Watch…

    Cut-and-paste editorials about companies with purportedly cut-and-paste vehicles. Fitting, perhaps.

    How about something poignant like “Health Care Death Watch” or “Disposable Income Deathwatch” or “Dealer Franchise Deathwatch”? (Still waiting for that Chevy/Nissan/Snapper/Starbucks sign to pop up on M-53)

    or… if you dare… “UAW Deathwatch”? (Considering what’s going on in Battle Creek, MI with Denso and the UAW – there’s the REAL story of the day. Can they exploit opportunity elsewhere as effectively as Nippon-San Inc. has?)

    But really, none of this matters to John Q. Public as long as there are enough Wal-Marts around shelving cheap Chinese-made products – prices kept artificially down to match the falling effective wages throughout the country. Apparently, free-trade has turned into a form of extortion.

    Naw – go ahead – keep re-writing those Deathwatches at the expense of the U.S. manufacturing base. HEY – maybe make a few nickels and dimes for yourself off of advertising revenue along the way! It’s the land of opportunity, afterall.

    Soon the nation’s private cash reserves and credit will be depleted to the point that foreign investment in heavy industry will no longer add up or make sense. Then they’ll just use their foreign-held profits to buy up the corporate factory farms, build a fleet of Hyunta scoop trucks and we can all live on Soylent Green while all the meaningful crops and livestock are exported. American Corn Famine, anyone?

    But I guess we deserve it, right?

  • avatar
    aldon

    Is the UAW so bad that we are to believe they will be the downfall of all 3 domestic brands?

    I don’t get it, Japan has tons of Unions and German unions are much stronger and demanding than the UAW… how come they thrive and we have a death watch?

  • avatar
    tms1999

    “…but to try and tackle the reason for the high health care costs.”

    Reasons:

    1. Market economy. Prices are high because people are willing to pay alot for their own health (some see it as priceless)

    2. Disconnect from user and payer. I pay a fixed cost for my health care. 20% of the company premium (I work for a huge company) and $10 copay for everything. Does not matter if it cost $15 or $150, I pay the same. I have no incentive to shop around or pressure the provider to lower the price. You would say the insurance company should have that kind of interest. Not so, they’ll adjust my employer’s pay premium accordingly: doctors/hospitals can charge as much as they want.

    3. Lawyers. In sue-happy USA, it is very common to sue your doctor (for good or bad reason). Lawyers see that you get paid huge cash settlements, because they get a % of it.

    4. Doctors/providers shield themselves from #3 by purchasing liability insurance (wow, insurance cash in both ways) and charge huge premiums for it.

    My solution?
    – No cash award payment for lawsuits. => no civil lawsuit for doctors. No more lawyers running after the ambulance.
    – Criminalize gross negligence from health care providers. Make sure the incompetents do not practice.

    If the surgeon removes my left leg instead of my infected appendix during my surgery, I want him to go to jail and never be allowed to practice ever again. Face it, $55 billion ain’t bringing back my leg.

    Gee this is off topic…

  • avatar
    Ar-Pharazon

    JustAnotherGMer . . . I think I *like* you! But you won’t be very popular here . . .

    Remember . . . WalMart is *good* for the country, because we all deserve to buy $29 DVD players on credit. Exporting jobs is *good* too, because pretty much everyone here is stupid, lazy, and greedy, and really doesn’t deserve them. Listening to people brag about never ever even considering a domestic product again is also *good*, because we demand nothing but the best, and must punish those who dare not provide it. Reneging on past agreements made to our retirees is *good*, because I sure as hell don’t want to support the old farts . . . that’s why God made WalMart greeters. Foreign owned plants that pay half the wage and provide half the benefits of domestic owned are also *good*, because working grunts just don’t deserve to make any more than that. You really need to adjust your attitude, maybe . . .

    KTM — I can’t disagree with most of what you say . . . I also pay a significant (and growing) portion of my premiums, and have a large (and growing) deductible as well. I am not by any means happy to hear about folks employed by the same company that essentially pay nothing . . .

    My feelings on a national health-care plan are certainly new to me, and driven mostly by the philosophy of ‘the current system sure has sucked things up . . . ANY alternative must be better’. When you see that the US has the most expensive health care, the most people who are uninsured, and one of the lowest effectiveness (measured in many ways) of any industrialized country, then you’ve gotta say ‘we need a major change’. While I’m no fan of government intervention, in this case I think they’re the ones in the best place to do what you say, i.e., try to tackle the reasons for the high costs. But of course my comment was driven by the rather disgusting sentiment of the earlier post, primarily . . . I mean, way to care about your fellow man!

  • avatar
    aa2

    jazbo123.. I agree with you that once one goes under it will be a major help for everyone else. Even what we are seeing now with Ford, GM and Chrysler doing serious cutbacks will help everybody to some level over the next few years.

