By on August 5, 2009

Automotive News [sub] reports that Chrysler’s unsecured creditors have requested permission to sue Daimler for gutting Chrysler’s “most valuable assets” during its sale of the company. The request alleges that “unidentified assets” were lost in Daimler’s 2007 sale of Chrysler to Cerberus Capital Management, for which creditors are seeking $3 billion in compensation. If granted, the damages would eclipse the $2 billion granted to secured debtors during Chrysler’s bankruptcy sale. “This is completely without merit and we intend to defend ourselves vigorously,” say Daimler spokespeople, and we can’t help but feel that they have a point. What mythical assets were present for Daimler to squirrel away by the time they sold to Cerberus? Did Daimler mismanage Chrysler? Sure. Did they loot assets? For that to happen, there would have to have been valuable assets in place to begin with. Best of luck with that, Chrysler creditors.

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28 Comments on “Chrysler Creditors: Can We Please Sue Daimler?...”


  • avatar
    Robert Schwartz

    No. Bangor & Aroostook Railroad. Next?

  • avatar
    Lokkii

    No. Bangor & Aroostook Railroad. Next?

    I assume that you’re referring to this concept?

    1. “… a stockholder, who has purchased all or substantially all the shares of a corporation from a vendor at a fair price, may not seek to have the corporation recover against that vendor for prior corporate mismanagement…”

    http://openjurist.org/417/us/703

  • avatar
    NickR

    I hope they succeed. I’ve love to see Daimler get shafted.

  • avatar
    Runfromcheney

    I think when it comes to them claiming they stole valuable assets, they mean looting Chrysler of all its talent earlier in the decade. But that is not merits to be sued upon and I agree that this is pointless. Daimler will win.

  • avatar
    Wolven

    Chrysler DID have some great assets when they were treasonously handed to Daimler. If I remember correctly, there was about 8 billion in cash for starters. They also had some good selling vehicles and had the BEST American styling of any car company.

    Daimler SHOULD be sued for purposely trashing Chrysler. 3 billion would hardly be a slap on the wrist. Bob Eaton should have every single penny he owns taken from him as part of the suit.

  • avatar
    wmba

    Selective memories working overtime.

    From initial sale to Daimler, and then after Cerberus purchased Chrysler, at a profit! Well, damn near. Came to about $700 million net, as I recall.

    Daimler lost $37 billion dollars in this fiasco.

    And then the Americans blame the Germans for ruining an American company, and some utter twits think that that is argument enough to sue Daimler, even though Cerberus owned them for two years after Daimler, injecting more poor management that even Mercedes could achieve via the Handle Bar Mustache Man.

    As I understand the US point-of-view, all Chryslers thought of, dreamed-up before Daimler were class-leading and just plain wonderful, while all the ones dreamed up during Daimler’s ownership were absolute crap. Can’t come close to believing that myself, but these creditors are apparently delusional.

  • avatar

    Okay, so Daimler ruined Chrysler, but Cerberus paid for Chrysler anyway… Did Daimler do anything to ruin the value of Chrysler AFTER the sale? If not, I’m very unclear as to what this is over?

  • avatar
    CommanderFish

    You can not sue Daimler for being idiots while they owned Chrysler after you have already bought them. Unless Daimler lied about Chrysler’s assets when they sold it or something along those lines, there’s no reason to sue.

  • avatar
    rnc

    Eaton’s job was to do what was best for his shareholders, that’s what he did plain and simple, even then Chrysler was not going to make it as a going concern on its own.

    In terms of the cash and great profitability, those came by bringing out (stylish) under developed corning cutting vehicles whose qualities were going to catch up with them eventually (in a real sense ChryCo screwed Diamler who probably just saw profits and didn’t really ever check to see what was under them).

    In terms of the people who want to sue, these are people who bought ChrCo’s debt/stock at significant discounts trying to game the system and are just pissed because they lost a game they should never have played, but they can still afford the lawyers.

