A Strange Detour for Chrysler

External Since: May 03, 2007 Posts: 619

A Strange Detour for Chrysler
http://tinyurl.com/5rtx6j

So it's come to this. Chrysler, inventor of the minivan (one of the
best-selling ideas in automotive history), is starting to turn itself
into a marketer and contract manufacturer of other people's cars. To
plug gaping holes in its truck-heavy lineup, the U.S. automaker already
plans to stick a Chrysler badge on a restyled Nissan Motors (NSANY)
Versa subcompact. Now comes word that it is negotiating with the
Japanese company to start selling a version of the Altima family sedan.
Plus, to pick up the slack at its underutilized truck and minivan
plants, Chrysler aims to become an assembler-for-hire for any maker that
needs those vehicles.

This plan did not spring from the brain of a car guy. It smells of the
moneymen who are now deeply nested in Chrysler's operations. Cerberus
Capital Management paid $7.4 billion for 80% of the company and, having
underestimated the difficulty of turning it around, is looking to cut
costs and conserve cash. Chrysler and Cerberus say they will save
hundreds of millions or even billions of dollars in development costs
for small cars and family sedans. And far better to share their
factories, they say, than to lose money on them. Yes, it makes a strange
kind of sense, but it virtually assures that Chrysler may never thrive
as a standalone company.

The partnership has serious weaknesses. Picture the Chrysler star or
Dodge horns on a restyled Nissan. And ask yourself: Why not just buy the
Nissan? After all, the Chrysler and Dodge brands are among the weakest
out there. Nissan vehicles often hold their value better than Chrysler
ones do. (As a parallel, consider the General Motors (GM)-Toyota Motors
(TM) joint venture to build small cars: The Toyota version of the same
basic vehicle sells way better and for a lot more money.) And let's not
forget that Chrysler's most famous names stand for off-roading (Jeep)
and gas-guzzling power (the famous Hemi engine). Hard to sell small
Nissan siblings with that kind of branding legacy.

Which brings us to the plan to rent out Chrysler's factories. As part of
the partnership, Chrysler will build a version of its Dodge Ram pickup
for Nissan. Volkswagen (VLKAY) has ordered up a minivan. Votes of
confidence, to be sure. But will Chrysler's quality issues scare others
off? Two recent studies from J.D. Power & Associates (MHP) maintain that
Chrysler's quality lags way behind its toughest rivals. In their
defense, Chrysler executives point to a study done by consulting firm
Oliver Wyman Group showing the company's manufacturing efficiency is now
among the best in North America. They also claim quality has suffered
because its former parent, Daimler (DAI), was cheap on parts.

But there's another problem with relying on other carmakers. It steers
Chrysler into me-too land and away from its roots as an innovator. The
company has often risen Phoenix-like from a crisis with innovations such
as the minivan or early SUVs such as the Jeep Grand Cherokee. Design
breakthroughs like the Dodge Ram pickup and the PT Cruiser during the
1990s earned billions. More recently, the 300 sedan was a big, if
short-lived, hit. Chrysler President Tom W. LaSorda counters that
Chrysler's cars will look nothing like their Nissan siblings and that
the strategy will play a big role in his planned overseas expansion.

Auto industry partnerships have a tendency to go kaput when interests
diverge. For the moment, the alliance with Nissan will allow Cerberus to
keep Chrysler going while it figures out an exit strategy. Nissan may
not buy Chrysler outright (despite speculation) and seems content with a
looser arrangement that will allow it to sell more cars. LaSorda doesn't
see a sale happening any time soon. But a deepening partnership with
Nissan means Chrysler is less likely to go it alone. This company will
end up on the block again. The only question is when.

