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Thread: A Big Divorce -- and a Splashy Wedding?

  1. #1
    Vulture of The Western World Eric's Avatar
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    A Big Divorce -- and a Splashy Wedding?

    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.

    That's understandable.

    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"!

    END

  2. #2
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    Re: A Big Divorce -- and a Splashy Wedding?

    Quote Originally Posted by Eric
    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.
    Why am I reminded of what happened to the British car makers? They all merged iinto one huge conglomerate, which finally died, bankrupt, in 2005. All that is left in Britain is a few specialty makers, like TVR, AC, and Morgan, and some foreign-owned brands like Jaguar (Ford), Bentley (VW), and Rolls Royce (BMW).

  3. #3
    mrblanche
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    Re: A Big Divorce -- and a Splashy Wedding?

    Chrysler had some very big reserves when they "merged" as "equals." A year later, when the fine print became obvious to Chrysler executives, they realized they had actually been taken over. I'm guessing this move is because the reserves are now gone.

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    Re: A Big Divorce -- and a Splashy Wedding?

    mrblanche,

    Make no mistake about it, everyone in the know including Chrysler knew that it was not a merger but a buyout back in 1998. When a bigger company merges with a smaller company it's a buyout. The old Daimler Benz structure stayed in place and the headquarters remained in the old Daimler-Benz building. Eaton, Lutz, and the other Chrysler execs at the time got rich over this sellout.

    Chrysler was flushed with cash, and their cars and trucks were selling well when Daimler Benz bought them out in 1998 and pocketed all the cash. Now that there's a slight ripple in the U.S. automarket and Chrysler is bringing in less money, Daimler now wants to bail-out. The execs at Daimler are acting like a cheap pimps.

    I would actually have no problems with Chrysler falling under GM or Daimler spinning them out as its own separate company again. I just don't want Chrysler to be bought out by a Chinese auto company (rumors where circulating a few months ago that Daimler was looking for a Chinese buyer for Chrysler).

    Chrysler has some great products and it would be ashame if it's flushed down the toilet because of a few greedy Daimler execs in $4,000 suits.

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    Re: A Big Divorce -- and a Splashy Wedding?

    Quote Originally Posted by pgranzeau

    Why am I reminded of what happened to the British car makers? They all merged iinto one huge conglomerate, which finally died, bankrupt, in 2005.
    The problem was that the mergers were forced by government interference. BMC (Austin/Morris/MG) was dying on its feet; to 'save' it, a merger with Leyland, which had had some success in reviving Triumph's fortunes, was imposed. Add into that companies like Rover, Jaguar, etc., & you had a conglomerate with too many models competing with one another, worn out plant because of a chronic lack of investment, gross overcapacity & unions which could do what they wanted because management refused to manage. The death of Rover was due, in no small part, to BMW, which took what it wanted, the Mini brand, & dumped the rest. Had Rover been taken over by Honda rather than BMW the outcome would have been somewhat happier, I think.

    All that is left in Britain is a few specialty makers, like TVR, AC, and Morgan, and some foreign-owned brands like Jaguar (Ford), Bentley (VW), and Rolls Royce (BMW).
    TVR has been screwed by the Russians, AC is virtually non-existent, while Morgan just gets on with the job. Ford & GM (Vauxhall) have big manufacturing presence in the UK, although in Ford's case no Ford-badged vehicles are now assembled here. Nissan, Toyota & Honda have big plants in the UK, even exporting vehicles to Japan, Land Rover is doing well under Ford ownership & the UK components industry is very strong. So, while on the face of it there's no UK car industry left, the reality is that it's still a major contributor to one of the strongest economies in Europe.

    The bottom line on this is that we UK produces good engineers & factory workers but lousy managers.......I worked in the industry as an engineer from 1966 to 1997.

  6. #6
    Vulture of The Western World Eric's Avatar
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    Re: A Big Divorce -- and a Splashy Wedding?


    "Chrysler was flushed with cash, and their cars and trucks were selling well when Daimler Benz bought them out in 1998 and pocketed all the cash. Now that there's a slight ripple in the U.S. automarket and Chrysler is bringing in less money, Daimler now wants to bail-out. The execs at Daimler are acting like a cheap pimps. "

    Well-said... amen.

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    Re: A Big Divorce -- and a Splashy Wedding?

    >>Well-said... amen.<<

    The way of the business world-- buy for the cash reserves and after raiding the bankbook, dump the rest of what's left! So, what else is new?

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    Senior Member Kwozzie1's Avatar
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    Re: A Big Divorce -- and a Splashy Wedding?

    But there's no denying these are exciting, distinctive cars that draw attention -

    They are exciting cars....I think refreshing also.
    So many models now are just plain bland.

    I think GM would spoil all that unless Chrysler were left to its own....as Ford does with Volvo, Landrover, Jaguar, Aston Marton and Mazda.......but maybe I am wrong.
    Rex
    On the Sunshine Coast, in the Sunshine State Queensland (QLD), Australia

  9. #9
    Vulture of The Western World Eric's Avatar
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    Re: A Big Divorce -- and a Splashy Wedding?

    Quote Originally Posted by Kwozzie1
    But there's no denying these are exciting, distinctive cars that draw attention -

    They are exciting cars....I think refreshing also.
    So many models now are just plain bland.

    I think GM would spoil all that unless Chrysler were left to its own....as Ford does with Volvo, Landrover, Jaguar, Aston Marton and Mazda.......but maybe I am wrong.
    GM certainly ruined Saab....

  10. #10
    mrblanche
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    Re: A Big Divorce -- and a Splashy Wedding?

    Quote Originally Posted by Eric
    GM certainly ruined Saab....
    And if building Jaguars on the Taurus and Lincoln LS bases aren't "messing with Jaguar," I don't know what is.

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    Re: A Big Divorce -- and a Splashy Wedding?

    Quote Originally Posted by mrblanche
    Quote Originally Posted by Eric
    GM certainly ruined Saab....
    And if building Jaguars on the Taurus and Lincoln LS bases aren't "messing with Jaguar," I don't know what is.
    The 2000- present S-type is a decent car, although its priced a little steep. On the otherhand, just like in many other situations, there is overreach. The small X-type, based on a Contour (MOndeo) was a huge mistake for Jaguar.

    I do not like what is happening to the formerly happy marque.

  12. #12
    Vulture of The Western World Eric's Avatar
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    Re: A Big Divorce -- and a Splashy Wedding?

    I look at the X-Type - and then I look at the Mercedes C-Class...

    The X-Type may be Contour-based, but it's not a bad car - and it's not grotesquely overpriced, like the C-Class is.

    Both are smaller/entry-level cars designed to broaden the base of their respective brands. Benz succeeded; Jag did not.

    I have no idea why people will pay $40k (or more!) for a C-Class.. but sneer at the (less expensive/better value) X-Type...

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