GM Using The Mercedes Playbook

Mercedes has diesels and hybrids. Chrysler, well, they discontinued their only hybrids and diesels. The new Grand Cherokee is based on a Mercedes model.

Yeah, full-sized fwd. Check Impala sales? Pontiac G6? Oh, not around.

That's what is selling.

Better ride and handling. You know, things that people like. Things that got the Ram named MT Truck of the Year and winner of a C/D comparison.

So you're saying customers don't care about ride and handling?

Oh yeah, that 1970-era design Ram van was such a huge seller.

Notice how many delivery trucks (FedEx, etc) are Sprinters?

And what does that tell you?

No, heavy, inefficient, poor ride and handling, poor mileage, poor reliability.

And what would that be? The only platform in common is the Liberty/ Nitro, and the Nitro looks nothing like the Liberty.

Uh, you might have noticed, no Durango any more.

Just Subaru sells a ton of station wagons. Volvo, Audi, etc.

That rwd platform you think so little of is going to used by Fiat for the upscale Alfa-Romeo brand.

re

"Starting in 1998, troops of managers started flocking to Auburn Hills on a corporate jet. Soon the Germans discovered that Chrysler, which has a long history of boom-and-bust cycles, was in much worse shape than they anticipated. It spun deeply into crisis in 2000, racking up $4.7 billion in operating losses the following year alone. Mercedes had to make the ultimate sacrifice, squeezing its own costs to pump out better profits for the group."

--

an opinion piece from the past........

Automotive News -- August 3, 1998 - 12:01 am ET d us a Letter to the Editor

THE PHRASE 'merger of equals' has just about disappeared from all references to DaimlerChrysler. Practically speaking, Daimler-Benz has swallowed Chrysler.

That settled, the House of Daimler is now getting lots of advice on how to domesticate the new division. Lately, the opinion givers all sound the same: Take firm and immediate control. Act like a senior partner. Give up the idea of two headquarters.

It may be time for a different voice, something along the lines of 'Let Chrysler be Chrysler.'

Bob Eaton wasn't kidding himself on 7 May in London when he called it a 'merger of equals.' Chrysler made twice as much money as Daimler last year on about the same amount of revenue.

Yes, BMW lost time by allowing Rover an early, unruly hands-off period. But every merger and acquisition is different. Each has its own set of rules. And this deal is like no other in the history of industry. Any industry.

Chrysler doesn't need to be digested. It needs to carry on as Chrysler, not turned into Mercedes-Benz of Michigan.

The textbooks say that can't work. Jeffrey Garten, dean of the Yale School of Management, says that unless Daimler imposes its culture on the new company and takes complete charge, 'don't be surprised if the deal fails.'

His textbook model? Japan's Sony Corp. gave too much control to reckless American managers when it bought CBS Records and Columbia Pictures in the late 1980s. A disaster resulted. Sony had to send in scores of Japanese executives to clean up the mess.

But comparing Bob Eaton and Tom Stallkamp to Peter Guber and Jon Peters, the wild-spending duo who ran Sony Pictures into the Hollywood turf, is like comparing Sense and Sensibility with Liar Liar.

Heeding the advice of Garten and others to act 'quickly and decisively' to integrate Chrysler could crash the merger on takeoff.

When a carmaker is acquired it is usually the brand that has to be carefully preserved. The corporate culture often has to be scrapped. But Chrysler's culture must be protected. Cherished, even.

General Motors still operates in the USA with more or less the same corporate mindset as in the 1950s. But Chrysler came up with an interesting recipe. Take what Bob Lutz saw in his early days at BMW, 30 parts; Bob Eaton's lessons from GM Europe's turnaround in the late 1980s, 30 parts; Francois Castaing's experiences as a young race-car engineer at Renault, 20 parts; Lee Iacocca's get-out-of-debt sense of urgency, 15 parts; Walter Chrysler's ancient antipathy to General Motors, which he quit in a huff in

1920, 5 parts. Mix.

It is a marvelous brew.

It would be easy for Daimler to impose itself on Chrysler, much harder to blend the two companies - saving the best of both. But that is the right recipe.

