Chrysler Suicide Watch 26: Connect the Dots

Frank Williams
by Frank Williams

Kids love to play connect the dots. When the dots are numbered sequentially (with a few outlining details thrown in to keep 'em focused), it's easy to do. When the numbers are missing, it's hard to see anything more than random points on a page. And so it is with Chrysler, an American automaker that's generated enough bloggable news during the last six months to keep Google News-alerted surfers away from their designated job for hours at a time. Even though only Chrysler's new owners know their real game plan, there's been enough new "dots" to form a recognizable pattern. What it reveals is a company on the cusp of a major revolution.

The first dot: DaimlerChrysler dumping selling Chrysler. Several companies showed interest in buying Chrysler early on, but most industry analysts expected Canada's Magna Corporation to be a shoo-in. Magna had the balls; Chairman and founder Frank Stronach is the personification of unbridled ambition. Magna had Chrysler-specific auto building experience; they held the contract to assemble Chryslers and Jeeps in Europe and run the paint shop at the Jeep Wrangler plant in Toledo, Ohio. And Magna had the money.

But before the Chrysler deal went down, the automaker announced it was moving production of Euro-spec Chryslers from the Magna-Steyr plant in Austria to Chrysler's plant in Brampton, Ontario. Magna wasn't happy. The Canadian Autoworkers Union (CAW) loved it. Dot two.

Third dot: the private equity firm Cerberus came from nowhere to grab the golden ring. It was the union's turn to be displeased. United Auto Workers (UAW) president Ron Gettelfinger and CAW president Buzz Hargrove both suspected that Cerberus was about to "strip and flip" their meal ticket. They saw storm clouds gathering over Auburn Hills.

And yet, after just one meeting with the three-headed dog's masters, both union leaders did a complete 180. Gettelfinger said the sale of Chrysler to the private equity fund was in the "best interests of our members." Hargrove, who had said he was "pissed off" over the sale, suddenly decided "Chrysler is better off under Cerberus ownership than they would be under Daimler." Dot four.

Fifth dot: after taking over Chrysler, Cerberus revamped the company's upper management. Union-friendly CEO Tom Lasorda suddenly found himself shuffled aside to a vice president's position. Former Home Depot CEO Robert Nardelli took over as Chrysler CEO. Toyota's Jim Press moved in as co-vice president, to run sales and marketing. Both came from companies known for their decidedly anti-union stance, yet the UAW and CAW were both uncharacteristically quiet about their selection.

Then came dot six: negotiating a new UAW contract. In return for ponying-up a bunch of billions for a health care VEBA superfund, the UAW's leadership agreed on a contract radically different from the GM deal. The Chrysler agreement doesn't include job guarantees or commitments not to close or sell plants. If the UAW's members ratify this agreement, it leaves Cerberus free and clear to shut down whatever plants they choose, whenever they choose. OR… sell those plants to someone else.

Last month, Magna surprised everyone. The fiercely anti-union company suddenly opened its plants to the CAW, inviting them to organize their employees. Owner Frank Stronach said the company "would embrace the union" under the "framework of fairness." He claimed an epiphany: Magna and unions need to work together to save North American auto industry jobs and create new employment. Dot seven.

Dot eight: Chrysler has announced it's [finally] ready to trim models across all three brands. The executions could mean a Chrysler plant now building several variations of one model for three divisions would build one model for one division. Although the divisions might share some components (e.g. engines or transmissions), the new regime will tie a specific production facility to a specific brand.

Connect the dots. As we predicted when Cerberus assumed control of Chrysler, the money men are getting ready to sell part or all of Chrysler to Magna, or, at the least, outsource production to them. This they can do because Chrysler’s unions have been well and truly appeased, paid off in billions and granted access to Magna’s expanding worldwide empire. This they will do because they’re a private equity firm that has always preferred right-now cash cows to long-term plays.

Magna is also on board because, well, it’s what Frank wanted then, it’s what Frank wants now and Frank’s got the cash to do the deal. Ah, but is this a picture of resurgent automaker? Nope. It’s an abstract image; one that allows both artist and onlookers to see what they want to see. One thing’s for sure: it's still very much a work in progress.

Frank Williams
Frank Williams

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  • Jurisb Jurisb on Oct 21, 2007

    What makes a good music? a good singer? only the vocal and melody, the rest is secondary. and no matter, how hard you try to put a good outfit, good advertisement, good moves,( bold moves) or media awareness, you get credit for what you deserve. Ditto the car industry, what makes a good car company? good pricing strategy? model range that doesn`t overlap? good ads? perfect slogan? NO! A CONTINUOUS REAL PRODUCT IMPROVEMENT COMPARATIVE TO ITS COMPETITION. If american product-makers( sounds akin to `evil-doers`) were dying so hard for REAL high quality products, as they are dying for easy profits, they would have already skyrocketed into bliss of car heaven. outsorcing, rebadging, dealer networking, cash anorexiing, etc won`t cut it! You think americans will buy your rebadged cherrys instead of pure Accords? If customers can`t get good american products, they go for good products, meaning, whoever makes them. Should they trust a japanese Accordima or a american sounding- cheapest-bidder-made mutant breed? Obese, overdebted, junk statused. Gues what i am talking about? american cars, people or country herself? Sadly, you can`t make a wrong choice in this multiple choice.

  • Stephdumas Stephdumas on Oct 22, 2007

    I'm a newcomer here, sorry for grammar faults, English isn't my 1st language. I read the comments and it could be tempting to add some more dots like dot 12: Russian billionaire Oleg Deripaska who recently buyed a 5% stake of GM Dote 13: he also invested in Magna International. Could be only the tip of the iceberg and we might see more future links and dots between GM, Magna and Chrysler? Unless Carlos Ghosn decided to join the party to step ahead and said then Chrysler will be the 3rd partner of his alliance that could give "CNR" (Chrysler-Nissan-Renault) or "CRN" (Chrysler-Renault-Nissan). Then Volkswagen ambitions to be the #1 automaker for 2015-2020, I doubt they currently check an eye on Chrysler but who knows? They could buy Chrysler later when the opportunity will arrive.

  • Akear Toyota wins once again, while GM has egg on its face.
  • Slavuta Why America needs school buses altogether? When I was in school, I rode on a regular city bus
  • Jeff Buy whatever works for you if you own an EV and are happy with it good, if you buy a hybrid or plug in hybrid and it works for you good, if neither and you like your ICE the way it is that is also good. I believe over time EVs will get better and have a larger segment of the market.
  • Tassos Jong-iL Is New Jersey better than Old Jersey?
  • Tassos Jong-iL Looking forward to buying 2 of these with all of those Rubles we have been earning lately.