Chrysler finds a future at the gates of hell

May 18, 2007

Daimler – Benz was finally able to find a good buyer for Chrysler. Cerberus, an investment company named for the mythological multi-headed monster-dog that guards the gates of hell, agreed to take Chrysler off Daimler’s hands for $7.4 billion.

It’s not actually a total “see-ya” for the companies that joined last decade, more a divorce with joint custody of the children. Daimler Benz (aka Mercedes) retains around 19 percent ownership, which ensures shared components and current joint manufacturing of products aren’t jeopardized.

It was sharing that made the original deal look so good to the boys in Deutschland. Everything made so much sense about a DaimlerChrysler marriage – Mercedes would expand its distribution and plant system in America and Chrysler would improve its quality and engineering. Ahh, if only it had worked that way. Sadly, when Mercedes woke up in the morning with the ring on its finger, it found Chrysler to be ugly with inefficiencies, organizational bloating and disorder, and hidden financial problems.

Instead of bringing Chrysler, Dodge and Jeep quality up, Mercedes’ quality went south. By 2002, Mercedes was ranked among the worst-quality vehicles within its home market (second to last, in front of Fiat,) despite being ranked at the top for image and prestige. Much of this had to do with Mercedes integrating new computer technology in its cars (as did BMW with similar results,) but the mess at Chrysler had the company taking its eyes of the ball.

As for all of the promises of great technology sharing, German-made Chryslers like the Crossfire demonstrated all the success of the Hindenburg.

It wasn’t all bad. Sharing switchgear, suspension and other parts didn’t help the Chrysler division’s profits, but it did help make cars better. Chrysler managed to get its once-per-decade accolades for design with the 300C / Charger. (Remember the “cab-forward” LHS/Concorde/Intrepid family of the 1990s and K cars of the 1980s?) Unfortunately, the rebirth of the Hemi-powered Chrysler and Dodge sedans was offset with other underwhelming products at Jeep (Commander, Patriot), Chrysler (Aspen), and Dodge (Caliber, Nitro).

The market is very happy to see the buyout. DCX stock surged once rumors started that Chrysler was on the block. Since the buyout announcement, the price is still up a few bucks.

Cerberus says it plans to run the company with a hands-off approach. They also plan to invest in the company to expand product lines and increase Chrysler/Dodge/Jeep’s presence in Europe.

Hopefully Cerberus’ experience guarding the gates of hell will allow it to face Chrysler’s big financial and executive leadership problems without fear. With some good vision, strong financial decision-making and smart product management, Chrysler could soon be the best positioned domestic auto manufacturer.

And without the Chrysler noose around its neck (although it will maintain some of Chrysler’s debt in the deal,) Mercedes can continue its march to be the world leader in diesel-powered cars…while also giving its investors something to smile about.

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SLR Roadster to sit on top of formidible Mercedes product lineup

May 3, 2007

Mercedes-Benz unveiled photos and details of its new SLR McLaren Roadster. This ultra-luxury GT car will carry on the fight in the uber-exotic niche started by the coupe a few years back.

I could chat forever about the important history of the SLR, or maybe about how I love that this supercar is now to be offered in a form to benefit those like me who require our sports cars to accommodate open air driving…but there’s something more important to discuss regarding the SLR.

What is most striking is not its amazing performance, no-cost-spared technology, wild looks, or even promised ease of use. Despite spending so much time, money and effort creating this halo vehicle (as well as other image cars, such as the AMG sedans,) Mercedes hasn’t taken its eye off its bread and butter.

In fact, 2007 is a record sales year in America for M-B. Compare this to Ford and GM, which have both been on downward sales spirals despite a focus on small-market image and halo cars in recent years. In fact, I’ve argued before that the domestics seem to spend so much time on image cars like the Ford GT, Mustang GT500, Corvette Z06, XLR-V, STS-V, CTS-V, and SSR, it has in part helped prevent success in important core money-earning segments.

Mercedes sold almost 21,612 vehicles in America in March, which was up about one percent from 2006. On the year, M-B has been up over nine percent over 2006. Other luxury players BMW and Audi have recognized similar gains, while German entry-level player Volkswagen has seen sales declines throughout the year. (Rabbit? Beetle? Okay, I won’t rant again on the value of retro!)

Back to halo and image cars… they’re nice, but they aren’t substitutes for valuable products across the line. GM and Ford (and Dodge, for that matter) have little ability to demonstrate that the technology and style of the halos are trickling-down through the rest of the product range. And let’s face it, the lack of quality luxury cars in GM and Ford portfolio is killing them. With the average price of domestic vehicles over $30,000, consumers are obviously exhibiting more price elasticity than any executive expected, because these buyers are deciding that a luxury sedan, coupe, wagon or crossover is a better value than anything the domestics have to offer.

After all, if you’re considering a $50,000 Denali or Suburban, wouldn’t you really rather get a BMW or Mercedes? More comfortable, higher snob appeal, better acceleration, handling and fuel consumption…people are seeing the obvious winner of the value equation more frequently than Michigan-based brand managers care to admit.

So not only is it nice to see another supercar from M-B, it’s also nice to know that the company has products hitting on all cylinders throughout its line…especially in that entry-level luxury space, where it, along with Audi and BMW, continues to clean Ford and GM’s clocks.