Chrysler Suicide Watch 6: Dance With Me
When 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.
More by Frank Williams
Comments
Join the conversation
"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.
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.