  • avatar
    Wolven

    wmba : “Daimler lost $37 billion dollars in this fiasco.”

    What more need be said about Daimlers management abilities? Chrysler actually WAS doing well before the “merger”. Daimler uglified every single vehicle Chrysler made. Then came up with things like the Compass, Caliber, and that gawdawful Gestapo mobile “Imperial” concept car. They DESERVED to lose that $37 billion.

  • avatar
    ruckover

    Please explain how Chrysler was going to make it on its own. Great sound-bite but more information would be helpful.

  • avatar
    Wolven

    Sales were increasing, they were making cars and trucks people liked and were buying, they had good cash reserves, business was good… So, please explain why it wasn’t going to make it.

  • avatar
    tced2

    We’ll never know how Chrysler would have done on its own. But the facts are that it was successful when purchased by Diamler. As pointed out previously – had $8B in the bank. No one has mentioned that none other than Bob Lutz was the president and chief operating officer of Chrysler at the time of the sale to Diamler. And responsible for a great deal of that success.

    One asset of Chrysler that has been subject to some financial manipulations is the headquarters buildings and property. Chrysler is a tenant and pays rent to Cerebus who retained title to the property.

  • avatar
    wmba

    Well, my memories of Chrysler cars in the mid to late nineties are of crap 3 speed auto Neons with a rubbery ride, Plymouth Breezes with engines that didn’t even idle properly, and minivans like my bro’s that crapped out at 70K km with various maladies. Rented them all, hated them all. Then that rough 2.4 liter engine from the Breeze was stuck in the PT Cruiser for some agricultural work.. All before Daimler.

    Yes, the Chrysler 300M my friend owned was nice, looked good and went well enough. About the only vehicle I can remember that was okay. The normal LH sedans were just OK, although on the highway, cars passing in the other direction caused what I termed the “bathroom effect”, a sort of glassy hollow echo in the cabin. Very strange.

    I’m the last person to defend Mercedes — they deserved to lose the money. But I do think that people asking to sue Mercedes are blinded by the sun, when you consider that Nardelli and all the other geniuses brought in by Cerberus did even worse. Those are the guys who need suing. Documented often enough on this site.

  • avatar
    rnc

    Because as every other automaker went global (either through organic growth or mergers) chrysler would have become a niche maker selling mainstream (discount) products, that just doesn’t equate success. And I agreed that they were successful for a short while, its how they got there, kind of like being tired and snorting a nice juicey line, you aren’t tired for awhile but soon will be again. Repeat the process long enough and you’re a tired, run down, broke junky looking for a handout, man that sounds familiar

  • avatar

    They should sue the U.S. Government for backing the loans the first time Chrysler was poised for a dive off the cliff.

    I realize it is just politically incorrect to suggest that Lee Iacocca’s K cars represented a step backward in automotive technology. However, Chrysler was ready to have a fork put in them in 1980 because the market had spoken many years before and no one at Chrysler was listening. And, ok, the minivan was a nice idea, but if post-1980 Chrysler had not existed, it’s likely that Lee would’ve come up with the idea for someone else. It did not take a K-car powertrain to make it a useful vehicle.

    I have no doubt that Bush’s advisors told him that any loan to Chrysler was like throwing money into a bonfire hoping that some would waft away, and Obama certainly was given the same verdict. Like the all-too-logical fuel tax as a means of changing our oil usage, it would have been political suicide for either Bush or Obama to save GM without giving lip service to keeping Chrysler around.

  • avatar
    Daniel J. Stern

    @Wolven:

    Sales were increasing, they were making cars and trucks people liked and were buying, they had good cash reserves

    …and they had some of the industry’s shortest and most efficient concept-to-production times.

    @edgett:

    I realize it is just politically incorrect to suggest that Lee Iacocca’s K cars represented a step backward in automotive technology

    It’s actually just plain incorrect, nothing political about it. Hate on the K-cars all you like — certainly that’s a fashionable pastime amongst those who weren’t really paying attention or weren’t there at all — but they were in easily-demonstrable fact the first American front-drive 4-cylinder cars that Americans really liked and bought in large numbers.

