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I've got your product placement right here.

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A highly scientific poll conducted by calling my friend Doug and asking him, “Hey, who do you think has more screen time in Iron Man: Jeff Bridges or the Audi logo?” determined recently that, yeah, there might be some product placement at work in the entertainment industry.

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The star of Iron Man. Also pictured: Guy in a robot suit.


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Exhaust Note #9: Kerkorian is Back

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Tracinda Corporation Buying Into Ford Motor Company
Kirk Kerkorian, the incredibly wealthy 90-year-old investor and businessman, has long been well known among auto-industry watchers. He was first involved with Chrysler, back in the days when Lee Iacocca was turning things around. Later, his takeover attempt also sparked the notion of merging the company with another, which ultimately led to the creation of DaimlerChrysler. There are few today, other some who retired well off the deal, who would say that was a merger that was beneficial for either company, equals or not.
After eventually getting out of the Chrysler business, Tracinda bought enough of General Motors to get a seat on the board. Company man Jerry York held that seat and pushed for a GM-Renault-Nissan tie-up. Bound by duty to stockholders to explore the option instead of dismissing it outright, Rick Wagoner and GM staff worked with Renault-Nissan for a few months to prove what we all seemed to know in the first place: A Renault-GM tie-up didn’t make much sense. Kerkorian’s Tracinda sold off its GM stake and went home. The end of that story, right?

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Well, yes and no. Whether by the “third time’s a charm” or “try, try again” schools of thought, Tracinda has been accumulating shares of Ford Motor Company since April 2, 2008, and offered today to buy more. And by more we mean enough to give Tracinda 5.6% of FoMoCo. But what does Tracinda really want? Does the company want take over a Detroit car company, no matter which? It does seem that Kerkorian is obsessed with making a major, direct impact on the automotive industry. His efforts so far have succeeded in shaking things up, often when it can be most disruptive, but not in improving the business overall.


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Chrysler and Nissan: Sharing Can be Fun

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Chrysler LLC has not been shy about going after a partner. Chrysler needs access to the expertise in small cars that they don’t have, as well as to benefit from the kinds of economies of scale necessary to make any sort of profit on vehicles expected to sell at the bottom end of the scale. After signing with Chinese maker Chery for help in the international arena, announcements have come on new relationships with Nissan. The OEM agreements with Nissan announced this week are examples of two companies finding a win-win relationship.

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Nissan and Chrysler Serve as OEM Supplier and Client
Often deals like this are announced with one partner clearly benefiting more than the other, no matter how many times the phrase “win-win” is used during the presentation. But in this case, the relationship will benefit both partners. Each company is contributing in areas where they have expertise and market success, areas where solo development costs are prohibitive. Each company is also using production capacity that might otherwise be difficult to fill.


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Dodge Magnum Killed by Chrysler – Among Other "Adjustments"

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Chrysler LLC today announced a wave of manufacturing actions to reduce capacity and headcount. They also announced that four products would be cancelled from the Chrysler lineup and that two new products and two hybrids would be introduced.
Perhaps the most significant drop is of the Dodge Magnum. This distinctively styled wagon has always been a favorite of mine, but as a “wagon” it has not resonated well with the buying public. When the Charger 4-door sedan was added to the Dodge lineup, Magnum was relegated to the list of forgotten models at the Dodge store. There is probably not a cooler looking vehicle on the road when it is well-dressed by a tuner than the Dodge Magnum.

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Three More Products Announced for Cancellation – Two Added
Chrysler also announced that it will kill the Chrysler PT Cruiser convertible, the Chrysler Pacifica and the Chrysler Crossfire. All are low volume products that have not captured the attention of the market. While killing four products, Chrysler adds the Dodge Journey Crossover SUV and Dodge Challenger muscle car to the Dodge lineup. Seems like a very fair trade.
Next on the block we’d like to see the demise of the Jeep Commander and Jeep Compass – both products Jeep does not need. While Commander has Jeep DNA, Compass does not and Jeep should keep pure to its Trail-Rated DNA. Commander should be on the block because it is UGLY. Aspen, Dakota and Durango could also be up for consideration to drop.
More Headcount Reductions
In addition to cancelling products, Chrysler will eliminate shifts at several plants to bring capacity in line with demand (market shrinkage from 17.2 million units to around 16.2 million units). This will reduce hourly headcount by another 8,500 to 10,000 workers. Salaried headcount is to be reduced by another 1,000 staffers. These reductions are in addition to a 13,000 job reduction previously announced by Chrysler.
Read Chrysler’s November 1 Press Release below the fold
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Unbelievable – Jim Press Joins Chrysler LLC

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We don’t normally get involved in reporting on the management at carmakers. We don’t figure that these faceless heads are of much interest to our readers, but in the case of Chrysler LLC’s new management the stories are unfolding and they are very, very interesting. The latest is the move of Jim Press from Toyota to Chrysler.