--
Civis Romanus Sum

External Since: May 15, 2007 Posts: 46

On Aug 15, 8:46 am, Jim Higgins <gordian....RemoveThis@hotmail.com> wrote:
> A Strange Detour for Chryslerhttp://tinyurl.com/5rtx6j
>
> So it's come to this. Chrysler, inventor of the minivan (one of the
> best-selling ideas in automotive history), is starting to turn itself
> into a marketer and contract manufacturer of other people's cars. To
> plug gaping holes in its truck-heavy lineup, the U.S. automaker already
> plans to stick a Chrysler badge on a restyled Nissan Motors (NSANY)
> Versa subcompact. Now comes word that it is negotiating with the
> Japanese company to start selling a version of the Altima family sedan.
> Plus, to pick up the slack at its underutilized truck and minivan
> plants, Chrysler aims to become an assembler-for-hire for any maker that
> needs those vehicles.
>
> This plan did not spring from the brain of a car guy. It smells of the
> moneymen who are now deeply nested in Chrysler's operations. Cerberus
> Capital Management paid $7.4 billion for 80% of the company and, having
> underestimated the difficulty of turning it around, is looking to cut
> costs and conserve cash. Chrysler and Cerberus say they will save
> hundreds of millions or even billions of dollars in development costs
> for small cars and family sedans. And far better to share their
> factories, they say, than to lose money on them. Yes, it makes a strange
> kind of sense, but it virtually assures that Chrysler may never thrive
> as a standalone company.
>
> The partnership has serious weaknesses. Picture the Chrysler star or
> Dodge horns on a restyled Nissan. And ask yourself: Why not just buy the
> Nissan? After all, the Chrysler and Dodge brands are among the weakest
> out there. Nissan vehicles often hold their value better than Chrysler
> ones do. (As a parallel, consider the General Motors (GM)-Toyota Motors
> (TM) joint venture to build small cars: The Toyota version of the same
> basic vehicle sells way better and for a lot more money.) And let's not
> forget that Chrysler's most famous names stand for off-roading (Jeep)
> and gas-guzzling power (the famous Hemi engine). Hard to sell small
> Nissan siblings with that kind of branding legacy.
>
> Which brings us to the plan to rent out Chrysler's factories. As part of
> the partnership, Chrysler will build a version of its Dodge Ram pickup
> for Nissan. Volkswagen (VLKAY) has ordered up a minivan. Votes of
> confidence, to be sure. But will Chrysler's quality issues scare others
> off? Two recent studies from J.D. Power & Associates (MHP) maintain that
> Chrysler's quality lags way behind its toughest rivals. In their
> defense, Chrysler executives point to a study done by consulting firm
> Oliver Wyman Group showing the company's manufacturing efficiency is now
> among the best in North America. They also claim quality has suffered
> because its former parent, Daimler (DAI), was cheap on parts.
>
> But there's another problem with relying on other carmakers. It steers
> Chrysler into me-too land and away from its roots as an innovator. The
> company has often risen Phoenix-like from a crisis with innovations such
> as the minivan or early SUVs such as the Jeep Grand Cherokee. Design
> breakthroughs like the Dodge Ram pickup and the PT Cruiser during the
> 1990s earned billions. More recently, the 300 sedan was a big, if
> short-lived, hit. Chrysler President Tom W. LaSorda counters that
> Chrysler's cars will look nothing like their Nissan siblings and that
> the strategy will play a big role in his planned overseas expansion.
>
> Auto industry partnerships have a tendency to go kaput when interests
> diverge. For the moment, the alliance with Nissan will allow Cerberus to
> keep Chrysler going while it figures out an exit strategy. Nissan may
> not buy Chrysler outright (despite speculation) and seems content with a
> looser arrangement that will allow it to sell more cars. LaSorda doesn't
> see a sale happening any time soon. But a deepening partnership with
> Nissan means Chrysler is less likely to go it alone. This company will
> end up on the block again. The only question is when.
>
> --
> Civis Romanus Sum

I disagree. This has been done for years, from the Chrysler
Mitsubishi Colt, Champ, Arrow, Challenger, Sapporo, Stealth, and
Summit, to the GM Nova, Prizm, Storm, Tracker, Metro, Sprint, and
Vibe, to the Ford Probe, Isuzu Oasis and pickups, Mitsubishi Raider,
Mazda pickups and Navajo, the old Chevy LUV and Ford Courier...

The VW/Porsche 914 was an early example. Then there was the
Sterling. Nissan and Renault share platforms now. Most Fords use a
Mazda or Volvo platform. Saab shares platforms with other GM makes.

If a platform is good, why re-invent the wheel? That's what got US
makers into trouble -- they thought they had to invent everything
themselves, even if another maker was already using it.