Did Daimler accelerate or cause Chrysler's Ruin I have read a lot here as to how the Daimler-Chrysler merger (or takeover in 1998) diluted Mercedes, imposed hardships on Daimler, benefited Chrysler more, and other such comments by Daimler advocates. Here are some facts and opinions (can be verified and commented upon). By no means should it be presumed that I am making an apology for Chrysler or an indictment of Daimler:
1. Following the 07-05-1998 announcement that Daimler and Chrysler would combine, many financial analysts (incl. from WSJ, FT, brokerage houses) openly speculated that the deal was more Daimler takeover than merger. Daimler was supposed to be interested because at that time Chrysler was generating cash. In 1998 and 1999, Chrysler had annual profits of around US$5 billion. Bob Lutz and his team had adapted AMC's innovative product development approach to create a "platform team" process at Chrysler.
2. Following the listing of Daimler-Chrysler on NYSE on 15-11-1998, the next morning, DaimlerChrysler co-Chairman Juergen Schrempp and Chrysler's Bob Eaton, met with a pair of reporters. Schrempp handled most questions, while Eaton puffed a huge cigar and occasionally added a remark. But when Eaton, who already had announced he would retire before Schrempp, was asked whether he would leave early, Schrempp intercepted the question, abruptly leaned forward, slammed both fists onto the tabletop, and growled, "I need him!" Eaton remained silent.
3. Slowly as Daimler dominated the merger and Eaton failed to defend American viewpoints, some veteran Chrysler managers got disheartened and left. Chrysler's inner circle was dissolving. Lutz had already retired in June 1998 while the new company was being formed. Executive Vice President Dennis Pawley also said he would leave by Day One. Pawley was an ex-GM plant foreman, and had established a Japanese-style lean manufacturing system at Chrysler. Although dissuaded by Schrempp, Pawley left before Day 1 to set up his own manufacturing consulting business. In early-1999, engineering Vice President Chris Theodore and manufacturing Vice President Shamel Rushwin also left to join Ford. As Chrysler's top management team left, Schrempp tried to rebuild German-American camaraderie at a February 1999 management retreat in Seville, Spain. As usual, Schrempp's wife was not there. But his longtime secretary, Lydia Deininger, was right beside him. Abruptly, Schrempp picked up the petite Deininger, slung her over his shoulder, said farewell to a startled cluster of executives and carried his secretary up the stairs. That was it for many more Chrysler execs. Eaton had picked Tom Stallkamp to replace Lutz as Chrysler president in late 1997. But before retiring in late 1999, Eaton fired Stallkamp, appointing Chrysler sales boss Jim Holden as the new president. In 2000, as Chrysler sales continued falling, Schrempp abruptly sacked Holden. In May 2000, Executive Vice President Tom Gale, Chrysler's highly regarded design chief, also announced he would retire by year end and open a design consulting firm. Thus, by 2000, two years after Daimler's takeover, the group that had created Chrysler's platform teams and six years of prosperity had quit, retired or been fired.
4. By end of year 2 (Nov. 2000), Schrempp appointed Dieter Zetsche, an engineer then running Mercedes' commercial-vehicle division, to replace Holden. By then, the US operation was no longer a cash cow. Chrysler had closed most plants and boosted incentives on unsold inventories. By the fourth quarter of 2000, the profits of 1998 and 1999 had disappeared to be replaced by a US$1.2 billion loss.
5. Following this loss, sales chief Ted Cunningham, chief administrative officer Kathleen Oswald and communications head Tony Cervone all departed. Zetsche also ordered his chief operating officer (COO), Wolfgang Bernhard (another German), to slash costs. Costs had increased as Chrysler's lineup of cars and trucks shared fewer parts. Under Zetsche, Chrysler ripped out stuff and consumers began noticing that Chrysler went back to making cheap interiors and noisy cars. Colleagues remember a Jeep platform team manager's embarrassment. Told to cut manufacturing costs on an existing model, he removed a low-washer-fluid warning light. His daughter bought one of the stripped Jeeps. On a rainy day, she called her father from her car: "Dad, I'm out of washer fluid and I can't see. What happened to the warning light?"
6. However, the losses continued. They damaged Schrempp's status with his own board and emboldened shareholders who had opposed the Chrysler deal. German financial circles believed Chrysler was a loser that was draining Mercedes' resources. When Schrempp was forced to step down in 2005, Chrysler lost much of its access to outside expertise for car development. As German investors increased demands to shed Chrysler, Daimler cut resources to aid Chrysler, and US product programmes lost focus or were shut down.
7. By the time Cerberus acquired the majority of Chrysler in 2007, industry critics rated most Chrysler cars below average. In Dec 2008 before a Senate hearing, Chrylser CEO Bob Nardelli admitted to this. When Sen. Bob Corker, R-Tenn., suggested Chrysler had few competitive vehicles under development, Nardelli agreed. Under Daimler, Nardelli said, Chrysler had been "somewhat hollowed out."
Last edited by vasudeva : 6th March 2009 at 11:12.
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