A Strange Detour for Chrysler

A Strange Detour for Chrysler
http://tinyurl.com/5rtx6j

So it's come to this. Chrysler, inventor of the minivan (one of the
best-selling ideas in automotive history), is starting to turn itself
into a marketer and contract manufacturer of other people's cars. To
plug gaping holes in its truck-heavy lineup, the U.S. automaker already
plans to stick a Chrysler badge on a restyled Nissan Motors (NSANY)
Versa subcompact. Now comes word that it is negotiating with the
Japanese company to start selling a version of the Altima family sedan.
Plus, to pick up the slack at its underutilized truck and minivan
plants, Chrysler aims to become an assembler-for-hire for any maker that
needs those vehicles.

This plan did not spring from the brain of a car guy. It smells of the
moneymen who are now deeply nested in Chrysler's operations. Cerberus
Capital Management paid $7.4 billion for 80% of the company and, having
underestimated the difficulty of turning it around, is looking to cut
costs and conserve cash. Chrysler and Cerberus say they will save
hundreds of millions or even billions of dollars in development costs
for small cars and family sedans. And far better to share their
factories, they say, than to lose money on them. Yes, it makes a strange
kind of sense, but it virtually assures that Chrysler may never thrive
as a standalone company.

The partnership has serious weaknesses. Picture the Chrysler star or
Dodge horns on a restyled Nissan. And ask yourself: Why not just buy the
Nissan? After all, the Chrysler and Dodge brands are among the weakest
out there. Nissan vehicles often hold their value better than Chrysler
ones do. (As a parallel, consider the General Motors (GM)-Toyota Motors
(TM) joint venture to build small cars: The Toyota version of the same
basic vehicle sells way better and for a lot more money.) And let's not
forget that Chrysler's most famous names stand for off-roading (Jeep)
and gas-guzzling power (the famous Hemi engine). Hard to sell small
Nissan siblings with that kind of branding legacy.

Which brings us to the plan to rent out Chrysler's factories. As part of
the partnership, Chrysler will build a version of its Dodge Ram pickup
for Nissan. Volkswagen (VLKAY) has ordered up a minivan. Votes of
confidence, to be sure. But will Chrysler's quality issues scare others
off? Two recent studies from J.D. Power & Associates (MHP) maintain that
Chrysler's quality lags way behind its toughest rivals. In their
defense, Chrysler executives point to a study done by consulting firm
Oliver Wyman Group showing the company's manufacturing efficiency is now
among the best in North America. They also claim quality has suffered
because its former parent, Daimler (DAI), was cheap on parts.

But there's another problem with relying on other carmakers. It steers
Chrysler into me-too land and away from its roots as an innovator. The
company has often risen Phoenix-like from a crisis with innovations such
as the minivan or early SUVs such as the Jeep Grand Cherokee. Design
breakthroughs like the Dodge Ram pickup and the PT Cruiser during the
1990s earned billions. More recently, the 300 sedan was a big, if
short-lived, hit. Chrysler President Tom W. LaSorda counters that
Chrysler's cars will look nothing like their Nissan siblings and that
the strategy will play a big role in his planned overseas expansion.

Auto industry partnerships have a tendency to go kaput when interests
diverge. For the moment, the alliance with Nissan will allow Cerberus to
keep Chrysler going while it figures out an exit strategy. Nissan may
not buy Chrysler outright (despite speculation) and seems content with a
looser arrangement that will allow it to sell more cars. LaSorda doesn't
see a sale happening any time soon. But a deepening partnership with
Nissan means Chrysler is less likely to go it alone. This company will
end up on the block again. The only question is when.

 

I disagree. This has been done for years, from the Chrysler
Mitsubishi Colt, Champ, Arrow, Challenger, Sapporo, Stealth, and
Summit, to the GM Nova, Prizm, Storm, Tracker, Metro, Sprint, and
Vibe, to the Ford Probe, Isuzu Oasis and pickups, Mitsubishi Raider,
Mazda pickups and Navajo, the old Chevy LUV and Ford Courier...

The VW/Porsche 914 was an early example. Then there was the
Sterling. Nissan and Renault share platforms now. Most Fords use a
Mazda or Volvo platform. Saab shares platforms with other GM makes.