You can send an e-mail to Richard Johnson at: snipped-for-privacy@compuserve.com

Read more:

"Starting in 1998, troops of managers started flocking to Auburn Hills on a corporate jet. Soon the Germans discovered that Chrysler, which has a long history of boom-and-bust cycles, was in much worse shape than they anticipated. It spun deeply into crisis in 2000, racking up $4.7 billion in operating losses the following year alone. Mercedes had to make the ultimate sacrifice, squeezing its own costs to pump out better profits for the group."

--

We have the trucks and buses here too.

In message , Matthew Russotto writes

They also happen to make rather good locomotive engines too.

As a general comment, I think the Daimler/Chrysler situation is not black or white, and various aspects have already been discussed by others. To me it always looked like a takeover of Chrysler and did not buy/understand the "merger of equals" talk.

Clearly DB bit off more that it could chew and, I believe, was run by megalomanic top management. I recall reading a respectable and founded opinion piece about the rush to get the new joint company registered on the NY stock exchange. A driving force for the German directors was to have justification to raise their salary levels to the then stratospheric American ones. No director of a German-listed company could ever have found support for this.

Regardless of the technical/mechanical arguments about technology transfer, quality of Chrysler car (selling maybe 2m p.a. against 1m Mercedes cars at the time of the fusion) and as a fan and long-term driver of Mercedes cars, I always thought the idea stupid, a diversion of management attention from the production of Merc-branded cars. Yes, maybe US sales growth was slow but it was manageable, and the quality issues in the US plant were eventually sorted out.

The corporation had already made ill-advised excursions into unrelated areas such as white goods (AEG kitchen equipment and the like, when AEG was losing money hand over fist, later divested), and into aerospace, also a hugely loss-making (and govt-subsidised) venture. The hypocrisy that the then management managed was breathtaking. After previously complaining about (German) govt subsidies going into other enterprises and how that should end, they went cap in hand to the (German govt) bleating about the need for subsidy.

This was quite a few years before the Chrysler fiasco and I thought that management had learned some lessons, but evidently not.

I have already expressed these opinions here before some time ago, but I thought them worth repeating as they are apposite to this discussion.

Furthermore, I could not see how Daimler Benz (as it was then called) could handle running a mid-market brand and an upmarket one (despite Merc having become 'mass market') under one roof. It is a trick that Volkswagen have pulled off but only after years (decades?) of careful nurturing of the Audi marque, which had and has been part of the corporation for decades. Downmarket/decrepit Skoda was acquired and integrated with great success but under special circumstances.

The Mercedes dealerships in Germany had real problems coming to terms with having Chrysler in the group.

DAS

To reply directly replace 'nospam' with 'schmetterling'

They should have studied BMW's purchase of a mass-market manufacturer, Rover, and all the problems that caused, such that BMW, I believe, sold it for the equivalent of one dollar just to get rid of it.

I read Chrysler first tried to interest Fiat in merging, but Fiat said no. Interesting, because back in the 70s, Iacocca also tried to get Fiat interested in a merger, and Fiat said no then too.

Although I did think of the BMW/Rover mess as well, but it is quite different to Daimler/Chrysler. BMW sold it for a nominal sum but it came with very large debts, so it wasn't cheap for any buyer. Even so, BMW made the deal relatively sweet but the crooks who bought it pocketed vast sums.

I never understood how the trades unions fell for the line that the buyers (4 senior managers from the team that had previously driven Rover into the ground in the first place) would continue production/sales at 250 000 per year. The alternative buyer (a financial group) said they would initially produce 50 000 per year of the MG sports car and related vehicles, a far more realistic proposition. It did not take long for Rover's sales to fall through 50K p.a. and then into bankruptcy.

BTW, Rover long ago ceased being 'mass market' Relatively small and declining sales.

DAS

To reply directly replace 'nospam' with 'schmetterling'

They should have studied BMW's purchase of a mass-market manufacturer, Rover, and all the problems that caused, such that BMW, I believe, sold it for the equivalent of one dollar just to get rid of it.

I read Chrysler first tried to interest Fiat in merging, but Fiat said no. Interesting, because back in the 70s, Iacocca also tried to get Fiat interested in a merger, and Fiat said no then too.

