By on January 23, 2007

geely222.jpgWhen Daimler-Benz began its Apache dance with Chrysler in 1998, everyone wondered who was leading and where the Hell they were going. At first, the “merger of equals” looked like it would bless Chrysler with Mercedes’ best engineering. When the 300C was built atop some last gen Mercedes cast-offs, and ye olde SLK-based Crossfire [dis]appeared, it seemed that Chrysler would at least get some natty hand-me-downs. Then DCX leadership declared "a Mercedes will remain a Mercedes.” Now it's Dancing With the Stars gone bad, and it's bound to end in an elimination.

In fact, this German – American automaking partnership is starting to look more like The War of the Roses. For example, Chrysler is negotiating their next United Auto Workers (UAW) contract. They’re asking the UAW for the same health care concessions bestowed upon GM and Ford in 2005. When the union dug-in their heels, DCX CEO Dieter Zetsche jumped in and publicly announced the union had acted “irrationally.” With friends like these…

According to Businessweek online, despite Dieter’s name calling, the UAW returned to the negotiating table and offered Chrysler the health care concessions they sought– provided DCX let the UAW organize their ‘Bama-based bubba Benz buildin’ barn. Given Chrysler’s recent hemorrhagic losses and their need to cut costs wherever possible, you’d think Mercedes would at least consider the offer. Nein. It appears platforms aren’t all Mercedes refuses to share with its “equal.”

Chrysler's quarantine is unhelpful on many levels. Or is it? After deciding that it needs a small car for the U.S. market, after discovering that the home office wouldn't let them work their ‘Merican mojo on SMART or A-Class underpinnings, Chrysler has snuggled up to China’s Chery automaker. They’ve signed a letter of intent to build and import a B-Class segment car for America’s entry-level market. Chrysler’s Chinese play will give Chery a chance to dip its toes in the world’s biggest automobile market (still), in anticipation of introducing their own lineup. 

Equally important/ominous, the Chrysler Group is about to sell Chery a complete assembly line for building automatic transmissions. Chery will ship the entire line, currently living in Kokomo, Indiana, to Wuhu, China. It’ll give Chery an inroad into transmission engineering and production (without having to rely on reverse engineering). Initially, the transmissions will go in cars produced by Chery for Chinese consumers, but there’s nothing to keep them from shipping the transmissions back to the US for use in other Chrysler models. Talk about UAW end runs and low cost outsourcing…

In short, the Chrysler-Chery tryst seems to be going much better than the Chrysler-Mercedes marriage. Hmmm.

There are renewed reports from Europe that DaimlerChrysler is thinking of “spinning off” (a.k.a dumping) Chrysler. Although the corporate mouthpieces are spouting the obligatory denials, there is a vocal (and growing) group of German shareholders who want to get rid of Chrysler and return to Daimler-Benz. About 80 percent of DCX’ common stock is held by German citizens and institutions, so management there tends to sit up and take notice when the stockholders start banding together. German shareholders convinced then-CEO Juergen Schrempp to kill a deal with Mitsubishi a few years back. They could do the same with the Chrysler partnership.

Meanwhile, LaSorda is the man in the middle.  He’s due to release his turnaround plan for Chrysler Group by the end of February. Other than a goal of cutting production costs by $1k per car, the details of the plan are sketchy at best. You can bet he’ll be sweating bullets over this, though. Rumors are rampant that he’ll be replaced by Volkswagen's Wolfgang Bernhard, who will be seeking gainful employment by then.

Like The Mystery of Edwin Drood, there are several possible endings to this drama. DCX could be so enthralled with LaSorda’s plan that they leave everything just as it is (unlikely). Or DCX could decide the Chrysler Group is worth saving but needs stronger leadership (possible). Or DCX could start treating Chrysler as an equal, as originally advertised (yeah, right).

Then there’s are the more extreme possibilities. German stockholders, tired of Chrysler’s losses and seeming lack of direction, band together and force its sale. To survive, Chrysler would have to strengthen its ties with Chery. It’s even possible that Chery would buy Chrysler outright. Either that, or Chrysler flounders a few years on its own and dies. 

