Bob Lutz:

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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GM, Renault, Nissan in Possible Tie-up

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The buzz around the global auto industry on Friday June 30 was that a possible tie-up between General Motors, Renault and Nissan was being seriously discussed by GM’s board. A meeting held on June 20 in Nashville (Nissan North America’s new headquarters) between Kirk Kerkorian, Jerry York and Carlos Ghosn explored possible relationships. Kerkorian’s Tracinda Corp. owns 9.9% of General Motors – the 4th largest shareholder – and Jerry York, Kerkorian’s right hand man, is Tracinda’s representative on GM’s Board. Carlos Ghosn is chairman of Renault and chairman of Nissan. Could he also become chairman of General Motors and then rule the auto world with 25% of the global market?
GM’s Board had a urgently called telephone conference on Friday to discuss the issue. No news yet.
General Motors Share Price Skyrockets
GM’s share price rocketed 8.6% on Friday on the news and skeptics opined that Kerkorian had orchestrated the news to win back the losses his investment in GM has taken over the past year. Others saw this as another wake-up call to Rick Wagoner that the restructuring of General Motors is not moving fast enough and that someone like Carlos Ghosn is needed to impersonally and analytically cut through the inertia that faces the General. Admittedly, Rick Wagoner has one of the toughest jobs on the planet and steering GM is like steering the Titanic. It cannot change direction quickly. But Ghosn demonstrated that you can turn around a huge ship – Japan’s second largest carmaker Nissan returned to profitability two years following Ghosn taking the helm.
Personalities, Personalities, Personalities
Think about the personalities. Wagoner the low-key professional chairman trying to improve the General incrementally. Bob Lutz the charismatic product czar of GM whose impact is just beginning to be seen in newly introduced products. Jerry York the impatient financial wizard from Chrysler/IBM/Tracinda who is delving into GM’s operations. Kerkorian the “long term investor” trying to make a risky investment a sure thing. Carlos Ghosn another charismatic exec credited singlehandedly with saving Nissan. Wow! This is fun!
Don’t Forget China
Oh, don’t forget. GM has a solid presence in China and Renault and Nissan much less so. This tie up could really benefit Renault and Nissan in China.
Stay Tuned
Stay tuned. This will play out quickly over the next week or so. Is Kerkorian just playing with his share price? Is he really able to goose GM into accelerating its restructuring? Will any sort of relationship develop between GM/Renault/Nissan? Between Wagoner/Lutz/Kerkorian/York/Ghosn?


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