If a platform is good, why re-invent the wheel? That's what got US
makers into trouble -- they thought they had to invent everything
themselves, even if another maker was already using it.

 

Chrysler has been "involved" with other manufacturers as far back (at
least) as with Simca in the middle 1960s. Then later MItsubishi and the
British Rootes Group in the early 1970s (Dodge Colt and Plymouth
Cricket). In the early 1970s, Chrysler's 10% state in Mitsu brought us
the Dodge Colt. GM's 10% state in Isuzu got us the Chevy L.U.V (light
utility vehicle) trucks. Ford's 10% stake in Mazda got us the early
Ford Ranger small truck.

The fwd Chevy Nova was a Toyota Corolla with "home market" sheetmetal,
rather than USA-market Corolla sheet metal. The current Mitsu Raider
pickup is a re-skinned Dakota.

In typical "money people" fashion, Cerberus is seeking to stop losses in
"the normal manner" (i.e., cut costs) rather than be inventive and build
the business and increase market penetration. The Daimler influence in
current small car products (which were done in conjunction with Mitsu
and using Mitsu-influenced platforms and engines) has not been the best
thing to have around, it seems. Many of the prior "good formulas" were
discarded to give us what Chrysler's product portfolio now has in it.

Whether a product sells well can be highly influenced by regional
issues. With the shale oil boom in certain areas of TX, all you see are
Dodge Ram HD trucks with work beds and such on them. Even younger guys
are driving new ones as "the image" is good for them . . . just like the
Chrysler muscle cars of the '60s were back then.

It seems that Cerberus and all of their "dream team" imports from
Toyota/Lexus are not up to the task of effectively marketing Chrylser
products to the masses, by observation. Chrysler still has some very
credible products, as suboptimal as they might appear to be in some
cases, but still good products. As in other cases, the difference
between good comments in the consumer magazines will not take very much
money to remedy . . . different shock calibrations here, something else
there, for example.

It seems interesting that Nissan would want another truck when they have
a decent truck in their Titan (which I see aimed more at Ford than Dodge
or GM). Nissan does have some great products, just as Mitsu does, but
the image of Nissan tends to be more like Dodge than Honda or GM in the
way their vehicles are perceived to be "hip" and "desireable", with a
performance heritage.

Chrysler, like Oldsmobile, would not be that hard to save and make
prosper . . . but you CAN'T do it by cutting product choices or
following the imports down the path of "Any model you want if it has
THESE option packages" rather than individual choices that allow the
consumer to have real choices. Get back to basics like the old "Basic
Equipment Group" that Chrysler used to great success in the '60s and
'70s, then add the fluff from there. Not to mention more choices in
interior colors than just TWO.

It's normal for a stock broker to look to get rid of certain parts of a
portfolio to stop financial losses, but that's not the way you market a
car company to consumers! This, also, is not the first time that
"investment bankers" have been in control of car companies. At least in
the earlier times, the bankers had the good sense to hire Walter P.
Chrysler to get Buick back to health (which he did marvelously and made
enough money to go on to his bigger and better things!). At that time,
Buick was not bad off, just not being run efficiently.

Sometimes I wonder just how far Chrysler might have gone (with what it
HAD in the 1990s) if outside influences/influencers had not meddled in
Chrysler's business (pre-"merger") and if Daimler had not done all that
they did (which motivated the loss of apparently good employees to GM,
Ford, and others)? OR how many more golden eggs they might have
accumulated to fund future product growth?

Many considered the Daimler influence to be good, but then the allegedly
bad products that were in the mill when they got there were not that bad
to start with . . . just that they didn't have the Daimler "magic touch"
or "blessings". Their stated quest for quality obviously increased
development time and expenses for very little real gain in sales or
profits . . . OR customer satisfaction.

Over the road fuel economy typically took a slight dump with the block
body styles, by observation, plus the heavier weight of the cars.

So far, Cerberus is not delivering on their promise of "Saving an
American Icon". They might perceive they might be, but where are the
fruits of their efforts rather than hire in a bunch of opportunists from
Toyota/Lexus that have yet to really get a grip on how to effectively
sell/market Chrysler products. Worrying about profits (in the short
term) can be expected, but cutting things in the short term which will
adversely affect what happens in a few years is NOT a good strategy for
ANY business.

Regards,

C-BODY