    When one goes under it won’t mean all that production shut down, but it will mean a major scale back.

  • avatar
    DrVali

    Actually, the Magnum is classified as a SUV and hence goes under truck sales.

  • avatar
    windswords

    # DrVali:
    September 30th, 2006 at 2:09 pm

    Actually, the Magnum is classified as a SUV and hence goes under truck sales.

    See, that makes my point. How stupid I was to not realise the Magnum was a TRUCK not a car! Maybe I can rent one to haul some landscaping rocks from the Home Depot.

  • avatar
    allen5h

    windswords: Your point that minivans are now well equipped and engineered for safety is well taken. It was never my intent to imply that Chrysler is a car company that historically has been “behind the curve” so to speak in terms of safety. As I recall, Chrysler was the first company to spearhead the drive to get airbags into its entire vehicle lineup.

  • avatar
    allen5h

    Jonny Lieberman: “While GM disapearing is unlikely”…

    I disagree. I think GM and some other car companies are near the brink of bankruptcy.

    GM, Ford, Mitsubishi. Any one of these global car companies may not make it to the midway point in this century.

    All of these companies have to become product, product, product companies. If you build enough great vehicles that causes people en masse to bang at the doors of the stores to let them in then these companies will survive.

    But if GM cannot transform itself into a builder of great cars that people want to buy then GM will be toast. I do not want to see GM become extinct, nor do I wish for this to happen. But I can not dismiss the possibility.

  • avatar
    Frank Williams

    Mitsibushi’s name keeps coming up here. Don’t forget the auto arm of Mitsu is just a small part of a huge industrial conglomerate. If the auto company goes under, Mitsubishi will continue to live. However, the Detroit 2.5 have divested themselves of practically every other industry BUT automobiles, so if that goes under the company goes under (or at the very least undergoes a very radical restructuring). I don’t think Ford or GM will disappear as corporations because of their European, South American, Australian and Asian operations. However whatever is left in North America will be a mere shell of its former self.

    As for Chrysler? If they don’t get their act together I wouldn’t be surprised to see DCX trying to sell it to some other company looking for an existing dealer network to peddle their own cars.

  • avatar
    geeber

    Jonny Leiberman: Money paid out Unions, including pensions and benefits is what? 6-8% of a vehicle’s cost?

    If GM is spending 6 percent per vehicle for pensions and benefits, but Toyota is spending 3 percent per vehicle, the lower figure gives Toyota a huge advantage. Toyota can put more money into the product without raising the price.

    Jonny Leiberman: The companies are designing and building cars (and mostly trucks) that no one wants, that do not stack up to the competition and have/hold no value.

    It’s the product, not the people.

    If a company’s costs are higher because of what it is paying its people, and it can’t close unnecessary plant capacity because it can’t lay off its people, then those factors will influence the product. There is less money left over at the end of the day for product, especially when said company can’t raise prices to cover its higher cost base.

    Studebaker discovered this the hard way in the early 1950s.

    The brutal truth is that even if GM came out with a vehicle that matched the Camry in every way, and even exceeded in it a few, it could not price it higher than the Toyota.

    The pattern for the UAW agreements was forged in the 1950s, when the Big Three were really the only game in town. GM could agree to higher costs, because those costs were usually passed on to the customer (possible when said company controls 50 percent of the market, as GM did in those days). In the long run, that practice hurt both Chrysler and AMC.

    Read articles from the 1960s and 1970s about the new car introductions (which occurred at the same time for all the domestic manufacturers in those days). The debate was over HOW MUCH the price would increase, not WHETHER the price would increase. Fast forward two decades…from 1997 to 2005, the price of a new vehicle actually DECLINED 1 percent annually, because of intense competition.

    Unfortunately, for too many years, both GM and the UAW acted as though GM still controlled vehicle pricing. They entered these agreements that are now tightening around their collective necks like a noose. GM management has figured this out, but I don’t think that the UAW has gotten the message.

  • avatar
    geeber

    Ar-Pharazon: My feelings on a national health-care plan are certainly new to me, and driven mostly by the philosophy of ‘the current system sure has sucked things up . . . ANY alternative must be better’. When you see that the US has the most expensive health care, the most people who are uninsured, and one of the lowest effectiveness (measured in many ways) of any industrialized country, then you’ve gotta say ‘we need a major change’. While I’m no fan of government intervention, in this case I think they’re the ones in the best place to do what you say, i.e., try to tackle the reasons for the high costs.

    A huge chunk of health care is paid for by government programs (Medicare, Medicaid, the Veterans’ Administration).

    As someone who works in Pennsylvania state government, and sees firsthand how difficult it is for a government program to really cut costs, I’m not too inclined to believe that universal care is the answer.

