As I write this Letter, speculation is rampant about the possible/pending divorce of Daimler from Chrysler.
Nothing definitive, but no outright denial from DaimlerChrysler CEO Dieter Zetsche, either. “All options are on the table,” the good Herr Dr. Professor replied when a direct question was tossed his way.
That tells you all you need to know, really.
The so-called “merger of equals” (it was in fact a takeover, with Daimler simply buying a controlling stake in the formerly independent number three U.S. car brand) seems not to be working out as envisioned — meaning there’s not as much profit margin left in Chrysler’s passenger car portfolio to funnel into the pockets of Daimler Ag as the Germans had hoped for. Although there was back in ‘98, when the “merger” took place. What happened to it all? A large chunk undoubtedly went to help the Benz side of the business expand — which it has done copiously since then. Nine years ago, Mercedes was a luxury car line — but not a full line. Today it sells expensive minivans and SUVs. (R-Class, GL-Class, M-Class) as well as a litter of sedans and coupes in all sizes and price points. Wonder who paid for all that R&D?
But now that the spigot’s drying up, Daimler is thinking it’s time to cut bait and flee — before it ends up shelling out more than it can pick off the corpse, so to speak.
The Germans are probably worried more than anything else about Chrysler Corp’s various liabilities. Everything from health and pension obligations (the same issues plaguing Ford and GM) to a surplusage of old/unused/little-used factories and other cash-sapping “assets” the Daimler muckety-mucks would rather simply give the old heave-ho to than have to deal with (and pay for) over the coming years.
But this is one instance where an ugly divorce might end up being a positive thing.
Whatever problems Chrysler has, they’re not due to lackluster, unappealing cars. Ok, so the 300 and Charger sedans (shared platform with the current Benz E-Class), Magnum wagon, Pacifica crossover, Crossfire coupe (Benz SLK) and so on haven’t been stupendous sales successes. But there’s no denying these are exciting, distinctive cars that draw attention — a necessary first step along the road from red ink to black.
Moreover: There’s a gorgeous new rear-drive Miata-fighting roadster on deck (Dodge Demon) for next year. And the recently re-tooled Jeep Wrangler has been doing gangbusters. People seem to like the little Caliber, too (and its hunky cousin, the Dodge Nitro). Sometime in mid-late 2008, Dodge will unveil an all-new/updated version of the Viper supercar that should be able to slap any Porsche (or Corvette) into next week.
So this isn’t AMC in 1975 — all Matadors and Gremlins and Pacers. Nor even Chrysler in 1981. The core product is worthy. No need for the defibrillators — or a complete makeover. Build great cars and the rest often takes care of itself.
Enter General Motors — and the much-talked-about possibility of a second marriage for Chrysler to America’s still number one (just barely) automaker.
The logic is simple, when you think about it.
One, GM is about to be supplanted by Toyota as the world’s largest automaker. Barring a catastrophic dip in Toyota’s fortunes (and an equally abrupt upswing for GM) this is an inevitability. A partnership with Chrysler could stave that off for at least a couple of years — allowing GM to retain its title (and the prestige that goes with it) for perhaps long enough to fix the underlying structural and product problems that threatened to lay it low — while assimilating the best elements of Chrysler into itself, sort of like the Borg in TV’s “Star Trek: The Next Generation.” (But in a good way.)
Make no mistake, GM’s slowly turning things around. Cadillac is healthy (and better yet, hip) for the first time in 10 or 20 years. Saturn — and specifically, the new Aura sedan and Sky roadster — has defied the mortician’s premature tape measuring. The Chevy Silverado pick-up is nipping at the heels of the Ford F-truck — and could possibly catch it as the number one selling vehicle in the American market. The new pack of rear-drive Pontiacs (G8, etc.) seem like winners.
Bu what would Chrysler bring to the table? Economies of scale, for one. The buying power of GM is already formidable; add Chrysler and the margins go down some more, making it possible for GM to squeeze a few more bucks out of each vehicle sold.
And Chrysler has some great cars, too. Don’t forget that.
But the biggest argument in favor of a merge may simple be consolidation — and the elimination of a domestic competitor for both GM and Chrysler. Such a partnership would allow the combined entity to turn its full attention on the Japanese — and to get ready for the coming onslaught of Chinese cars, which may be unloaded en masse at vending machine prices through big box retailers like Wal-Mart and Costco.
There is strength in unity. And bigness can be a huge advantage all by itself.
Who knows? Maybe Ford will join up, too — creating an American Automotive Entente for the 21st century that could be the only realistic hope of dealing with the homegrown problems of finding a way to pay all those promised bennies to current and long-retired employees — and of mounting an effective resistance to the seemingly unstoppable juggernaut from Asia.
Let’s face it: The auto industry is already global in all but formality. You’re as likely to find German (or Japanese) warning stickers under the hood of your ‘07 “American” car as you are English ones.
Or maybe “Hecho en Mexico.”
Maybe regional mega-blocs are the future. Maybe they are as inevitable as the free and fluid movement of money and people across international borders.
Why not make it official? Or at least, profitable.
This is just what they may be pondering right now in Auburn Hills — and on the top floors of the Renaissance Center (GM’s HQ) in downtown Detroit.
As the Borg from “Star Trek” liked to say — “Resistance is futile”!
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