It’s not a pretty picture.  The next six weeks or so will be crucial to Chrysler’s survival.  By the first of March we should know whether the Apache will turn into a tango, or if Chrysler will end up tossed out into the street. 

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24 Comments on “Chrysler Suicide Watch 6: Dance with Me...”

  • avatar

    Ah, Chrysler and its transmissions, now there’s a match made in heaven.

  • avatar

    Either that, or Chrysler flounders a few years on its own and dies.

    Or they could go on their own again and thrive without Daimler’s mismanagement. Plenty of other automakers that sell less cars than Chrysler are making it. It would be tough but if they find the right people to lead them it can be done.

  • avatar

    I think I remember reading that Chrysler unlike GM or Ford has maintained approximately the same market share more or less as they had 20 to 25 years ago. GM and Ford on the otherhand have gradually gone down from 50 percent and 25 percent market share to their current levels.

  • avatar

    It goes beyond outsourcing crappy transmissions. Call AT&T customer service (ironically a phone company) and try to guess what country you are connected with.

    At my old company, they shipped a lot of white collar accounting and finance jobs to India, all so the CEO could claim a huge savings in the last year, cash out, and retire.

    Corporate America will slit your throat in a heartbeat if they think it will save them a dime next quarter. Coming soon to your company as well.

  • avatar

    i think they should employ 20,000 more salespersons. they could call it “project surge”.

  • avatar

    DCX is actively looking to build a Getrag transmission plant in central Indiana.

    This could be a case of sending obsolete stuff to the Chinese (saving the cost of trashing it) and replacing it with state of the art. Still, the Chinese have a long history of taking old stuff and using it to leapfrog past the *state of the art*.

    Another knife in the back of Chrysler?

  • avatar
    Glenn A.

    Chrysler and D-B are a match made in hell. Both companies are morally bankrupt, and could be fiscally bankrupt as well, before long.

    Chrysler executives have a nasty history of going back on their word (polite-speak for “lying through their teeth”). 1987 – American Motors workers, then manufacturing rear wheel drive cars for Chrysler under contract at Kenosha (as well as Renault Appliance front drive cars and Jeep engines) were “informed” by Chrysler executives – “don’t worry be happy – we’re keeping Kenosha.” The ink wasn’t even dry on the purchase of American Motors (and Jeep) when Chrysler tore down the plant and “disposed” of hundreds of thousands of parts from the AMC parts depot (all the better to sell more Chryslers, if you can’t fix your AMC, eh?)

    Then we all know about how paybacks are hell, when Daimler-Benz did it’s dirty “merger of equals” lie on Chrysler stockholders, executives, etc.

    Not forgetting the DCX combine, which owned a good sized portion of Mitsubishi, decided their partner could go sink – sorry, no life-ring when you’re drowning. Apart from the fact of how stupid it was to so easily dispose of a very talented organization and make a permanent enemy of them (let’s be honest here), the DCX execs also forgot to think through the fact that – gee, had they assisted Mitsubishi, it just might have been Mitsubishi throwing THEM a life-ring at some time in the future…. but no.

    Then there is the 10% of Hyundai that DCX purchased, and after an acromonious divorce over Chinese assets, Hyundai demanded to buy their 10% back and DCX complied.

    Let’s not forget the “partnership” in Holland between Mitsubishi and DCX where – surprise, surprise, surprise, DCX yanked the rug and dropped their half of the Smart for Four production leaving Mitsubishi holding the can. Likewise, the plant in Normal, Illinois.

    If we look into the distant past, Daimler-Benz has bloody hands, too. I am given to understand that D-B wanted some additional plants in Bremen, so did some behind the scenes machinations to dispose of Borgward/Lloyd/Hansa. This company had been 4th in the German market and was a successful exporter, and a family owned business, and only needed a small bridge-loan from the government of Bremen. “NEIN”. The government rushed in and closed it. All very suspicious, and decades later, the facts started to trickle out.

    All in all, if I want an Enron-mobile, I’ll go ahead and buy a Chrysler or Mercedes.

    As I say, these two companies deserve each other. I almost feel sorry for Chery for getting involved with them, but then wait. Apparently, Chery also deserve to be associated with Daimler-Chrysler because, they reniged on a deal with Visionary Vehicles, didn’t they? I am given to understand that the Chinese have a bad habit of signing deals and backing out of them, whether the deal is written with importers in Egypt, America, wherever.