    Your minivan comments are equally wide of the accuracy mark; Iaccoca did come up with ’em for another company: Ford, who decided they were a stupid idea and canned Iaccoca.

    When it comes to history, it’s best to learn it first, then attempt to critique it.

  • avatar
    tced2

    And if you read the Lutz book “Guts”, he describes how the Chrysler development system was improved by the American Motors acquisition. American Motors had a very efficient product development system headed by Francois Castaing. This was one of the un-discussed assets Chrysler picked up when it bought American Motors. Everyone thinks the only asset was Jeep.

    Briefly, automobile development was very “Balkanized” (think power window department, seat department, brake department, etc) and difficult to schedule efficiently. American Motors had teams on vehicles which cut out the in-efficiency of coordinating the traditional development departments.

  • avatar
    kowsnofskia

    It’s actually just plain incorrect, nothing political about it. Hate on the K-cars all you like — certainly that’s a fashionable pastime amongst those who weren’t really paying attention or weren’t there at all — but they were in easily-demonstrable fact the first American front-drive 4-cylinder cars that Americans really liked and bought in large numbers.

    The K-cars were complete garbage. Period. They only sold well because they were dirt cheap, and their quality reflected their price.

    And while we’re at it, several other companies – including Renault (the Espace) and arguably VW (Type 2/Van) had the whole “minivan” idea going before Chrysler came along with it.

    Above all, I really can’t believe that anyone here is claiming that Chrysler was a wonderful automaker with top-notch products before Daimler showed up. Chrysler’s products were so horrendously unreliable and behind-the-times in the 1990s that they might as well have been made by the Soviets.

  • avatar
    Upuaut

    :kowsnofskia

    My 1994 Dodge Ram with 343,000 miles that still runs like a top would disagree with you.

  • avatar
    galaxygreymx5

    kowsnofskia

    If memory serves, the K-cars were initially quite expensive for their markets, topping out above $10,000 for many models shipped to dealers. There was a little scramble after launch to get more affordable versions on the lots to pick up the sales pace.

    Renault didn’t matter in the US and Chrysler didn’t matter in Europe, so the Espace is fairly irrelevant in the US market. The one-box car-based people mover idea started long before either vehicle, I believe as a concept by Pininfarina (feel free to correct this if inaccurate).

    As far as mid-’90s Chryslers, they were simply best-in-class as far as design, packaging, and customer enthusiasm were concerned. Of course quality was questionable, but better than the cars that preceded them.

    The ’93 Grand Cherokee was a massive improvement over the crotchety old model in almost every way. Superior off road skills with car-like driving dynamics. A strong seller immediately after launch with innovative four wheel drive and safety systems for the time.

    The ’93 LH cars were rather awe-inspiring at launch. Efficient, roomy, modern, and powered by a very high-tech powertrain for the time: an OHC 3.5L V6 making well in excess of 200hp. These replaced the ancient and awful Eagle Premier. Automobile of the Year.

    The ’95 Neon (launched in early 1994) was a leapfrog over the competition in design and performance. At the time, 85hp and a panhard-rod rear suspension were standard issue for the class (except at Honda), and the Neon popped in with 132hp, stellar handling, amazing packaging, and advanced safety features (dual airbags, four-wheel ABS discs, etc.). The Neon was a show-stopper for everyone besides Honda’s Civic. This car replaced the ancient K-car based Shadow and Sundance. Automobile of the Year.

    The ’94 Ram was in the same league, a complete design breakthrough. It was jaw-dropping at launch and had the performance to back up the looks. First pickup airbag, first glove-based ergonomics, massive interior innovation, etc. It replaced a truly “Soviet” Ram that dated back to the 1970s. MT Truck of the Year.

