Autoline on Autoblog with John McElroy
HAVE I BEEN TOO HARSH ON CHRYSLER?
Chrysler has been harshly criticized by analysts and the media. And with good reason. It's lost a ton of sales and market share. It had to bail out of leasing when its residuals plummeted. It came up $6 billion short trying to renew its credit lines. And its debt rating is pure junk.
Ever since Cerberus took Chrysler private they've only doled out dribs and drabs of information about the company. So analysts and reporters (including me!) rushed in to fill the vacuum, mostly with negative news. That woke the company up to the fact that it better start communicating with the outside world.
And that landed me an interview for Autoline with Tom LaSorda, the vice chairman of the company, who offered up a lot more information than I ever expected.
First off LaSorda quashed rumors they plan to break up the company and sell it off in pieces. He says Cerberus is committed to a long-term plan to revive the company, and besides, the industry is in the dumps, so now is not the time to sell.
He also complained that Chrysler is not getting credit for making major progress on a number of fronts. For example, the company is going to build the Routan minivan for Volkswagen and the next version of the Titan for Nissan. He says Chrysler will soon be building 150,000 vehicles a year for other car companies, which ain't a bad number.
LaSorda talked about how Chrysler is selling non-core assets, like the deal it cut with Gaz to make the last generation Sebring. Now we know it plans to sell off the Viper and all the assets that go with it. So far the company has earned half a billion dollars with moves like this, which shows it's getting pretty creative on how to pull more value out of existing assets instead of throwing them in the wastebasket.
Of course, the key to thriving in the future is by coming out with new products and Chrysler is working with a growing list of automakers to help it do just that. So far it has signed up with Nissan, Cherry, and Great Wall to provide it with small cars. It's in discussions with Tata and it's working on yet another deal with an un-named company in Russia. LaSorda said he hopes to have another announcement before the end of the year.
Not only will this slash the cost of developing new products for Chrysler, it will get the company into a lot more markets overseas where it currently has no presence. The plan is to scour the world looking for open manufacturing capacity, then do a deal where Chrysler contributes its intellectual property to build cars.
I asked him why Chrysler wouldn't just export vehicles from North America, taking advantage of a weak dollar and boosting its own capacity utilization. He said there are too many import tariffs in a lot of countries and that forces them to build there instead of exporting.
I also questioned how the company is going to come up with all the advanced technology it needs since it no longer has any major R&D operations in house. LaSorda pointed out that Chrysler owns Global Electric Motor Cars, or GEM, so it already makes neighborhood electric vehicles (NEV's) that it's selling in North and South America and in France. The plan is to greatly expand to other markets. Recently, Chrysler combined GEM with ENVI, its in-house operation to develop advanced electric and hybrid drive systems.
That's when LaSorda let drop that Chrysler would love to do an electric city car. And that got me wondering. Wouldn't Tata, combined with Chryco IP, be a great partner to do an inexpensive EV?
Anyway, the bottom line here is that even though Chrysler is still in a precarious position, it's not quite the basket case I thought it was just a couple of weeks ago.
Chrysler has been harshly criticized by analysts and the media. And with good reason. It's lost a ton of sales and market share. It had to bail out of leasing when its residuals plummeted. It came up $6 billion short trying to renew its credit lines. And its debt rating is pure junk.Ever since Cerberus took Chrysler private they've only doled out dribs and drabs of information about the company. So analysts and reporters (including me!) rushed in to fill the vacuum, mostly with negative news. That woke the company up to the fact that it better start communicating with the outside world.
And that landed me an interview for Autoline with Tom LaSorda, the vice chairman of the company, who offered up a lot more information than I ever expected.
First off LaSorda quashed rumors they plan to break up the company and sell it off in pieces. He says Cerberus is committed to a long-term plan to revive the company, and besides, the industry is in the dumps, so now is not the time to sell.
He also complained that Chrysler is not getting credit for making major progress on a number of fronts. For example, the company is going to build the Routan minivan for Volkswagen and the next version of the Titan for Nissan. He says Chrysler will soon be building 150,000 vehicles a year for other car companies, which ain't a bad number.
LaSorda talked about how Chrysler is selling non-core assets, like the deal it cut with Gaz to make the last generation Sebring. Now we know it plans to sell off the Viper and all the assets that go with it. So far the company has earned half a billion dollars with moves like this, which shows it's getting pretty creative on how to pull more value out of existing assets instead of throwing them in the wastebasket.
Of course, the key to thriving in the future is by coming out with new products and Chrysler is working with a growing list of automakers to help it do just that. So far it has signed up with Nissan, Cherry, and Great Wall to provide it with small cars. It's in discussions with Tata and it's working on yet another deal with an un-named company in Russia. LaSorda said he hopes to have another announcement before the end of the year.