Yes to some, the Chrysler 300 series is very good in a segment of the market. But Chrysler lost their traditional FWD customers. We started buying Chryslers in the early 80s because of their FWD cars. Over the years we bought many of their cars new. A few years ago I had to replace my '95 Concorde with a used 2004 300M which I love. Nothing since the 300M interested me. I did have two weeks

300 experience with a rental 300, not my kind of car even if it was FWD.

Our next FWD cars likely won't be Chrysler's, unless they finally come out with something that fits today's mid priced market. For now Chrysler is surviving selling trucks and the truck like 300.

Under The Hood Of The Chrysler Deal Even though it has been 30 years since I worked for Chrysler (DCX ), the auctioning off of the division by Daimler deeply offends me ("A deal that could save Detroit," News & Insights, May 28). The idea that Daimler (DCX ) has been dragged down and German investors have somehow been cheated is a myopic vision of the situation.

What happened to the *** $8 billion survival fund Chrysler had in the bank when the merger occurred? Was it used to buy Detroit Diesel Corp. outright and Mitsubishi Motors shares? Why did Daimler get rid of competent American management at Chrysler and install "sock puppets"?

Wasn't there. Read Chrysler's 1997 annual report (I rechecked it -- I was a stockholder). 8 billion was the value of assets over liabilities -- that includes plants, machinery, etc., not all cash.

A lot resigned rather than work with the Daimler folk. Happens a lot in mergers, take-overs, etc.

Besides, part of the reason for coming together was to save money by avoiding duplication -- of people as well as other things.

And as for Mitsubishi -- Daimler was intersted in buying into Nissan, but the Chrysler folks said, "no, they're about to go bankrupt. Buy Mitsubishi -- we worked with those guys before."

Of course, Mitsu was in bad financial shape and has misled everyone, including covering up recalls, warranty work, etc. When Damiler found this out and got rid of their piece of Mitsu, in return for the deception, Mitsu gave Daimler Mitsubishi Fuso trucks, which Daimler still owns.

And diesels and hybrids are real big sellers, aren't they? They're like building sporty cars. They're an ego statement. People look at them and say "cool" but then by something else.

The origin of the Cherokee shows the problem. You don't take expensive cars and try to modify them so they can be sold for cheap. You go the other way.

A relevant comparison is Intrepid sales versus Magnum sales

Talking about ride and handling is ludicrious when customers have shown they want a vehicle jacked up sky high. Ride and handling are not high on the priorities of commerical buyers and don't fit the ego of personal buyers.

Past winners of the Motor Trend Car Of The Year include the Renault Alliance, the Plymouth Volare/Dodge Aspen, the Chevrolet Vega, the Chevrolet Corvair.

C'mon. Ford was the number one selling pickup during a time when it had Twin I Beam front suspension. Quirky handling, rode hard, and ate up tires.

You over rate Sprinter sales. Their small numbers are quite visible on the road because of their appearance.

My point. As with the thoughts of turning Dodge into a wagon brand, they got a higher percentage of a negligible market.

Which doesn't change the stupidity of the decisions I've mentioned. When they did the redesign of the Dakota and Durango, they gave each uniquq front sheet metal. They gave the Durango torsion bars and kept coils on the Dakota.

Has Mercedes never heard about sharing parts? This was a smart time to share parts. NOT recreasing the sheet metal on Jeep models to sell as Dodges, merely sticking in a Dodge grill, is a dumb time to share parts.

There's no conistency is what Mercedes did in these instances. Except that the decisions were wrong.

Subaru, Volvo, and Audi, don't sell a ton of cars, let alone a ton of station wagons. And your examples further prove the stupidity of the decisons. Foolish for Dodge to have Volvo and Audi as targets, because it didn't have the brand name value to compete with them, and the idea of Dodge aiming for Subaru, well gee, that's like Coca Cola considering RC Cola instead of Pepsi their target.

Which proves once again its not suitable for a mass market car.

Show me that the people who created the LH cars, the PT Cruiser, and the 3.5 and 4.7 engines left BEFORE Mercedes took over. You can't.