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Incredible. Unbelievable. Jim Press, the top American at Toyota has left the Japanese firm he has been with for 37 years to join Chrysler as Vice Chairman and President responsible Sales, International Sales, Marketing, Product Strategy, Service and Parts.
One of the true gentlemen of the industry – domestic or import – Press was at the helm of Toyota Motor Sales as the firm blasted past its Japanese rivals and then began to pick off Chrysler and Ford in monthly sales figures. Press was on the board of Toyota Motor Limited – the Japanese mothership – and had moved from Toyota Motor Sales’ Torrance, California headquarters to run all of Toyota’s North American operations from New York during 2006. It is likely this move upwards to New York that took Press out of his comfort zone and made any approach by Chrysler possible.
In his new job, Press has the same title as Tom LaSorda. Chrysler said LaSorda will be responsible for manufacturing and suppliers, while Press will be responsible for sales and marketing, product strategy and service and parts. Both will report to Chrysler CEO Bob Nardelli. This is the second high profile choice that undermines LaSorda’s previous position as Chairman of Chrysler… first came Nardelli and now Press.
Press joins another Toyota alum, Debra Wahl Meyer, in moving to Chrysler. Wahy Meyer was tapped last month to be Vice President of Marketing. She had previously been Vice President of Marketing at Toyota’s Lexus Division.
“Part of my new responsibilities will be strengthening and energizing the dealer body,” Press said in a statement. “This is something I was passionate about at Toyota and will be passionate about at Chrysler.” This, of course, will be a challenge for Press because Chrysler dealers are a restive group of late. In his days as head of TMS, Press’ relationships with Toyota dealers was solid. Dealers respected Press and he respected the dealers. Chrysler’s dealer relations are so far in the dumps, however, that it will take months, if not years, for them to be repaired.


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The New Chrysler II: Lots of Noise, Questions, and Endless Speculation

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The furor surrounding Cerberus’ decision to make Bob Nardelli, formerly of Home Depot and GE, the CEO and chairman of the New Chrysler II, putting Tom LaSorda in the Number 2 position instead of Number 1, is the juiciest gossip train to hit the circuit since Mulally’s appointment at Ford. There has been much more noise than news this week, and here’s our contribution to the fray.

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Employees at Announcement Wanted to be in Air Conditioning or Home by the Pool
Watching both the press conference announcing Bob Nardelli’s appointment as CEO and chairman of the newly formed Chrysler LLC as well as the employee pep rally afterward, and both groups seem wary instead of enthusiastic or supportive. The backlash in the press finds little support for Nardelli. The employees, while impressed with acrobatics and fireworks, generally looked as though they’d have preferred to be in their offices that hot, muggy afternoon. Most left as soon as they sensed the formal program was over. Nardelli says he’s here to bring laser-focus and energy to the turnaround plan already laid out and in progress. His presence in front of employees didn’t bring energy, and returning to finish the last few days of a family vacation the next day didn’t display laser focus.
Nardelli’s been characterized as a drill sergeant with little people skills, and he’s entering a vibrant company full of strong personalities. Being private gives Chrysler LLC the ability to make decisions based on long-term health instead of short-term profit-and-loss statements. But Cerberus expects a quick turnaround and their investors do expect a return. Nardelli may be playing to a different audience, but the pressure will be no less intense.
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Huh? Bob Nardelli Formerly of Home Depot Heads The NEW CHRYSLER

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When Bob Nardelli left as CEO of Home Depot in January, he got a tidy bonus of $210 Million. Must have made a huge investment in Cerberus Capital Management because they just named Nardelli instead of Wolfgang Bernhard CEO of The New Chrysler Corporation. This is expected to be officially announced at a press conference on Monday morning August 6 in Auburn Hills.
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Mass Retailer Heads Chrysler – “Adjustments” Begin in Management Chairs
The surprise appearance of Nardelli on the scene – a man with supposedly no automotive experience but good experience running one of the biggest retail chains in the USA – leaves us guessing where the various players will eventually alight.
Early reports say that Bernhard declined the CEO position for personal reasons. Tom LaSorda, Chrysler’s CEO until Nardelli’s appointment, is expected to remain on board as Vice Chairman and President… kinda the Chief Operating Officer. Rumors have it that LaSorda is taking calls concerning future opportunities outside Chrysler. It’s tough to become a supporting player after having first chair even under the umbrella of DaimlerChrysler.
Eric Ridenour, a highly respected car guy and until now the Chief Operating Officer working with LaSorda has elected to leave the company to explore other opportunities.
The Zero Dollar Man – No Pay Until Chrysler is Profitable

