Chrysler Suicide Watch 8: Plan X From Outer Space

Robert Farago
by Robert Farago
chrysler suicide watch 8 plan x from outer space

According to the Consumer Federation of America, most large insurance companies rely on computer programs like "Colossus" and "Claims Outcome Advisor." These spreadsheets calculate how much money an insurer can save if they deny ALL their customers’ claims. The companies then set an acceptable claim approval rate and instruct their adjustors to “delay, deny and defend.” Readers with children will recognize Mr. Incredible’s fictional employer Insuricare. Readers without sprogs should recognize DCX.

First, the corporate mothership determines how much money they want to "save." Then the word goes out. Delay. Do not address fundamental problems: runaway health care and pensions costs, stifling union work rules, bloated dealer network, lousy branding and relatively poor product quality. Deny. Keep telling everyone that everything’s going to be alright. Defend. Maintain the status quo at all costs; only make changes that tweak the existing system.

Obviously, Chrysler is not the only American automaker that bases its business on The Triple-D Defense. The media’s fascination with Chrysler’s German ownership has obscured the simple fact that the automaker's plight is, at the deepest level, no different from GM's and Ford's.

While Banc of America celebrity auto analyst Ron Tadross continues to fan the flames of the “Chrysler for sale” conflagration– suggesting that the American automaker is viable as an independent company because its smaller and not quite as FUBAR as GM and Ford– Chrysler is plenty big enough to stress DCX’ independent-minded shareholders and just as FUBAR as GM and Ford.

DCX CEO Dieter Zetsche’s response to industry speculation about his American subsidiary’s financial distress underlines Chrysler's underlying weakness. Dieter's public declaration that he's "considering all options" also highlights the point we’ve been making here for some time. Chrysler's equals Germans masters are happy to stand back and watch Chrsyler kill itself.

Why else would Dieter allow Chrysler’s management to institute Plan X From Outer Space, a carbon copy of Ford’s Way Fordward and GM’s Jump Down Turnaround Sell Every Bale of Hay?

Chrysler will now cut jobs (mortgage its future to shed its union-protected workforce), close factories (amputate market share), reduce inventory (try to match supply against market share it’s already lost), sell the family silver (including “transportation services”), re-invest in what they should have built in the first place (allocate $3b for new engines, transmissions and axles), promise to build something that will sell (hybrids) and, last but not least, die.

The media seems entranced by any discernible difference in Chrysler's story and that of its cross-town rivals. Will GM and Chrysler share the rapidly deflating life preserver known as the GMT900 truck platform? Again, the similarities between Chrsyler's overall situation and that of GM and Ford are far more important than any SUV freak show.

And just as The Big Two's dreams of resurrection are floundering on the rocks of reality, Chrysler's Plan X turns the phrase "product strategy" into an oxymoron.

The official bumph is pretty vague. Chrysler says it will shift its product mix away from trucks and SUV’s towards smaller and more fuel efficient vehicles. Plan X includes unspecified promises to cut three to six models from the company’s 32-vehicle lineup. It has also promised 20 all-new vehicles and 13 refreshed vehicles by 2009.

In other words, beating Ford and GM in the deck chair rearranging sweepstakes is Job One. While it’s true that Chrysler’s virtually perfected the art of badge engineering eliminating development costs (e.g. the "new" Avenger will be a rebodied Sebring), launching so many new models is an inherently expensive business; it costs tens of millions more to introduce a new nameplate than it does to improve and promote an existing one.

Meanwhile, the basic problems besetting Chrysler’s product portfolio remain: weak brands, a farrago of constantly changing, not-entirely-wonderful models, and an ADD-related failure to fully market and support any one model. Of these, bad branding is the company killer. What is a Chrysler? What is a Dodge? What do they make again? Only Jeep remains focused on a definable mission– which the company is busy diluting with soft-roaders and urban flava posemobiles.

Given Chrysler’s financials, crushing union obligations and “throw it against the wall and see what sticks” product plans, Dieter would have to find The Mother of All Suckers to buy Chrysler. Perhaps he will. Probably he won’t. Which leaves DCX two options: fix their American patient or watch it commit suicide.

In today’s Automotive News, an analyst for investment bank Dresdner Kleinwort claimed that the official German document detailing DaimlerChrysler’s legal obligations makes no mention of Chrysler's health care liabilities. Dresdner theorizes that the Germans could “nurse Chrysler back to health” then float Chrysler on the stock market. The goal: attract the same sort of corporate buy-in that Daimler is so desperate to leave behind.

Back in the real world, Dresdner’s telling DaimlerChrysler stockholders that the German side of the business could leave Chrysler standing on the ledge while successfully defending itself against any future liability claims. So much for being a good neighbor.

[Click below to hear RF read the above text.]

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  • Allegro con moto-car Allegro con moto-car on Feb 20, 2007
    Robert Farago wrote: "No company in its right mind would buy Chrysler. No one." If this is true, then there is a very distinct possibility that Chrysler will close its doors under Mercedes. But what will happen to the UAW liabilities? Will they continue to be funded by Mercedes? The German govt? The American Govt? Or the retired Chrysler UAW simply lose everything? But I still think that some Chinese company would be interested, provided that they can buy it real cheap (like for $1 billion or less, or maybe even a cash-back deal from DCX).
  • Ogswizzo Ogswizzo on Feb 25, 2007

    does anyone have an idea why chrysler would overstock, (overbuild) minivans? they have over 170 days worth of dodge and chrysler, short and long wheelbase, models out in parking lots in BFE. and they are working overtime, 6 days a week 9 hour shifts for the month of march. they reported a loss on minivan overbuild last year. why are they setting themselves up for another loss on purpose

  • The Oracle The Spyder and Ryker platforms are great for folks who want an open air experience but may not want it on 2 wheels. I’ve had a Spyder RS-S since new in 2012 and it’s a fun machine with the manual transmission. When ridden hard, fuel economy goes well below 36mpg, but 2-up riding is great and the frunk is great for running errands.
  • The Oracle These pricing pressures have been around for decades and the traditional ICE supply base is about to be upended.
  • Druni Thanks. Great.
  • NaMiNo Thanks for the recap, Tim! It's always interesting to get a glimpse of what's happening at auto shows. The focus on EVs aligns with the industry's growing shift towards electrification. And optimism about the future, along with more vehicle debuts, is a good sign for the automotive world. I always go to site here for more writting ideas for my blog. Your photos tell the story beautifully, even with auto-show lighting challenges.
  • Ajla I wanted one of these a lot back when they were new.