Chrysler's problems at the beginiing of this century were due to cyclical market downturn. To be expected. Remember Bush and Greenspan couldn't stand still for a little economic discomfort - what was occuring was a normal cyclical adjustment - and cut taxes, sent out tax rebates, and cut interest rates. The bill for refusing to take a little discomfort back then came due as real pain in 2008.

Its true Chrysler has been a boom an bust company. For the first few years of its existence, it had a license to print money. They it mistepped with the Airflow.

It recovered from that and for a short time over took the terribly mismanaged Ford Motor Company in sales. But boring set in and it was in trouble again by the early 50s.

Engineering and styling brought it back in the mid 50s. But they blew it on product quality and then product offerings. They came out with mid size cars - a new category - the same year Ford did, but foolishly droipped their full size cars (Plymouth and Dodge).

Came back again starting in 65 with a license to print money. By the mid 70s they were in trouble again, and came back yet again with first the K cars and the the minivans.

Iacocca ran the K car platform one generation too many and it was trouble again. They pulled themselves out yet again with product: the LH cars and the Neon.

Its true Chrysler was a boom and bust company. Mercedes sure fixed that problem!

are

They're efficient. They let the manufacturer make bigger, lower-mpg cars.

Sedan vs wagon? Bizzaroworld? Charger vs Intrepid is more apt, but the economy has been quite different in the 2000s and the 1990s.

Yeah, I must see 1 truck a week jacked up sky high.

Sure they do. If Susie Soccer Mom is buying a pickup (or her husband is), she wants one that rides and handles like a car.

Uh huh, and Olds Toronado, Chrysler minivans, Ford Taurus (original), ...

Yep, and Dodge was a far distant third. How are you going to overtake #1 if you just make something just like #1? Where's the incentive for any Ford buyers to switch to a me-too vehicle? Especially one lower in quality and reliability?

I see them all the time. UPS, FedEx, plumber, AC repair, ...

The diesel 6 gets over twice the fuel mileage of the old Ram. And carries more inside.

Again, offering a "me-too" vehicle -- especially one not updated in 20 years -- doesn't get you anywhere.

Sharing parts? The problem was, most Mercedes parts were too costly for Dodges. How many parts does BMW, say, share with Mini? Ferrari with Fiat?

Why? Subaru sold 125,000 cars TYD through June 2010, with a much smaller lineup than Chrysler (basically 2 cars and 2 "trucks").

Was the Pontiac G8? (Which GM is now making a police car off)

Lutz did.

Exactly, and they could see another bust coming and were worried about surviving it.

How so? Chrysler was run as an independent unit, reporting its own profit and loss. And it had both profit and loss under Daimler. More loss than profit, especially towards the end.

It was a few years later that Chrysler mgrs left. They couldn't stand the weekly flights of German bosses who didn't understand the market. Dropping the LH line for the RWD 300 must have been a factor. Sure the

300 sold OK, but not to the LH customers who went elsewhere.

Chrysler couldn't get through the low sales times, after Daimler drained the cash off to Mercedes.

In message , edward ohare writes

We had a Chrysler Neon over here, and like it's stable mate the Chrysler Jeep Grand Cherokee, it was a pile of junk.

Oh BS. For most of the time it was DCX, Mercedes sales kept Chrysler going -- the Chrysler unit lost money. That's why DCX stock dived and why they sold off Chrysler so cheaply.

You read a different story, likely from the other side of the pond, released by the Daimler take over artists. Here is what a insider Chrysler saw in the early years of Daimler control of Chrysler:

By 2005 Daimler's influence on Chrysler was seriously losing their traditional customers. I know, because I was there.

Daimler sold off Chrysler cheaply because they knew they screwed up Chrysler and want to limit their losses. They did OK, because they kept the pile of cash Chrysler had 10 years ago. More recently Cerberus also did OK by Chrysler. In 2008 GM was thinking of taking over Chrysler to get at another cash pile. When Cerberus dumped Chrysler that cash was gone, vanished. So twice in 10 years Chrysler's cash was ripped off. By then Chrysler not only lost many customers, but Cerberus cut so many designers Chrysler couldn't design cars to go around their recent new V6 engines.