Monday, May 14, 2007

Why the Daimler Chrysler Deal Sucks

I’m a car guy. This means I like cars, I like to work on cars, I like reading about cars and am heartbroken at the mess the Big Three automakers have made of their product lines. So from my perspective, the news the DaimlerChrysler is shedding its lemon Chrysler unit for 7.4 billion large – a fraction of what it paid nine years ago -- to Cerberus Capital Management is not good news.
This is because Cerberus, a private equity investment firm run by former Treasury Secretary John Snow, doesn’t know squat about making cars, although it does have a stake in GMAC, General Motors' financing arm. It apparently knows a great deal about making money, and obviously believes it can wring the losses out of Chrysler, which it bought for a song, and have itself a dandy windfall of a winner.

Firing a bunch of front-office bigs in Detroit and dumping unprofitable isn't going to do the trick if Chrysler is going to be turned around. Well-designed, well-enginered and competitive automobiles is the only way that small miracle will happen.
Let’s step back for a moment and put this in perspective: The smug suits at Daimler believed they knew so much about making cars that glomming Chrysler onto its line of German-engineered automobiles was well worth a $37 billion investment.

Well, Daimler had not anticipated several things: That there were beaucoup problems with its own cars, that U.S. labor costs were going to be a bitch and that their Japanese rivals were stealing a march on the entire global auto industry.

Toyota Motor passed DaimlerChrysler in U.S. sales for the first time last year as GM, Ford Motor and Chrysler all lost buckets of money on their North American operations and announced plans to close plants and make deep cuts in staff.

The major reason: With few exceptions, they made boring products.

Not only has Daimler taken a bath with Chrysler, its fleet has seemed especially out of step to me: Flashy and derivative pimpmobile stylings that seem like caricatures of themselves.

More here.

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