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Chrysler Restructuring – Valentine's Day Massacre 2007

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.

1 Comment

  • 'Sack| February 15, 2007 at 3:34 pm

    Your blog correctly states that DCX would consider selling the Chrysler Group. Well, yes, of course. Who wouldn’t? Isn’t it the responsibility of the Directors to consider anything that maximizes shareholder value? Wouldn’t they be negligent if they didn’t consider such an option?
    The challenge isn’t being willing to sell. That part is easy! The trick is to find a buyer. And who is there that has the money to buy such a large company, and the automotive management savvy to successfully run it? Who would really want to buy into all those UAW/CAW contacts? Take on all those relatively old plants, excess dealers, too many models etc.
    GM and Ford have all the people and facilities they need – and more dealers,brands and models than they want. Renault/Nissan have plenty to do keeping Renault (in Europe) and Nissan (in Japan, the USA and Europe) making an adequate return. It isn’t in the Toyota or Honda DNA to make such an acquisition. If Daimler can’t make a go of it, BMW (especially after the Rover experience) and VW are unlikely to have a shot. FIAT is busy with their own recovery effort. So is Mitsubishi. Who’s left? Maybe an entrepreneur like Penske? Perhaps…if they could get out of the UAW contract commitments. But you’d have to call it a long shot at the very best.
    As in many areas, it is a lot easier to buy something than it is to sell it!

    All very true. The latest vibrations are about technology sharing with General Motors – not a sale or acquisition. That might make more sense.
    Just think, Daimler reported good profits for 2006 even with Chrysler Group holding it down. Much of the profit was by their commercial vehicle operations – better known as Freightliner in the USA. Freightliner and all other heavy truck makers pulled ahead substantial sales into 2006 before new diesel emissions standards increase the price and operating costs of their products by a bunch. DCX wants to avoid getting a double whammy in 2007 with both Chrysler Group and Freightliner down.

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