Not only will this slash the cost of developing new products for Chrysler, it will get the company into a lot more markets overseas where it currently has no presence. The plan is to scour the world looking for open manufacturing capacity, then do a deal where Chrysler contributes its intellectual property to build cars.
I asked him why Chrysler wouldn't just export vehicles from North America, taking advantage of a weak dollar and boosting its own capacity utilization. He said there are too many import tariffs in a lot of countries and that forces them to build there instead of exporting.
I also questioned how the company is going to come up with all the advanced technology it needs since it no longer has any major R&D operations in house. LaSorda pointed out that Chrysler owns Global Electric Motor Cars, or GEM, so it already makes neighborhood electric vehicles (NEV's) that it's selling in North and South America and in France. The plan is to greatly expand to other markets. Recently, Chrysler combined GEM with ENVI, its in-house operation to develop advanced electric and hybrid drive systems.
That's when LaSorda let drop that Chrysler would love to do an electric city car. And that got me wondering. Wouldn't Tata, combined with Chryco IP, be a great partner to do an inexpensive EV?
Anyway, the bottom line here is that even though Chrysler is still in a precarious position, it's not quite the basket case I thought it was just a couple of weeks ago.
Reader Comments (Page 1 of 2)
rwcmick 7:21PM (8/28/2008)
Selling off non-core assets is all well and good, but other than the so-far well reviewed Ram and some interior fresh-ups, where is the product? We know that there will be a Nissan based small car soon, but is that how it’s going to be, top hats on partners’ platforms? In the past Chrysler has always managed to pull a rabbit out of its hat and save the day. But when Nardelli/Press/LaSorda reach into the hat this time, it looks like they might pull out either a malnourished turkey or some other magician’s rabbit. I remember when François Castaing once roared in an internal meeting “We’re going to clean their socks” when speaking of Concorde/Vision/Intrepid. Sure he got the phrase a bit wrong and the cab-forward sedans didn’t light the world on fire, but Castaing had fire and drive to make his company the best. Mike Donoughe departed Chrysler’s Project D, supposedly a “moon shot” program that would return a shine to Chrysler’s engineering prowess, and has landed at Tesla Motors a very promising Silicon Valley firm. I wonder how many engineers like Castaing and Donoughe are left at Chrysler? Don’t get me wrong, I dearly want to see Chrysler survive and thrive, but I have to wonder if engineering is suffering in the hands of accountants.
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Jrejre 8:10PM (8/28/2008)
I think those things have taken a backseat while chrysler tries to become profitable. Most of what he was talking about was related to foreign investments. They're trying to bring in money with these "neighborhood electric" vehicles (which I know nothing about) and small cars in other countries. I'd imagine that the progress being made at chrysler is invisible to us in the US because it doesn't involve major new products for us for at least 2 years. And even then it could be dodge cars other platforms for a while.
John 7:30PM (8/28/2008)
I think McElroy has not been praising the domestics car makers enough for the great strides they been making, especially GM. He's been spending too much time with the Asian car makers.
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Brent 7:48PM (8/28/2008)
I agree. That seems like the popular thing to do.
mike 8:02PM (8/28/2008)
What strides at GM, lately GM has been coming out with worse and worse news.
Also many here on Autoblog say of GM is comingout with new product, so the company is on right trak.........sorry buddy but GM has been selling all their assets that are not related to consumer vehicles, Topkick and GMAC.
Sure GM may comeout with good cars....but those cars were begaten by sales of divisions that are not covered by autoblog.
geo.stewart 7:35PM (8/28/2008)
Wouldn't Tata, combined with Chryco IP, be a great partner to do an inexpensive EV?
considering GEM vehicles start at 6800, I'm not sure Chryco's IP is compatible with TaTa's vehicle plans
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Glenn 7:56PM (8/28/2008)
One thing Lasorda doesnt mention when the question was asked about losing market share yet not having the big losses as the others in the big 3 is were the losses came from. American Axle strike wasnt mentioned nor the Union payoffs which attributed huge to GM's losses. All was mentioned was again an attempt to of course put Chrysler in a better light by talking about them pulling out of fleet sales...BS
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AZMike 7:59PM (8/28/2008)
John,
it amazes me that someone with all of your alleged "automotive experience" (although I notice you never worked for a manufacturer, or owned a dealership) could be ignorant enough to trash Chrysler as you have in the past.
do you remotely think that Cerberus is staffed by idiots? do you think that their purchase of Chrysler was with a cavalier attitude? could there be just the remotest of chances that they just may have a little more knowledge to what they are doing than you do? just maybe?
do you think that the absolute finest talent they have recruited, such as Jim Press, a lifetime Toyota employee, are driveling idiots, too? I think not.