Back to Nardelli’s $210 million. Reportedly he will not take a salary until The New Chrysler has turned around. But since Chrysler no longer has to report to Wall Street we may never know the actual story here.
Cerberus’ move to have Nardelli is a brave one. The auto industry has numerous examples of industry outsiders who have been chewed up and spit out by the old gang. Cerberus has a legion of former industry execs to call upon. The assumption here is that Cerberus thinks they can find a way either by force of Nardelli’s own style, or with the help of gray-haired former execs, to have Nardelli succeed and excel at the help of The New Chrysler.
Stay tuned, more to come from Monday’s meeting in Auburn Hills.


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Detroit News: Big Changes Loom for New Chrysler

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This article citing input by AutoPacific’s George Peterson appeared on Thursday, August 2, 2007 in The Detroit News
Big changes loom for new Chrysler
Bill Vlasic and Christine Tierney / The Detroit News

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While CEO Tom LaSorda, left center, will continue to lead Chrysler’s executive team, analysts expect Wolfgang Bernhard, Chrysler’s former COO, right center, to drive most of the changes on the product side. This photo was taken at the signing of the Chrysler/VW minivan deal. © bilde 2007
AUBURN HILLS — The concept car had been shown publicly and critiqued internally. Business plans had been written, and Chrysler Group executives had debated for months whether to build the flagship luxury sedan.
But it would be up to Wolfgang Bernhard to ultimately approve or kill the Chrysler Imperial.
In mid-July, the incoming chairman of Chrysler made his call in dramatic fashion at a final product review, according to people familiar with the event.
“That car,” Bernhard said, “will never see the light of day.” [VehicleVoice Comment: Thank you. Thank you. Thank you for preventing another blight – the Aztek-ugly Chrysler Imperial – on the American roads]
His swift decision is a preview of how Chrysler will operate under Cerberus Capital Management, the secretive private-equity giant that will soon complete its $7.4 billion buyout of the No. 3 U.S. automaker.
With Cerberus exec Bernhard as its hands-on chairman, Chrysler is expected to move quickly and forcefully to turn around its sagging domestic operations and grow its international business.
Cerberus is expected to close on its acquisition of Chrysler from DaimlerChrysler AG as soon as Friday, according to people close to the process.
It’s the deal of the decade in the global auto industry and the beginning of a new era for Chrysler, the smallest of Detroit’s struggling Big Three automakers.
Big changes are in store for the new Chrysler, including the possibility of an expanded alliance with Korean automaker Hyundai Motor Co. and a deal to build cars in Russia, The Detroit News has learned.
But overseas projects and U.S. product moves are only part of the transformation awaiting Chrysler, which lost $680 million in 2006.
After nine years as a division of a domineering German parent company, Chrysler will get a much-needed fresh start as the prized possession of Cerberus.
‘We bring a fresh set of eyes’
Led by its hard-driving founder Stephen Feinberg, the New York-based private-equity firm owns more than 50 companies and applies cutting-edge business techniques to its corporate turnarounds.
“We are a lot more than a financing company,” said John Snow, Cerberus chairman and a former U.S. Treasury Secretary. “We bring a fresh set of eyes that looks at a company’s problems from another vantage point.”
Since agreeing to buy Chrysler in May, Cerberus has sent squads of financial and management experts to Auburn Hills to assess the company’s strengths and weaknesses.
Bernhard, Chrysler’s chief operating officer from 2000-04, has swept through the organization like a whirlwind — poring over product plans, brainstorming with executives, checking on even routine events like press previews for the minivan launch.
The level of oversight by Cerberus might surprise outsiders who expect the firm to stay in the background at Chrysler, said one private-equity expert.
“A lot of people think private equity is just all about financing, and it’s not,” said David Brophy, director of the Office for the Study of Private Equity at the University of Michigan.
Brophy said the bulk of Cerberus’ attention will focus on Chrysler’s core activities — purchasing, manufacturing, product development and sales and marketing.
Sources close to the situation said Cerberus insisted that detailed performance goals for Chrysler and its executives be written into the buyout deal.
“The trademark of private equity is to set high goals for a company where it’s not doing well,” Brophy said. “With Chrysler, you’ve got to turn your attention to making cars that customers want.”
Chrysler slipped behind Toyota Motor Corp. to fourth place in U.S. sales last year, and seems stuck at a 13 percent share of the market.
This year, Chrysler’s U.S. sales are down about 2 percent through July.
A new minivan model this fall should boost sales, but Chrysler’s longer-term challenge is to differentiate its products and brands from rivals General Motors Corp. and Ford Motor Co.
“They need to really decide who they want to be, and make sure the product line supports that,” said Wes Brown, a California-based automotive brand consultant.
Chrysler insiders said the flashy Imperial concept clearly didn’t fit the brand’s “premium” image, and Bernhard was correct to dump it.
People close to Chrysler also said the retro-styled PT Cruiser will go out of production when its current model ends in 2009.
The resurgence of Chrysler’s lineup will depend on the success of restyled versions of bellwether models such as the 300C sedan and Ram pickup, as well as all-new products, such as the Dodge Challenger muscle car and a crossover vehicle slated for production in Mexico.
“They need to recapture their spark,” said George Peterson, president of the consulting firm AutoPacific in Tustin, Calif.
“They need to pay more attention to the interiors of their vehicles, and just do a lot of the product stuff better.”

