Don't let the door hitcha? - Investors call for spin-off of Chrysler
There have been rumblings of late in the halls of Stuttgart that the boys in Auburn Hills are an albatross around the neck of DCX. Dieter Zetsche and company are reportedly in it for the long haul and fighting the good fight for Chrysler, but investors cite thin patience while waiting for a profit. Rumors of potential suitors waiting in the wings abound, but it seems that the real problem would be salability due to large pension commitments. Some have gone as far as speculating that even if Chrysler were to be put on the block, nobody would buy them. Of course, some of this situation seems to have been brought on by feeble cross-pollination, far below what was bandied about at the time of the 1998 merger. Sure, Chrysler got the old E Class platform to go play with, and the first-gen SLK is holding up the Crossfire, but there hasn't been any technology transfer from the smaller Mercedes vehicles to help DCX build a small car that's killer, or from their world-class truck division. One wonders if Chrysler's actually in the worst shape of the big three, but hiding it well. Are we in for a replay of the early '80s?
[Source: Reuters via Automotive News - Sub. Required]
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Reader Comments (Page 1 of 2)
Yatrik 9:11AM (11/29/2006)
Yeah... and man is that Sebring ugly.
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Michael Karesh 9:54AM (11/29/2006)
There are no problems with Chrysler that DCX didn't have complete control over, or even directly cause.
How influential are these stockholders, and how much of the company do they own? Unless they're powerful enough to launch a serious challenge, there's no story here.
The line out of the "merger" was that there would be no platform or powertrain sharing, just technology sharing. Sounds like the opposite has been the case.
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Bill 10:02AM (11/29/2006)
And wait until they see how much of a flop Smart in the US will be...
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Andy 10:30AM (11/29/2006)
I question the legitimacy of the arguments that Daimler-Chrysler will sell off its Chrysler half. Daimler-Benz AG and the Chrysler Corp. merged, and while the Daimler half controls majority stock and top management positions, it is legally a merger. A buyout would require Daimler-Benz AG to have purchased 100% of Chrysler stocks, or, for the sake of argument, an overwhelming majority. (For example, when Ford bought 75% of Aston-Martin stock in 1986.)
Mergers have not had a good historic record. The Daimler-Chrysler merger, like AOL/Time-Warner, was hyped for investors by proponents and business analysts. Both have turned into business blunders. The Daimler portion of the corporation can choose to cede off the Chrysler half, but it cannot sell the Chrysler Group--only separate.
The Sebring looks like an affordable Benz, without being a cheap knockoff like the Kia Amanti. I think the sedan, along with the new Avenger, will be a step forward for the Chrysler Group. But I don't think either will sell particularly well against Toyotas and Hondas. Dodge and Chrysler don't come to mind when thinking about good family sedans.
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Sebastian Stone 10:18AM (11/29/2006)
Yatrik - Yes you are right, the Sebring is REALLY ugly. I just cannot believe how they messed that car up!!
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C. McFeeny 10:20AM (11/29/2006)
I have to disagree on your Smart assessment, Bill. I believe that Smart is going to be a smash hit for DCX along the lines of the Mini for BMW. It's going to be a "must have" for a fairly affluent and influential segment of buyers. I predict that the demand for it will even outstrip the supply. This will leave GM and Ford scrambling to introduce their own highly stylized, and quality built sub-sub-compact car. Luckily Ford has the Fiat500/Ka in the pike over in Europe. I'm not sure what GM could bring. Perhaps something from Suzuki?
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Luso 10:37AM (11/29/2006)
The Smart a hit in the US - AH, AH, AH.
Chrysler offered nothing valuable to Daimler over the last few years.
I think this site had a brilliant report on DCX. Although I cannot find it now, but I remember the report highlighting some great points about the relationship.
www.carnorama.com
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Avinash Machado 10:32AM (11/29/2006)
Even if Chrysler was put up for sale, who would buy it? However the Jeep brand has a lot of heritage and it may be attractice to some potential buyers.
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Avinash Machado 10:36AM (11/29/2006)
Even if Chrysler was put up for sale, who would buy it? However the Jeep brand has a lot of heritage and it may be attractive to some potential buyers.
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Richard Warren 10:52AM (11/29/2006)
Chrysler has had a history of spectacular successes and spectacular failures in it's history. The "merger of equals" was bullshit, it was a short term profit for those at the top.
Investors need to get real, time was when you invested for the long term, not the short. This business requires huge amounts of new product and cash to stay competitive and you may be betting the company on each new release. Pretending to think you'll make huge returns in this business as an investor? Forget it. There will be times you make plenty, other times you're going to be on the ropes. Reinvestment in product is the name of the game.
Best thing for Chrysler? Sell off to an investor who knows the car business and the passion to see it happen. It'll make money.
Smart? I think it will do well in major metro areas. Fuel prices will play a part in it's success or failure.
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Jay Evans 11:06AM (11/29/2006)
The Smart a hit? Yea, untill the fist one get punted into the next county by a Semi or F350 sized truck and DCX gets hit with a $600 million+ lawsuit for selling an "unsafe car for American roads".