    The ’95 “cloud cars” (Cirrus/Stratus) were in the same league as the Neon and Ram, a stylistic home-run that left mouths agape at first sight. Packaging efficiency like nothing else in the class. MT Car of the Year.

    These were breakthrough products that, with time, fell apart. But these cars demonstrated that Chrysler was at the top of the car-making game in many respects and quality improvements were peeking through.

    Comically short lead times on new models, stunning concepts that actually hit production while the market was still excited (Viper, Prowler, Neon, PT Cruiser), and simply class-leading performance in many areas all disappeared when the “merger of equals” hit the fan.

    Chrysler was a force in the mid-’90s as far as product development goes and we can clearly see where they’re sitting today.

  • avatar
    Wheeljack

    It’s easy to criticize the K-Car now, but when you look at the marketplace in the early 80’s and compare Chrysler’s offerings to their crosstown competitors like GM X-Cars, the K-Cars were far superior. As far as Ford goes, at the dawn of the 80’s, they were stil peddling fox-platform Fairmonts, and the ’84 Tempo (their first mainstream mid-size FWD car) was utter trash. My parents had an ’84 LeBaron that while uninspired, was totally reliable during the time we owned it.

    Yes, I know everyone here is going to remind all who will listen that every import car made in the 80’s was vastly superior to their domestic counterparts, but the domestics still pretty much dominated the market in the early 80’s and therfore made up the bulk of the sales.

  • avatar
    venator

    @galaxygreymx5, DKW had a transverse-engined, front-wheel-drive minivan around 1951, Lloyd and Goliath (members of the Borgward group) also had fwd minivans by the late ’50s, so the concept is nothing new!
    I would like to rephrase your comment:”These were breakthrough products that, with time, fell apart” to read “These were break-apart products that, with time, fell through”, to reflect my personal experiences with Chrysler products of that vintage. You did make some valid points, however, I must (grudgingly) admit.

  • avatar
    Daniel J. Stern

    @Beavis:

    The K-cars were complete garbage. Period.

    Oh, yeah, everything Chrysler built in the ’80s and ’90s was such complete garbage (period), which explains the large number of 1st- and 2nd-generation Chrysler minivans still in evidently reliable, cost-effective daily service in cruelly car-hostile Ontario, with its heavily-salted roads in perpetually poor condition. If you care to try finding one ’86 Aerostar or Astro for every thirty ’86 Caravan or Voyager still on the road here, you’ll need more luck than I’m authorised to wish you; I’ll have to get my manager.

    Substitute at will, BTW; wanna run the comparison between Aries and Citation? Spirit/Acclaim and Tempo/Cadavalier? Die-Nasty vs. Taurus? Caprice vs. Diplomat/Caravelle? LeBaron vs. oh-yeah-that’s-right? Go ‘head. The results are the same.

    Your derision of them as garbage may win you points on Amateur Night at the Improv, but the market at that time was hungry for relatively inexpensive-to-buy, relatively inexpensive-to-own cars that got good gas mileage, and the K-cars filled that need satisfactorily for a lot of people; it’s evident by their very strong sales through eight model years (fourteen if we count the direct K-derivatives).

    Look, nobody’s going to claim seriously that any of these cars was a paragon of quality by any objective standard, and the only wholly innovative one of the bunch was the minivan, but the K-cars and their derivatives and successors were — with very significant, substantial exceptions like the Mitsu 2.6L Four and 3L V6 engines and the A604 ProbleMatic transmission — soundly engineered and built relative to a great deal of what came before and relative to most of their domestic competition.

    Y’wanna talk about the Espace? Okeh, let’s: Renault were still active in the North American market when the Chrysler minivans came along, and while Chrysler minivans have been one of the most popular American vehicles in Europe since their introduction there in 1987 or ’88, it’s funny, but I don’t recall the Espace being particularly popular in North America. Must be because Renault didn’t sell ’em here. I guess we’ll just have to extrapolate from the Alliance and Encore to arrive at an approximation of just how fabulous the contemporaneous Espace would’ve been; woe is us for having missed it.

