Following its counterparts Ford and GM, and after weeks of speculation, the other shoe dropped at DaimlerChrysler this week. The company finally released details about its plans for a restructuring at its loss-generating Chrysler Group division. The company plans to cut 13,000 jobs, trim capacity by 400,000 units, and shutter an assembly facility. Although official numbers haven’t been released yet, analysts estimate Chrysler lost just over a billion dollars in 2006.
But the big news is that DaimlerChrysler is saying it might be interested in pawning Chrysler off on someone else – a direct backtrack of what it was saying just a couple of months ago. Talk of a split evidently was what investors wanted to hear, as the news of a possible dumping of Chrysler sent DaimlerChrysler’s stock soaring up 5% to its highest level in nearly five years (stock peaked at $65.43).
The question is: Who would want to buy Chrysler? The company’s lineup is heavy on gas-slurping SUVs, and short on economical offerings. The lack of small cars is a sore spot the company is currently trying to sort out by turning to China - a move that is viewed by many as a crapshoot wrapped in a Hail Mary.
Some reports suggest “bankers” believe Chrysler could solve its small car problems by tying up with Renault or Volkswagen. Trouble is both of those companies have problems of their own. Taking on Chrysler might be like bailing out a leaky boat with a sieve.
Like Ford and GM, Chrysler’s woes largely stem from the brilliant decision it made in 2006 to continue cranking out gas guzzlers despite the fact that no one was buying them and dealers weren’t ordering them. This left lots clogged with unsold vehicles. They were later steeply discounted and Chrysler’s margins were blown. Not as blown as Ford’s – which lost so much money in 2006 it was mathematically equivalent to giving away a Mustang once a minute for a year – but blown nonetheless.
If Jack in the Box can figure out the “We won’t make it ‘til you order it” matrix, why can’t Detroit? Okay cars are a little harder to make than a Jumbo Jack, but still.
Comments
John MacAyeal Says:
February 15th, 2007 at 10:27 am
Sadly this isn’t the first time Chrysler has been through — one may note the unfortunate alliteration — such a crisis. Some 25 years ago the US government bailed out an ailing Chrysler with a guaranteed loan. It seemed in the late 70s/early 80s that the most discussed topic after the Iranian hostage crisis was whether or not the government should bail out the ailing industrial stalwart. But I wonder how much patience there would be today for a similar government offer of aid. The old saying goes that there are no second acts in America. Such may apply to the outlook of Chrysler, as well as the other big US automakers.
Leslie Jones Says:
October 11th, 2008 at 8:07 am
Since the time the Chrysler K were released (early 80’s), the company has built garbage based on cheap construction. Chrysler squeezes manufacturers buying a piece for 11 dlls that you can’t find in the market as original for under 200 dlls. This is just criminal and that’s why crisis is happening now. Funds are sucked from the societies who can not aquire the goods made with such a greed. Now they have NOTHER soup of their own chocolate (or something with similar color)
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