While CEO Tom LaSorda will continue to lead Chrysler’s executive team, analysts expect Bernhard to drive most of the changes on the product side.
A charismatic leader with experience at Mercedes-Benz, Chrysler and Volkswagen, Bernhard is known as both a champion of edgy designs and a disciplinarian on costs.
“Wolfgang will be good for the product because that’s his skill,” said Dennis Pawley, who headed Chrysler’s manufacturing operations in the 1990s. “If they can successfully execute the right products, they’ve got a chance.”
Chrysler looks abroad
Under Cerberus, Chrysler will also be pushing harder to build its international presence.
The automaker is committed to launching eight new vehicles outside of North America this year, but other moves appear to be in the works.
People close to the company said Chrysler is in discussions with Hyundai to expand ties beyond their three-way alliance to build engines with Mitsubishi Motors Corp.
A Hyundai source said “the door is always open to new talks on new proposals,” but declined to specify potential areas of cooperation with Chrysler.
Chrysler already has cut a deal to purchase Chinese-made small cars for sale in the U.S., and is working on a partnership with a Russian automaker, according to a person familiar with the plans.
Extending its global reach is critical for a company that sells about 90 percent of its overall volume in North America.
“You can’t gain the scale you need just from a regional perspective,” said a consultant to Chrysler, who spoke on condition of anonymity. “You need to look outside North America.”
Chrysler is also gearing up to purchase more components in low-wage nations in Asia. The effort began before DaimlerChrysler put the U.S. automaker up for sale in February, but has intensified since Cerberus agreed to acquire it.
In fact, Chrysler insiders said the Cerberus deal has been like a shot of adrenaline throughout the entire organization. “Things are moving very, very fast here,” one Chrysler official said.
Cerberus has kept its specific plans for Chrysler close to the vest. Feinberg declines all interview requests, and Cerberus officials speak only in the most general terms when discussing their corporate holdings.
“Our job is to ask the difficult questions and to create an environment where management teams can succeed,” Snow said in an interview in Detroit last month.
The tone is set, however, by Feinberg, the reclusive financier who masterminded the buyout.
‘They need to deliver’
Operating out of a suite of offices on the 22nd floor of a Park Avenue skyscraper, Feinberg runs a lean organization with fewer than 200 full-time executives.
“There’s very little bureaucracy at Cerberus,” said one former executive of the company, who asked not to be identified. “Things go right to the top at Cerberus, and Steve is known for making decisions on the spot.”
Executives at Cerberus-owned companies are given performance targets, and are said to have an unusual amount of autonomy to achieve the goals.
“He gives each management team a chance to deliver the goods,” said the former Cerberus executive. “But they need to deliver.”
People close to Chrysler said LaSorda has made several trips to Cerberus’s New York offices in recent weeks. Chrysler insiders said Feinberg already has a deep understanding of the company’s inner workings.
“This is a guy who never asks a question he doesn’t already seem to know the answer to,” said one Chrysler official. “He really does his homework.”
People familiar with the Cerberus buyout said that LaSorda and other senior Chrysler executives stand to earn huge cash bonuses if they achieve performance targets.
Unlike a publicly traded company, Chrysler will not have to disclose its compensation plans.
“The newspapers were full of pictures of the big smile on Tom LaSorda’s face after the deal, and that’s because there’s a big payoff if Chrysler succeeds,” said Brophy of U-M.
But with Cerberus looking at perhaps a five-year time frame to return profits to its own investors, Chrysler can’t afford to get off to a slow start.
“The key to private-equity deals is to get a return on the investment in a relatively short period of time,” Brophy said. “If the limit is five years, well, there’s not a lot of room for mistakes.”