    Pennsylvania’s state government is struggling with Medicaid costs – it’s the biggest driver of spending increases by state government – and any attempt to reduce them brings about a storm of protest. Having the federal government assume more of the costs only brings about cost shifting, not cost reduction.

    The simple fact is that people want to consume as much healthcare as they desire…and have someone else pay for it. That is what is driving costs. There are two ways to truly cut costs: restrict access and/or force higher co-payments, both of which are extremely unpopular.

    And having spent time in England and Germany with friends and relatives, I can assure that their nationalized systems have their own set of problems, including rising costs to serve an aging population.

    As for the effectiveness of our system – first, many of those results are obtained by surveys that cherry-pick results to favor nationalized health care; and second, the effectiveness of a procedure or result often depends on how the patient takes care of him- or herself after the physician is done with the treatment.

    Last week a representative of the Pennsylvania Dental Association sat in my office advocating passage of a bill that will allow the flouridation of water. One reason the Dental Association is supporting this bill is to reduce tooth decay among children, especially lower-income children…because many poor people can’t be bothered to bring their children in for dental care, even when it is offered for FREE! They skip appointments, or just don’t care.

  • avatar
    nino

    I don’t understand, we should buy inferior products made by domestically based companies with arrogant management, who themselves have no problem basing their manufacturing and sourcing of their products offshore, and not buy better made foreign products directly ourselves.

    While I don’t agree with everything we buy in this country being made in China (we won the Cold War against Communism, right?), I’ve yet to run into anybody that willingly paid MORE for something if he could get it for less.

    GM sources their 3.5 liter V6 engines out of China now. Whole cars can’t be far behind. GM (and others) do this so they can make a profit while keeping the prices at a level that we’ll pay. Frankly, if you don’t like this situation, the only thing I can see is drastic government regulations on foreign trade that will hurt the economy overall.

  • avatar
    jerry weber

    Some of the bloggers get it others don’t Lieberman saying that 6-8% of a cars cost for medical insurance is insignificant doesn’t gel with Dieter Zetches pronouncement that he would like to earn 5% at Chrysler and 6-8% at Mercedes. That says it all. Funky D, you and I can’t believe the same story right out of Iacocca’s book, the infamous job bank; building for storage and future sales is alive and well. Chrysler knew or should have that the last dodge full sized pickup was over the top in styling and facing resistance in the marketplace. Did they trim production until a new model comes out? Of course not. Their minivan advantage is down to seats that fold into the floor, honda and toyota are rated above chrysler in this segment in every other measurement. Jeep, was allowed to be eclipsed by hummer. In this segement, over the top syling seems to be a winner and jeep is conservative and smallish vis a vis the competition. As for a death watch, it will be different here, chrysler will be dumped by mercedes and then we will have to see what the remnants look like and who own them. (A brand new death watch perhaps?)

  • avatar
    Glenn

    People (and companies) which refuse to learn from past mistakes are doomed to repeat them.

    Also interesting is how Jeep is the ruination of every company which has ever built them / bought the company, yet the self-same companies regarded the Jeep brand as an icon worth buying.

    Willys Jeep of Toledo was the original company, and the Jeep business saved the company (the very well engineered Willys Aero compact automobile line was a good seller in 1952-1953 until the Ford-GM sales war of 1954 which nearly ruined all the other car companies including Chrysler).

    Kaiser Motors, which had succeeded in a seller’s market but was just a money pit for the Kaiser group after that, decided to remain in the auto business despite huge losses, and wanted to sell their overly massive plant (to GM) so bought up Willys Jeep and moved Kaiser car production to Toledo in 1954, ceased production (and killed the Willys Aero just before compact sales finally took off in 1956) by 1955.

    Kaiser stumbled along with Jeep until it finally offloaded it to American Motors in 1970 (Kaiser finally departing the auto industry for good), the rest of the industry essentially saying it was a foolish purchase for AMC.

    By 1980, Jeep was carrying AMC almost entirely and Renault bought into AMC (and Jeep) to help and to offer AMC fresh front wheel drive subcompact lines already designed, plus assisted a bit with Jeep engineering. The best vehicle Jeep ever made, the Grand Cherokee, came out (but with a terrible GM V6 option, soon replaced by AMC’s exellent inline six).

    By 1987, Renault had seen enough of the money-pit and had sent enough money to refloat the Titanic for no good results, (i.e. return profits) and sold out to Chrysler.

    So, after Chrysler bought AMC and Jeep, it went through a down-cycle and nearly went belly-up, was threatened with a take-over and instead got bought by Daimler-Benz (in a “merger of equals” – not).

    Not long after this, DCX as an entitiy was in trouble and would not and could not afford to help bail Mitsubishi (which, ironically, have built licened-production JEEPS for 5 decades).

    So, is Jeep a curse or what?

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