I seriously doubt if you had to pick up the mess that Daimler made of Chrysler, you could have done even half of the job that Cerberus has done so far. perhaps things might be a little better financially if Daimler hadn't sucked out the ELEVEN BILLION dollars in cash that Chrysler had on hand (you know, "that loser company") when Daimler took over "the merger of equals".
it never ceases to amaze me that supposed "experts" like you are so quick to trash GM, Ford, or Chrysler, yet we never hear a peep from you when Toyota has a 39% profit drop. where are your comments here on Autoblog about that?
you make a big deal out of Chrysler's disappearance from the leasing market; why no comments about Toyota's write-down of lease-end losses? why no mention of the fact that EVERY manufacturer, including BMW, Lexus, Mercedes-Benz, Nissan, Audi and Jaguar are having exactly the same problem? do you ever actually READ auction sheets from Manheim or ADESA, and see how little ALL vehicles (NOT just Chrysler) are bringing at auction? do you think highline manufacturers like BMW and Mercedes will continue to offer $399 leases for $50,000 cars when they lose $10,000-$15,000 below the residual values at auction?
I owned a Dodge dealer for ten years (1983-1993) in Southern California, and actually loved having "experts on the auto industry" like yourself come in for at least a few days, or preferably for at least a week.
you could help our finance manager get a single mom with bad credit approved for a loan she desperately needed, droppping our profit to zero, just because we felt sorry for her. you could assist our service manager when the factory refused to pay a warranty claim, and we took it in the shorts for $5,000, just to keep a good customer. one of our detail guys didn't come in today; would you like to go back and help wash cars, just like I used to do? would that be too below you?
it's always easier to criticize business when you're on the outside looking in; not so easy when you actually see what's going on.
AZMike
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SPG 10:12PM (8/28/2008)
AZMike,
it's ok man, breathe.
P.S. Owning a dealership must of been the experience of a lifetime.
sw 11:15PM (8/28/2008)
While the big 3 are doing things to improve their situation now, the fact remains that Toyota has remained profitable throughout and has the funds and the previous foresight to weather the storm of a bad economy. That kind of a track record cannot be argued.
People are going to place their bets on a winning horse and even though Toyota has slumped, it's still in the lead as far as profitability, resale value, mileage and reliability is concerned.
I know this firsthand as we had to get rid of either a Toyota Matrix or a Jeep Compass. We tried to sell both but guess which one was going to sell for a higher price and guess which one had less reliability issues, and guess which one got the better mileage. It was the Toyota on all counts.
Red 5:10AM (8/29/2008)
In his defense, he's not the only person who has criticized Chrysler and it's not something that's just started this year. People have been saying many of the same things for years, even prior to the merger, and especially after. Say what you will, but there's no excuse for putting out fairly half-hearted products like the Caliber (which, when you take away the hatch, is slightly better looking, but inferior to even the Cobalt) and focusing on fads like HEMI-this, or HEMI-that. Even before Daimler, Chrysler built inferior products. As with pretty much all domestic manufacturers, most of their products took a huge dive after the 50s and 60s, when those vehicles were the epitome of elegance and engineering. Now, instead of being able to stand on their own two feet, they've forced themselves into a position of having to rely on other companies to bail them out of the hole they've dug themselves. LaSorda's proud of building 150,000 cars a year for VW and Nissan? He's proud they've had to sell off assets like the long-associated Viper, for a few bucks here, a few bucks there, that adds up to a decent-sized pot, but nothing particularly earth-shattering? I don't think he even bothered commenting on any new product plans for the US, other than "neighborhood EVs" which sound like electric golf carts and we're supposed to be impressed? Please. I would hate to see more jobs cut and more plants closed as much as the next guy, but when a king does something stupid, it's almost always the kingdom that bears the brunt of the suffering. In this case, Chrysler's employees would be the sufferers. They can't pay their bills or feed their families with talk and dreams.
Defend them all you want, but when products like SRT-8 Jeeps and the Challenger take priority over core, mainstream profit-making SUSTAINABLE products, the company has a problem.
I think that's the main criticism everyone is directing at Chrysler, including myself, honestly.
AngeloD 9:00AM (8/29/2008)
perhaps things might be a little better financially if Daimler hadn't sucked out the ELEVEN BILLION dollars in cash that Chrysler had on hand (you know, "that loser company") when Daimler took over "the merger of equals".
Dont forget that Diamler also also drove down Chrysler's N. American market share and killed off many many lines of very good selling cars to produce strange stuff like the Caliber, Compass, Sebring, and Magnum.
There is something seriously deficient about a company like Diamler that couldn't even do a better job of updating an iconic and good selling vehicle like the Cherokee.
