Mercedes-Benz premiered its all new S-Class sedan in Hamburg on May 15, 2013. Held at the Airbus factory where final assembly of the Airbus A320 and A380 is occurring, Mercedes took advantage of an over-the-top venue for an over-the-top introduction to their new Flagship. While an introduction like this should showcase the car (which it did), the showmanship used by Mercedes in this occasion was second to none. A very official looking YouTube video (http://www.youtube.com/watch?v=U94OftPwcAc) shows the event up to just before Deiter Zetsche announced Alicia Keys who was sitting in the back of the center stage S-Class. They probably were prevented from showing her performance for contract reasons, but it was pretty darn good. She even worked very well with the Hamburg Symphony Orchestra that was playing original compositions prior to her arrival.
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
Private equity firm Cerberus is in the process of taking Chrysler Group out of the hands of the automaker formerly known as DaimlerChrysler AG (DCX). What will soon become Daimler AG will continue to own 19.9% of the new company – Chrysler Holdings LLC – with Cerberus owning the remainder. This is the end of the Jurgen Schrempp dream for Daimler-Benz to create a global auto colossus made up of Mercedes-Benz, Freightliner, Chrysler, Mitsubishi and Hyundai.
Cerberus Has Auto Industry Heavyweights Involved
Daimler-Benz took over (no merger – ever) Chrysler Corporation in November 1998 for $36 billion. Nine years later, DCX agreed to sell 80% of what is now Chrysler Group to Cerberus Capital for $7.4 billion. Clearly Schrempp’s plan did not work.
Impact on Opinion of Chrysler –
In late March, a VehicleVoice survey indicated that the opinion of Chrysler Group had deteriorated drastically from a year earlier. Our respondents variously said: “Daimler bought ’em, raped ’em and threw them away,” “Why would I buy a car from a company that’s parent company is trying to sell it?” Perhaps the purchase by Cerberus will serve to offset some of this deterioration, but time will tell.
Cerberus is the mythological three-headed dog that guards the gates of hell. Cerberus Capital is an interesting firm in its own right. Secretive to a fault, at least three auto industry heavyweights are on its letterhead (if they had one): David Thursfield, former Vice Chairman of Ford and an aggressive cost cutter; Wolfgang Bernhard, former COO of Chrysler Group (with Zetsche) and then head of Volkswagen in Germany prior to his Cerberus gig; and Robert Rewey, former head of Sales at Ford. Rewey could sell anything any day of the week. While Cerberus says they will keep the present Chrysler Group management team in place, it is only a matter of time that “adjustments” begin being made.
Remember the character in Pretty Woman
played by Richard Gere? He was a private equity magnate that wanted to buy a shipbuilder, break it up and sell the pieces for a profit. A private equity firm like Cerberus isn’t too much different and the jury is still out on how Cerberus will handle its investment in Chrysler Group.
Cerberus has an interesting portfolio – a large stake in Delphi, 51% of GMAC – General Motors’ financing arm, Tower Automotive, Guilford Mills, Albertson’s, Sav-On, and others. The fact that Cerberus now controls Chrysler Financial and over half of GMAC gives it substantial clout in the automotive financial services market.
So, now, Chrysler Holdings can stay below the radar as a privately held company. Unfettered of its requirements to be transparent financially the company will largely be able to restructure itself outside the glare of the media and Wall Street. What will emerge after three, five or seven years is unknown, but the story will be fascinating to watch as is unfolds.
DaimlerChrysler announced a massive restructuring of Chrysler Group on Valentine’s Day – February 14, 2007. Wags in the press have taken to calling this the “Valentine’s Day Massacre” of 2007.
Chrysler Joins General Motors and Ford in Restructuring
Following years long restructuring by its crosstown rivals General Motors and Ford, Chrysler Group completes the Domestic Three in their attempts to restructure.
Still saddled with tremendous unsold inventory and a mis-match between capacity for traditional SUVs and big pickups and demand, Chrysler announced the closing of one SUV plant (Delaware) and reducing shifts on others.
The inevitable headcount reduction will total 13,000 hourly and salaried workers bringing the combined headcount reductions by the Domestic Three into the range of 100,000 workers. While operations all around the USA will be affected, selling a house in Southeastern Michigan will be a long and probably expensive task with a huge inventory of unsold homes offered at prices that can only come down.
DaimlerChrysler May Cease to Exist
You remember the “merger” back in 1998 that combined Daimler-Benz and Chrysler Corporation. Characterized as a merger that was indeed a take-over, the synergies anticipated from the match have not been realized. Sure there are the outstanding Chrysler 300, Dodge Magnum and Dodge Charger cars that use the IRS from a previous generation Mercedes, but that is a rare example.
In statements surrounding the restructuring, DaimlerChrysler head Dieter Zetsche admitted that all alternatives were on the table including spinning off Chrysler Group. Rumors immediately arose that DCX was in talks with General Motors about GM absorbing Chrysler Group. Rumors.
So, this puts all three domestic auto makers in restructuring mode just as Toyota and Honda are beginning to get their second wind. It’s going to be a tough few years around Detroit.
Primedia’s AUTOMOBILE MAGAZINE
, not to be left behind in the automotive awards category by its Motor Trend stablemate (you remember, Car of the Year, Truck of the Year, SUV of the Year), has announced its winners of Automobile of the Year, Design of the Year, Technology of the Year and Man of the Year Awards. Automobile calls itself “America’s leading automotive lifestyle publicaion.” Sounds very similar to Motor Trend’s claim. Oh, well lets see who won what (note that these are “Editors’ Awards with no consumer input) and register the VehicleVoice
2007 Automobile of the Year: Volkswagen GTI –
seems like there would have been other more worthy selections. The GTi is a fine car; fun to drive, attractive, easy to live with. How about some other candidates? I’d definitely consider the Lincoln MKZ mid-size sedan or Lincoln MKX crossover SUV. I’d have the Ford Edge on the list. Hmmmmm. Maybe they really mean “automobile” and trucks, SUVs and crossover SUVs don’t count. So, lets limit it to cars. So, we’ll leave in the MKZ. Howabout the Infiniti G35 sedan? The all new Nissan Altima. Why didn’t they agree with Motor Trend on the Toyota Camry as Car of the Year? Well, the list can go on forever. GTi is nice, but certainly ain’t the only game in town.
2007 Design of the Year: Aston Martin V8 Vantage –
AUTOMOBILE is right on selecting the V8 Vantage. Absolutely drop dead gorgeous, the V8 Vantage takes Aston’s iconic shape to the next level and puts it in a more “affordable” package.
Roger Penske (Left) with DaimlerChrysler CEO Dieter Zetsche (Right) and smart cars
2007 Man of the Year: Roger Penske –
Can’t really argue with Penske’s selection, but we’d include in their rationale his intention to import the smart from Europe. Penske has accomplished a tremendous amount in his career – racer, race team owner, owner of truck rental agency, owner of Detroit Diesel, owner of tremendously successful chain of automobile dealerships, etc. The smart may be his next great accomplishment.
2007 Technology of the Year: Electronic Stability Control –
Automobile’s Press Release for these Awards can be found below the fold.