Think I'm kidding? Just wait an see.
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jamie 11:16AM (11/29/2006)
Chrysler has hit the markets strong with PT Cruiser, Dodge Caravan, Chrysler 300, Dodge Magnum, and Dodge Charger.
Unfortunately they lost that momentum when Dr Z moved up to the corporate office. Apparently that vacuum has not been filled yet.
About the only vehicles of note in the pipeline are the Dodge Nitro and Dodge Challenger. The Chrysler Imperial must be reworked entirely if they even expect to bring it to market. Sebring is a disappointment because it reeks of last year's model. Similarily Dodge Avenger, although cool, needs to be RWD. That leaves a lot of holes in their line-up as the now aging and slow moving truck line isn't holding up their fair share of the business.
Yup, Chrysler has hit rock bottom again. But the good news is that now 'rock bottom' is quite a bit better than it used to be.
Quick fix:
GET SOME NEW PRODUCTS ON THE DEALER LOTS WITHIN THE NEXT 18 MONTHS!
Not an impossible task if handled correctly. Any decent manager worth his salt could do it blindfolded.
Of course he must be able to sell off all the overproduction of unwanted vehicles of the past few months. Somebody in charge must have been sleeping at the switch.
I would like to apply for that position...:)
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Steven T. 11:25AM (11/29/2006)
I suspect that the Nitro's sales will be underwhelming, and the Challenger will be a flop. If that's all they got, Chrysler is in trouble.
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Richard S. 12:04PM (11/29/2006)
Chrysler Corp. would have serious problems going alone. Their Jeep brand faces much more competition nowadays from other brands SUVs and new crossovers. Besides their Jeep offerings lack the same pizazz vis-a-vis the competition.
The Chrysler minivans are no longer the king of the road. The Odyssey and Sienna are offering a serious competition, although GMs decision to stop producing minivans might be somewhat good for ChrysCo. OTOH, new crossovers will make life for minivans more difficult as did SUVs previously.
The midsizes (new Sebring and Avenger)cannot compete with the Accord and Camry and much less the newly improved GM and Ford cars (Aura, new Malibu and Fusion). While the 300C and Charger are good vehicles, they are not selling in sufficient numbers. The Dodge Caliber is selling well to those that want something other than a Civic/Corolla. I still think that the Mazda 3 looks better and has better interior quality.
So if you add average car/truck (trucks will face more competition from new Tundra) lineup to a higher overhead costs courtesy of UAW and pension obligations, the only way for Chrysler Corp. to survive would be for it to be spun-off as a stand alone LLC owned by DCX, then put this LLC through Ch.11, void all contracts with UAW, dump pension on PBGC, then inject money on new cars that people might choose to buy, then take the LLC public and cashout.
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pd 11:34AM (11/29/2006)
Jamie goog luck with your new position, your going to need it. Chrysler is drowning in unsold inventory,with DCX forcing dealers to take on cars they didn't want in the first place,dealers now refusing to take on new 07's with so many 06's left on dealers lots. This is known as channel stuffing and is going bite DCX in the ass. Thats why shareholders are trying to dump CHRYSLER.
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Dm 11:35AM (11/29/2006)
Well people are chomping at the bit to buy the Challenger. Hell, they already have the platform in which it will be built on and the engine that will go in it. On top of that, they have a design that everyone wants. But it is still taking them 2+ years to get this to dealers!!!??? It would be pretty sad if GM completes the Camaro before the Challenger and DCX see a good chunk of the sales drive away.
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Ron 12:53PM (11/29/2006)
Prediction: Dodge will come out with the Challenger, and it'll retail for ~$30-$35k and bomb. The car's going to cost way too much money and be another niche loser that could've been a winner had they priced it right (hello Crossfire).
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MarkWeb 11:45AM (11/29/2006)
Like you said, Chrysler's in the worst shape of the former "Big 3" but hiding it well.
This was obvious when GM and Ford were taking big hits last year. Sure, the LX sedans have been a winner, but one passenger car model line isn't enough to avoid the hellacious problems the other companies are facing.
After a year, the cracks began to appear in Chrysler's facade - the unsold cars stacking up on lots, for example.
My rule of thumb is that companies don't bother to take the risk unless they are hiding something big - so within 3 months to a year Chrysler will either be for sale, spun off, privatized, or announce major cost containment programs similar to Ford and GM.
They were NEVER the exception to the red ink and slashing at GM. It's just amazing that in the era of Sarbanes-Oxley they could get away with it. But maybe they will have SOX issues as well....
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Gardiner Westbound 11:58AM (11/29/2006)
Instead of the Mercedes merger improving Chrysler quality, Mercedes quality plummeted. How's that for a kick in the pants!
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aaron 12:23PM (11/29/2006)
congrats on not commenting further on the article which you guys may or may not have read. It talked about the specific shareholders and what stake they had in the company too.
As for the idiots talking about smart cars in the US, it was my understanding they werent' even sold mass market, but all imported which increased their prices and made their availability sparse.. lol mongoloids.
p.s. ever see a crash test on a smart car? It is amazing.
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