    As for the UAW, well…. what’s the best definition of short-sighted greed, intransigence, stupidity and slowly helping to kill the golden goose that once laid golden eggs?

  • avatar

    Hey Dr. Z, where are all those Diesels again?


  • avatar

    Whatchu talkin’ bout, Willis? The new 2007 Grand Cherokee Diesel is on the way, with a whopping 2mpg better than the V6 gas version. I’m sure that will be sufficient, mind-blowing incentive to get Americans back on the diesel bandwagon despite the high fuel price, spotty availability, urea refills, and likely premium over other models.

    I love diesel, but DCX are idiots with this launch.

  • avatar

    Doesn’t the Bluetec in the Grand Cherokee compete with the 4.7l 8-cyl in terms of pulling power? Surely it will yield better than 2MPG in comparison to the bigger petrol engine.

  • avatar

    Yes! I’m just getting ready to go pay the BIG bill for the blown transmission on my Chrysler mini-van. Driven kindly and maintained meticulously…and just a tick over 100K and the tranny buys the farm…

    Apparently the carnage was so bad that they couldn’t even rebuild it.

    With at least now with a “Made in China” sticker on the transmission, the quality will match the label.

  • avatar

    I’ll admit I haven’t seen the towing numbers yet, but often the limit is the chassis, not the engine (unless we’re talking about full-size HD pickups, where there will be some difference). I’d bet the V6 diesel is on par with the 5.7 Hemi in towing, but even the Hemi returns about 20mpg highway with MDS (IIRC).

  • avatar

    As a former (W108 chassis) Mercedes fan what I said many years ago when this merger was announced was ” The resulting products will combine the best of Chrysler engineering and Mercedes styling”

    It appears I was right. A disaster for both corporations.

  • avatar

    Ever wonder if Mercedes-Benz’s quality problems are related to the cost-cutting initiated after the merger with Chrysler?

  • avatar

    The Grand Cherokee 5.7 returns 19MPG HYW.
    The ML320 CDI returns 27MPG HYW.

    That’s a substantial difference.

  • avatar

    And the E320cdi gets 37mpg. Apples and oranges. The GC with the same engine was already stated in the press release at 23mpg (so 4mpg over the 5.7…still not very substantial).

  • avatar
    Terry Parkhurst

    If this outsourcing of work to Chery, or affiliation with them, doesn't ensure decent quality control, it won't help Chrysler. Admittedly, I am probably in the minority of TTAC contributors and readers when I say, I liked the looks of the late Chrysler Crossfire. But the build quality was terrible for any kind of automobile, but especially so for a machine reportedly designed to go head-to-head with cars such as the Honda S2000 and the Nissan 350Z convertible. In the summer of 2004, I had a Crossfire for a week's evaluation (for a community paper serving the African-American community in Seattle WA and Portland ORE) and it was finished in an interesting shade of blue. It gathered comments such as "that's the best looking car I've seen" from people when I took photos of it, at sunset overlooking Puget Sound. What they didn't know was, only hours before, when I pushed down on the rocker switch in the console to reset the convertible top – unable to come down until the electronics "recycled" themselves, according to the owner's manual – said switch just went south of my thumb, into the console. My pals at Daisywagen (sic) Foreign Car Repair had a young technician there who used a piece of double-sided tape to retrieve it. We then got the top down for the photos; and later, I got it back up to turn into the manfacturer's representative. When I told someone working for the rep, who came to pick it up what happened – and pointed out the switch, then diagonally across the slit it fell into, so that wouldn't happen again – he replied, "Don't worry. We've had more problems with this car than anyone we've ever had." Now that was Chrysler's halo car. One has to wonder what build quality is like with its other more plebian products. I did include what happened, in my review. The paper kept it, in both the printed editions and its web site. But I haven't asked for another Chrysler to review since. It's tough to kick someone when they seem to be going down – at least, for me it is.

  • avatar

    Acx is correct in his assesment about Daimlers’ mismanagement of Chrysler. I have heard that they haven’t been too kind to Freightliner here and Fokker in Europe. Even the “sales bank” was overseen by a Daimler guy, Joe Eberhardt.

