Tuesday, August 14, 2007

The New Chrysler: OK, Now What?

Posted Today 05:00 AM by Matt Stone
Filed under: Editorial, Maximum Strength Car Talk, Chrysler


The Daimler/Chrysler separation has been finalized, new owner Cerberus is in charge and has appointed a controversial new leader who understands profits, but didn't make many friends at his previous posts at The Home Depot and General Electric. But most people just want to buy a car, not the whole company, so the relevant product-related questions are: where do the Chrysler, Dodge, and Jeep brands go from here?

Even though there's no more Chrysler hanging on the end of Daimler -- literally or figuratively -- Daimler still owns 20 percent of the company, so is likely to stay in the picture for some time. There's a fair amount of commonality over several car lines, so the New Chrysler will be purchasing components from the old Daimler/Benz/Freightliner/et all for a while. No matter how nasty these divorces are, the aftermath is handled by trade agreements; competitors buy and sell more components from each other than most people realize. So it's not likely that some Daimler exec will wake up in a bad mood and say "don't sell anything else to Chrysler -- ever!" For Daimler, Chrysler has gone from being partner to customer, plain and simple.

What'll be interesting to watch is how the company develops products on a going-forward basis. Chrysler has competitive models in some market segments (the soon-to-be-freshened 300/Magunum/Charger RWD cars and solid new minivans) but is less well positioned in others. Its halo cars -- Viper, PT Cruiser, and Crossfire -- are aging, and don't account for many units.

Another interesting question is partners. It's my belief that carmakers need strong global partnerships in order to survive, prosper, amortize costs, develop expensive things like alternative powertrains, etc. Chrysler has unwound much of its partnership with Mitsubishi, and of course is doing the same with Daimler, so this aspect seems to be going counter clockwise.

There has been much talk of Cerberus buying Jaguar and Land Rover off of Ford, but I'm not sure this is a good idea. The so-called New Chrysler needs to get its own house in order first. While Jaguar may seem like a smart jewel to own and place above the Chrysler brand, it's struggling in terms of sales and profits. And Jeep and Land Rover fight over much of the same turf. No need to go there right now, unless the price becomes unavoidably cheap.

If there's one advantage the New Chrysler has, it's that, as a private equity firm, owner Cerberus doesn't have to waste a lot of energy pleasing stockholders and romancing Wall Street. This saves them a ton of time and money and hopefully positions them to make smarter, more aggressive decisions, and make them faster. We'll see.

What does it all mean? "To be determined" is my stock answer, as we just don't know. But the new ownership and leadership needs to improve its dealer body, rethink its current design language, stop trying to water down Jeep with wimpy car-based crossovers, forge strong global partnerships, become good friends with the UAW, and focus on the Three Ps: Product, Product, and Product. Only then will it stand a chance.

What do you think?

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