When is Chrysler is for sale? When it is not. Dieter Zetsche, leader of Daimler Chrysler (hereafter DCX), says DCX remains committed to its 1998 acquisition of Chrysler Corp. For a company that is not up for sale, it is generating a lot interest. People speculate daily who will buy Chrysler; however, Chrysler is not for sale. For a company not for sale, many sharks including General Motors, Hyundai, and Toyota are circling the water.
What could these companies possibly want with Chrysler? The company boasts aging factories, a pension problem, healthcare issues, potential labor strife, few, if any, discernable brands, and mediocre engine technology? What possibly does Chrysler have to offer?
To the right suitor, its dealer network, or intermediate customers, represent Chrysler’s most valuable asset. Mercedes Benz, like most auto companies selling in the U.S., possesses an extensive if not bloated dealer network. Of the auto companies pushing steel in this country, Subaru, Mitsubishi, and Hyundai feature the weakest dealer networks. By purchasing Chrysler, any of these three firms would gain an immediate access to every market of every conceivable as soon as the sale close. Of the three, Hyundai makes the only sense because Subaru is rumored as an acquisition target and Mitsubishi may not remain in the passenger automobile business much longer.
Of the auto companies not selling in the U.S., the Chinese nameplates represent the most likely suitors for Chrysler. An acquisition by a Chinese nameplate such as Chery would give them instant access to intermediate and end customers as well as established brands. In turn, a Chinese nameplate could produce small cars and parts for larger vehicles to sell under the Chrysler, Dodge, and Jeep brands. When oil heads above $100 a barrel, then this scenario will make little sense. The Chinese nameplate would lose the efficiency of exporting products from the home market.
As to the company, DCX announced a “turnaround plan” that would lay off 13,000 workers, idle shifts at several plants, and look for other efficiencies gained from supplier and internal relations. With the first two moves, DCX concedes it will be in fifth place in about a decade should Hyundai maintain its current pace. The last move appears as code for “screwing our network to our own benefit.” That plan has worked out well for General Motors and Ford too. Little wonder why some dismiss the plan as a 360-degree turn instead of a 180.
Since buying the company, DCX managed to raise the sticker price for Chrysler-badged vehicles but Stuttgart did little else correctly or well regarding the marketing management of Chrysler, Dodge, and Jeep. Inventory has swelled beyond the industry goal of 50 days into the 100+ range. DCX antagonized its intermediate customers by brow-beating them into taking stock of cars and light trucks that they could not sell. Steadily rising gas prices harmed sales of the big engines branded Hemi. Toyota and Honda steadily chipped away at DCX’s position in the minivan market. Its light trucks have historically finished a distance third to Ford and Chevrolet. Now, Nissan and Toyota have taken aim at Dodge’s product mix.
DCX has also antagonized relations with Jeep’s end customers by introducing a vehicle that lacked 4-wheel drive. This action erodes Jeep’s brand identity and creates confusion for intermediate and end customers.
DCX’s U.S. portfolio of brands (Chrysler, Dodge, and Jeep) offers little excite for would-be buyers. The brand portfolio’s value lies in the Jeep brand identity and the intermediate customers. In that light, few automobile manufacturers will be interested in bidding for the portfolio.
9 responses so far ↓
julianneb1 // February 20, 2007 at 3:15 pm |
I think that people want DCX purely because of Jeep, it’s the only product that really offers them alot of revenue. Jeep is innovative and appeals to the xtreme sport in people. While all the companies swarming for DCX have some form of semi-xtreme SUV there’s not that’s like the Jeep Wrangler. It’s in a class by itself. DCX also has many valuable dealerships which if bought out they could switch the types of cars they sell or mix types of cars so as to be more profitable.
jalderson2 // February 21, 2007 at 2:33 pm |
I agree and disagree with Julianne. Jeep is a great brand but it does not offer many other vehicles other than the Jeep or other SUV type cars. The SUV market is not expanding, rather deminishing from the world market. With the EPA rising mileage requirements, Jeep struggle to be able to transform their offered vehicles for the furutre. Chrysler though offers many different types of cars and would be a better fit to capture a bigger share of the market.
codyj002 // February 25, 2007 at 7:22 pm |
Chrysler has been lost in the mix of other vehicles. Today with the influx of foreign made cars American made cars are fighting to stay alive. Chrysler is not the only automotive company struggling in the United States. Ford and GMC are also facing similar problems. They all have endured large losses in profitability. Foreign made cars run on a lean production system allowing them to make higher quality cars cheaper. I believe that these foreign cars need either a heavy tariff or tax levied on them to level the playing field for American automakers. The cost to produce cars on foreign soil is a lot cheaper than it is in America.