    As for the VW Bus: Sure, yeah, it was way better than a Chrysler minivan…which is why VW sold veritable dozens of them to a broad cross-section of the American market ranging all the way from hippies and wake-‘n’-bakers to navel-gazers and deadheads.

    The more you rant about K-cars, the clearer it becomes that you really don’t know what you’re talking about. People bought the L-cars because they were cheap (or in the case of a couple of Shelby-massaged special editions, because they were blisteringly fast and relatively cheap). And even those cars had enough going for them to sell well through twelve model years.

  • avatar
    menno

    tced2, you’re right about Lutz’s book Guts. I just finished it and was shocked to see that he actually admitted how good the AMC guys were instead of “um, who again?” simply forgetting the entire chapter in the history of Chrysler (because of course, Chrysler bought AMC). He even truthfully mentions that the theoretical starting point for the LH cars was the Eagle Premier, which is also true.

    Another thing that Lutz mentions in the book is how leaders should act.

    Simply having a glib tongue is NOT NEARLY enough. But I can’t possibly comment on Barack Obama’s leadership eh? Someone will report me to the Stazi at the white house.

  • avatar
    windswords

    rnc:

    “Because as every other automaker went global (either through organic growth or mergers) chrysler would have become a niche maker selling mainstream (discount) products, that just doesn’t equate success.”

    After the recovery from near death in the 80’s Chrysler slowly built up it’s foreign sales. By the 90’s they were selling hundreds of thousands of units in Latin America, Europe and China. They developed left side of the road vehicles for Japan and Australia (Neon, Cherokee). They built a mini-van/Grand Cherokee plant in Graz, Austria. They designed the 300M as a “5 meter” car (with rear orange signal lights) so that it would be appropriate for European markets. Like it’s US sales, Chrysler’s export sales in the 90’s were going in one direction: Up

    edgett:

    “And, ok, the minivan was a nice idea, but if post-1980 Chrysler had not existed, it’s likely that Lee would’ve come up with the idea for someone else.”

    He did. For Ford. He and Steve Sperlich had the idea for what they called the “MiniMax”, but Henry the Deuce hated it and fired Sperlich, who went to work for Chrysler. Chrysler – before Lee – didn’t think it was a bad idea and were developing it when he got there. So yeah, they should get the credit because they recognized it was a worthy idea.

    “I have no doubt that Bush’s advisors told him that any loan to Chrysler was like throwing money into a bonfire hoping that some would waft away, and Obama certainly was given the same verdict.”

    Chrysler has a better chance of surviving than GM does and it always did. Like someone said GM is cancer patient waiting to die, even though the government is still giving them chemo (cash).

    tced2:

    “And if you read the Lutz book “Guts”, he describes how the Chrysler development system was improved by the American Motors acquisition. American Motors had a very efficient product development system headed by Francois Castaing. This was one of the un-discussed assets Chrysler picked up when it bought American Motors. Everyone thinks the only asset was Jeep.”

    The development process was based off a study of Honda and furthered by the experience of the engineers at AMC, who had to do more with less. And of course Dumbler FUBARe’d it. For that alone they ought to be sued, but about that $8-10 billion…

    galaxygreymx5:

    “The ‘93 Grand Cherokee was a massive improvement over the crotchety old model in almost every way. Superior off road skills with car-like driving dynamics. A strong seller immediately after launch with innovative four wheel drive and safety systems for the time.”

    You forgot to mention MT truck of the year. And it was clearly a superior vehicle to the Ford Explorer. It even had a counterbalanced hood that didn’t need a prop rod to hold it up (like the Ford).

    “The ‘95 “cloud cars” (Cirrus/Stratus) were in the same league as the Neon and Ram, a stylistic home-run that left mouths agape at first sight. Packaging efficiency like nothing else in the class. MT Car of the Year.”