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Chrysler Sale to Cerberus Closes

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Ah, yes. It began with such high hopes but without enough due diligence. Little did what was then Daimler-Benz AG know it was “merging” with Chrysler Corporation wearing an empty suit. The “merger of equals” was anything but. It was a take over. Not a hostile take over, but a take over nonetheless. On the surface, Daimler-Benz got a high volume American manufacturer with some critically acclaimed models and the Jeep brand. They also got thousands of Chrysler-Plymouth, Dodge and Jeep dealers. What they did not get was a solid cycle plan with investment levels sufficient to guarantee competitiveness.
LX Cars Greatest Result of Tie-Up with Daimler-Benz
Perhaps the greatest accomplishment during the brief existence of DaimlerChrysler (name to be changed at a extraordinary shareholder’s meeting on October 4, 2007) was the development of the LX platform. Sharing components with a previous generation Mercedes E-Class (primarily independent rear suspension) the big rear wheel drive sedan – the Chrysler 300 – and wagon – the Dodge Magnum – and later the Dodge Charger sedan – could have set the tone for Chrysler Group going forward. Add the HEMI V8 to the mix and WOW!
LX Cars Were One Trick Pony – No Follow-Up on Design Theme
But Chrysler never followed up on the LXs. On the car side of the business the Chrysler Crossfire was an absolute flop. The Dodge Caliber, Dodge Avenger and Chrysler Sebring have become the darlings of rental fleets. The Jeep Compass the butt of jokes. The LX-Based and almost approved Imperial was thankfully killed before it could go into production. Where is the DNA that could have been passed down from the LX cars? A lineup rich in LX DNA could have been an extremely strong lineup instead of a group of weak sisters.
Sounds Like BMW Rover
Maybe the large German car companies are not destined to own foreign companies. BMW was not able to turn around Britain’s Rover and Rover eventually folded. Was “The Chrysler Problem” the fault of Daimler-Benz? Was there a talent drain at Chrysler with the departure of product guru Bob Lutz and design leader Tom Gale? Did Chrysler cut costs too drastically? Did adopting Daimler-Benz processes create operating problems? But those issues are part of the case study the Harvard Business School is undoubtedly writing right now.
Will Chrysler Prosper Under Cerberus?
The more intriguing question of the moment is “How will Chrysler respond to its new ownership? Will it prosper? Will it struggle even more? Will Chrysler once again develop and sell cars and trucks we covet? Time will tell

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Chrysler's Lifetime Warranty Announced

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If you want to get attention you do something really spectacular. Right?
Well, beginning on July 26, 2007 Chrysler began offering a lifetime powertrain warranty for the initial owners on all 2006, 2007 and 2008 model year vehicles with the exception of diesels and high performance SRT models.
Chrysler Leapfrogs Competition with Lifetime Powertrain Warranty
Having been a laggard in the warranty wars up to now, Chrysler one-ups Hyundai’s and Kia’s 10-year/100,000 mile powertrain warranty, General Motors’ 5-year/100,000 mile powertrain warranty, and Ford’s 5-year/60,000 mile powertrain warranty. Even Mitsubishi is in the game with a 10-year/100,000 mile warranty for initial owners.
Chrysler needed this bump to get its vehicles more competitive and to eliminate a barrier to sales that dealers have been finding. It was too easy to use warranty as one excuse among many not to buy a Chrysler, Dodge or Jeep. Now that Chrysler can tout the ONLY lifetime warranty in the industry, maybe this is just what is needed to boost sales and welcome their new owners – Cerberus Capital Management.
How Will Competition Respond? Lifetime Bumper-to-Bumper Warranties?
Over the next few weeks and months it will be interesting to watch how Chrysler’s competition responds to this move. It is known that several other companies have considered lifetime warranties – even including lifetime bumper-to-bumper warranties – but Chrysler is the first to commit.


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