It is inevitable for these companies to merge. I would not like to see a foreign manufacturer gain control of Chrysler. It could strengthen their foothold in the American market thus damaging the other large American firms. I for one will never buy a foreign made truck. Not because I believe it to be an inferior product, but because it is one of the few markets American manufactures still dominate. Take for instance the new Toyota Tundra commercials. They are playing Black Sabbath in the background with their truck running through the mud. This tougher edgier image should help them shake the sissy image they first received. This kind of commercial is hand made for their target market. They want guys to see themselves driving this “tough” truck through the mud looking macho. The only thing that can save these American automakers is to do what we did to make ourselves great. American Automakers need to get off their lazy tales and start developing better cars. America as a whole has been riding on our past greatness when we should be striving to be great. MEMO To Ford and GMC: If you are going to bring back past great cars (see Charger and GT) use the basis for what made them great and then expand. DO NOT SIMPLY UPDATE!
christopherf2 // February 26, 2007 at 10:19 am |
Although Chrysler is having trouble with their quarterly returns, they still hold certain areas of the car market. If I am not mistaken Daimler Chrysler has ownership over Mercedes car group, which is a large international car manufacturer. If a company like GMC could purchase a company like DMC, they would have the largest market share in the industry. By having the largest market share, a company like GMC could possibly take what they have developed over the years and implement it into the DMC production lines. Thus helping their overall profit line. Also if a well-respected car brand purchased DMC, it could ultimately change Daimler Chrysler’s overall brand image. Therefore if this company is looking for buyers, all large automobile manufacturers could increase their market share if they were to work out a deal with DMC.
patrickm2 // February 26, 2007 at 2:57 pm |
The reason people want Chrysler is the amount of market share, current region distribution of recourses, and long-term possible profitability in a local (American car) company. The problems for Chrysler came soon after 2001 when demand for the minivan (what they considered thier cash-cow) dramatically reduced because of the increasing SUV sales, higher oil prices and inadequate American industry information within the Daimler camp. Daimler is a German engineering company and the proud maker of the BMW which has been very successful in sales but fall short in terms of market share. Daimler has failed to fully integrate Chrysler into their business model and in turn has lost whatever synergy they hope to obtain because of management oversights and engineers unwilling to share core technology between the businesses. The Chrysler Corporation has the physical recourses to be a competitor and has the least amount of sunk cost of the big American Car companies. If a foreign company were able to combine core competencies between their company and the Chrysler Corporations, they would be in a very advantageous situation. For example, one problem Chrysler is slow turnaround time in developing new cars, an issue that Cody hit on. Currently, it takes about 6 years for any of the top 3 American Car Companies to bring a new idea to the market. This number is less for companies like Hyundai or Toyota, around 1 or 2 years. Chrysler value is in that their weaknesses match the strength of many of the foreign car companies and many foreign companies believe that if integration occurred, the competitive advantage created would lead to greater profits.
justinj1 // March 1, 2007 at 10:34 pm |
If I were head of Hyundai or Chery I would not even contemplate buying Daimler Chrysler. The negatives of an overly structured company and terrible brands far outweigh the positives of a dealer network or the Mercedes nameplate. In fact, if I was previously connected to Daimler Mercedes I would be up in arms about Chrysler watering down the Mercedes image by sharing Chrysler parts and platforms. Stick a fork in them, DCX is cooked.
hunterh1 // March 2, 2007 at 12:39 am |
If I was Hyundai, or any other vehicle manufacture, I would not purchase Daimler Chrysler. Daimler Chrysler, while it has an extensive dealer network, has little if any other value. I honestly think it would be more cost effective to spend money on developing better dealer networking rather than purchasing the dealer networking of a company like Daimler Chrysler that has such a recently tainted image.
treyk1 // March 2, 2007 at 12:22 pm |
I think for a foreign company struggling in the American market Chrysler could be a valuable asset. Along with the dealer network, the company (I don’t know, let’s say Fiat, no one here knows who they are) gets the benefit of being associated with an American company. A fresh face like Fiat come across as helpful to Americans who are aware of Chrysler’s struggles. They come out of no where, help pick up a dying U.S. brand, and viola people start buying little Fiats for weekend fun cars. The baby boomers are getting close or are retiring, and while some are struggling to make sure they have enough money, others have some to burn. What better place than a company who bailed out Chrysler, who just so happens to be the company that built their first car when they were 16?…”Ahhhh what fond memories my new Fiat convertible brings back.”
evaughan2 // March 2, 2007 at 1:01 pm |
The Chrysler brand and customer loyalty is the only thing worth while to gain from the purchase of Chrysler. That name would be an automatic in for other companies that haven’t exactly broke into the American market yet. Though Chrysler is definately decreasing in their market share, they still have their the loyal followers and by still having the Chrysler image yet, putting in other new types of cars with the known, a new loyal customer could be formed.
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