    My mouth was agape. And I bought one. Red ’97 Stratus SE with Auto Stick. Loved it. Never gave me any problems. My wife’s grandmother, who bought TWO new Accords every few years when the redesign came out (for her and my mother-in-law) drove it and was impressed. Oh yeah, one of the buff mags compared it to Fords new Contour and they liked the Stratus better.

    “Comically short lead times on new models, stunning concepts that actually hit production while the market was still excited (Viper, Prowler, Neon, PT Cruiser), and simply class-leading performance in many areas all disappeared when the “merger of equals” hit the fan.”

    I would like to add: 1996 Dodge Caravan – MT Car of the Year (Boy was Ford pissed! That’s when they introduced the new “jellybean” Taurus. They thought they had the award in the bag.) 1996 Dodge Dakota MT Truck of the Year. 1999 Chrysler 300M, MT Car of the Year. I won’t even bother with CD’s Ten Best lists, they were all over that.



    It seems there’s a certain amount of myopia when it comes to Chrysler, it’s products, and it’s (near) history. Or maybe it’s just Sodium Silicate of the brain, the inability to process anything outside of the Asian or Euro imports or the GM/Ford mega-corp. I’ve seen the 1980 loan guarantees miss-labeled a direct government bailout via a transfer direct from the US treasury; a dismissal of products in the ’80’s and 90’s that were genuinely ground breaking; a mental snort of the designs, sales, and SPECTACULAR profits made in the 90’s like they were some sort of “stroke of luck” that was not earned by hard work (and I think the fact that Bob Lutz had so much to do with that is the heart of the problem, after all we can’t give HIM any credit now can we?). Then the re-writing of history that Chrysler was terminal all along in the 90’s (hey it was only a matter of time till they went out of business, no, really!) and that Dumbler did them a favor by buying them and giving them “good quality” German engineering. And just recently the hope and desire of some that Chrysler would just die so that GM might live (if GM is so great, why can’t it make it no matter what happens to Chrysler?).

    We like to say this is the “truth” about cars and claim that we are the “best” and the “brightest”. Perhaps we need to work on that a little more.

  • avatar
    psarhjinian

    As I understand the US point-of-view, all Chryslers thought of, dreamed-up before Daimler were class-leading and just plain wonderful, while all the ones dreamed up during Daimler’s ownership were absolute crap.

    As much as it sounds like whitewashing, it’s largely true. The last products Chrysler designed more or less by itself were the LX cars (they picked up Mercedes’ rear suspension and five-speed transmission). Before that, we had the not-bad minivans, the actually-decent PT and LH cars and the not-too-bad Neon. Oh, and the Viper.

    After that we had jewels like the Calibre/Compass/Patriot, Aspen, Sebring/Avenger and Crossfire. You could argue the Pacifica and Challenger as well, and their relative merits. The point was that every vehicle designed under Daimler’s stewardship was patently worse than it’s predecessor.

    Every single one.

    Now, that’s not grounds for a—or rather, this—lawsuit, unless you were a DCX shareholder at the time and you want to call Schrempp and Zetsche on the carpet for mismanagement. Schrempp certainly deserves it, considering that he steered two otherwise-respectable automakers into a reef.

    I don’t think Daimler was malicious in what they did to Chrysler, just arrogant and incompetent.

  • avatar
    Wheeljack

    @ windswords

    Thank you for helping to get the truth out there. Daimler did nothing other than squeeze the fruit for all the juice they could get and then throw the rind away.

    A good example of this that many people don’t understand are all the “preferred” German suppliers that were forced upon Chrysler…in many cases Chrysler’s costs went up vs. the suppliers they had been using, but Daimler reaped the benefit of improved pricing from the volume increase. I submit as an example the awful 6-speed manual transmission from Daimler that replaced the excellent NVG 3550 transmission in the Wrangler at near triple the net cost to Chrysler. To add insult to injury, the 5-speed NVG gearbox had a better overdrive ratio!

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