Tourian 11:13AM (8/29/2008)
Man I seriously enjoy reading your posts. So few people are quick to criticize people in this business and have no idea what we go through and what we do. All they ever want to focuson is the bad, or the percevied bad.
Jrejre 7:59PM (8/28/2008)
He was definitely trying to avoid talking about the US. Looks like we won't be seeing any news relevant to us until around 2009.
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Gary 8:03PM (8/28/2008)
To quote the story above: "So analysts and reporters (including me!) rushed in to fill the vacuum, mostly with negative news."
That's what's wrong with the media today. They always try to find negative news and why everything about the country sucks. And if they can't find news, they JUST MAKE IT UP! I once read something like this: "Self-loathing and pessimism is far more effective at killing a civilization than bombs ever could".
Why keep dropping bombs about why the "home team" sucks? If a child is in organized sports, do the parents scream from the sidelines to say how much their child sucks? Without going into a psychology lesson as to why, the answer is NO for many reasons.
What I'm getting at is that parents today are put under a microscope on how they are helping shape society, but the media just does anything they want, causing self-pity, helplessness, and apathy for our society.
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Bruno 8:25PM (8/28/2008)
Interesting, but it still says ZERO about their financials and ability to survive. What is he gonna say? "I'm getting my resume ready" ?
I hope they survive since we need choices out there. But I saw nothing concrete in this interview. They need a decent small and midsize design that sells. How far off is that? What is cash flow like till then?
The new Ram is a modest improvement over the old one. Its main improvement is the suspension that gives a smoother ride over some surfaces. This comes just as "lifestyle buyers" of pickups are fleeing enmasse to more economical vehicles, and work users are likely to be wary of coil springs.
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mike 8:18PM (8/28/2008)
Well AZ MIke, John ripped Chrysler for a reason.
Look it is hardly a secret that Chrysler has horrible interiors. I am telling you this seriously, Honda Civic's overall interior design and feel is above of Dodge Magnum. Civic goes for 17-19Gs, magnum can be in 30's.
Look the market wants small cars, the smallest car Chrysler has is Caliber and PT Cruiser, and neither gets good fuel economy. Caliber is nowhere NEAR Corolla, or Civic or Sentra in desirability. Detroit is as backward as companies can be, GM is headed by arguably the least effective individual in USA. And yet even GM will bring a small car to the market in 2010-Cruze, Chrysler will not do that, we are still to even hear rumors about a small car, let alone see a spy shot or what not. Attacks on this company are justified.
Just to give you an example, according to wall street journal, in June of 08 Toyota sold slightly under 50,000 units of Camry, Chrysler sold under 6,000 of Seabrings and Avengers COMBINED, why is that?
Also look at the way Chrysler builds their cars, every car has those cheap, black plastic door handles, what a way to attract a costumer.
I was telling here to someone, but they simply refused to believe me, Honda Civic can seat 3 people in the back, Chrysler 300C, because it is a rear wheel drive and because of the way its back seat is designed can only seat 2 people. Come on, that car sells for mid 30's.
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BigWill 10:05PM (8/28/2008)
Chrysler has intellectual property?
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Gardiner Westbound 11:26PM (8/28/2008)
Poor Ol' Tom has told so many stories so many times it's hard to believe anything he says.
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bethlumboy 9:48AM (8/29/2008)
There's no doubt that the interiors under DBAG have been a mess. I'd like to hear some feedback about the interiors that are being produced under Cerberus, namely the '09 Ram and the '09 Patriot and Compass.
While the PT Cruiser was left to rot, the Neon and that entire segment was abandoned, and new products like the Caliber/Compass/Patriot and Sebring/Avenger have been disappointments, some good products have arrived under DBAG, namely the LX full-size cars. They are due for a redesign but they were groundbreaking when they were released and continue to be strong sellers. The Challenger is making a very strong debut.
The Liberty is controversial but successful. The minivans have been suffering due to market conditions and better competition but remain strong. The Aspen was the answer to a question no one asked but it's a great SUV. The Pacifica was a great product that was poorly marketed. The Journey is not going to set the world on fire but it's a solid entry into a competitive market.
Cerberus cannot turn the company around overnight; it's only been one year, and because they are private, we don't know what they are planning as far as the much needed small car market and improvements to the D-segment (Sebring and Avenger). The next couple of years will bring refreshed Sebring/Avenger sedans, redesigned Charger/300 sedans, a B-segment vehicle based off the Nissan Cube (hopefully the Dodge Hornet), and hopefully a true Cobalt/Focus competitor. Keep your eye on the auto shows for new concepts and new production vehicles. I suspect that things are about to get very interesting at Chrysler LLC.
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