  • avatar
    Point Given

    Gotta love reverse engineering:

  • avatar

    Thanks to press lead time, I recall that Wired article with GM poo-poohing hybrids came out a few days after Lutz did an about face and proclaimed hybrids were actually good. Whoops.

    The hydrogen-fueled vehicles in the article? We’re still waiting…

  • avatar
    Glenn A.

    Let me quote from the article pointed to by Point Given:

    “The teardowns tell GM a different story. “They’re all about validating our insights into what competitors are doing and extrapolating where we think they’re going,” says Clay Phillips, GM’s director of intelligence, in charge of scoping out other automakers. Phillips, a former Navy intel officer, is tall and thin, with a gray mustache and a serious, almost scholarly demeanor. “We think the Prius was originally less about fuel economy and more about a technical and assembly experiment,” he says. “In Japan, the hybrid drive was sold as a cool electronic feature. Fuel economy was hardly mentioned, and I have a hunch that fuel efficiency was a marketing strategy that they just stumbled onto.” ”

    OK this flies right into the face of what Toyota says about the Prius themselves. Having read what little there was in English about why and how the program was begun, I can assure you that when the then-CEO of Toyota said he wanted to double the fuel economy of the Corolla for the new car, he meant it. That doesn’t sound like “…fuel efficiency was a marketing stragegy that they just stumbled onto” to me.

    Wow, scary that GM’s so far outside the loop.

    Mark my words. Those companies which don’t adopt wholesale what Honda executives recently derisively called “only an interim technology” (i.e. hybrids) won’t exist in 10 years.

    Honda can talk all they want about hydrogen fuel cell cars and I realize they plan to introduce one for lease in the US within a year to 18 months, with a home refueling station (powered by natural gas – so much for a non-hydrocarbon economy, huh?)

    But much as I would like an FCX for the cool factor – and to see if the tech actually works in a real world (northwestern Michigan), I think it’ll possibly arrive at my local Honda dealer at about the same time as the new 1963 Chrysler Turbine arrives at my local Chrysler dealer.

    It’s ironic that Honda may survive in spite of itself.

  • avatar

    What !! Chrysler is going to teach the Chinese how to poorly build horribly designed automatic transmissions !

    Maybe Cherry should be showing Chrysler how to build good transmissions…

  • avatar

    “We think the Prius was originally less about fuel economy and more about a technical and assembly experiment,” he [Phillips of GM Intelligence] says. “In Japan, the hybrid drive was sold as a cool electronic feature. Fuel economy was hardly mentioned, and I have a hunch that fuel efficiency was a marketing strategy that they just stumbled onto.”
    – Wired – February 2006

    GM’s interpretation – or is this spin? – seems very unlikely. You don’t sell anything in Japan without good fuel economy. Japan imports everything and energy conservation is like a national mania. Toyota was certainly aiming for fuel economy when they built it. The advertising message in Japan, however, can certainly be different. What sets this car apart isn’t the fuel economy but, perhaps, the size of car you get at 48mpg city and the intrinsic coolness of the drivetrain. The Japanese domestic market is also about very cool gadgets.

    And, if it’s not about fuel economy, why bother with regenerative braking? Why have the performance profile that they offer? Why bother reengineering the 1.5 as an Atkinson-cycle engine? Why not just use the off-the-rack 1.5?

    Frankly, I hope this IS GM spin, because I’d hate to think they’re deluded and/or lulling themselves to sleep on this.

  • avatar

    A Chrysler diesel SUV line with 17 mpg instead of 15mpg over gas won’t help DCX since diesel is 40% higher per gallon than E85’s price.

    Here is what is going to happen to Chrysler. Chrysler will setup shop in China for trans and other parts. After about a year or two a Chineese company will purchase Chrylser from DCX, much like the PC division of IBM’s sell off to Lenovo. China will then have a distribution channel for autos like they now have for computers. One by one weak and struggling U.S. companies will be acquired by Chineese companies just like the Japaneese did in the sixties to get their products into the american market. When the Chineese make everything, they will not need american companies to sell them for them. They can sell them themselves and cut out the middle men.

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