Monday, March 05, 2007

Christine Tierney and Katharine A. Schmidt / The Detroit News

DCX timeline

November 1998: DCX created by combining Daimler-Benz, Chrysler.
February 2001: Amid deep losses, Chrysler CEO Dieter Zetsche unveils turnaround plan.
July 2003: Chrysler surprises with $1.1 billion second-quarter loss; rebounds in third quarter.
September 2006: Chrysler warns of $1.5 billion third-quarter loss.
February 2007: Chrysler says it will cut 13,000 jobs to restore profits. Now DCX CEO, Zetsche won't rule out possible Chrysler sale.


Nine years ago, as the world's top auto executives converged on Geneva for the annual motor show, the heads of Daimler-Benz AG and Chrysler Corp. met secretly to discuss a merger that former DaimlerChrysler CEO Juergen Schrempp would later describe as "a marriage made in heaven."

But as the auto industry gathers in Geneva this week for another show, the DaimlerChrysler union looks headed for dissolution, and many Europeans -- certainly most Germans -- look back on the $36 billion deal as a regrettable error that weakened both partners.

Since DaimlerChrysler CEO Dieter Zetsche confirmed on Feb. 14 that "all options" are under consideration for the ailing Chrysler Group, reactions in Germany have ranged from simplistic to regretful. "Mass and High Class don't Mix" blared the Stuttgarter Zeitung, DaimlerChrysler's hometown newspaper.

German workers and engineers who have cooperated with Chrysler colleagues may have mixed feelings, but the consensus among German investors, employees and commentators is that it's probably time to split up.

"It's time to say goodbye," German TV channel ARD's stock market commentator said the day after Zetsche's comments. More than three-fourths of the investors polled by ARD said DaimlerChrysler should sell Chrysler.

DaimlerChrysler's shares rallied after the Valentine's Day bust-up, but the stock market euphoria has been tempered by concerns about the costs of a divorce.

"Investors shouldn't rejoice yet," Stuttgart reader Kurt Huppenbauer wrote in a letter to the Stuttgarter Zeitung's editor. "Schrempp's Chrysler adventure will apparently have cost 30 billion euros ($39 billion) in nearly nine years, and reportedly getting rid of Chrysler will cost 26 billion euros ($34 billion) including the pension and health care costs for Chrysler employees." (Analysts' estimates of the liabilities run lower, closer to $18 billion.)

Company officials have refused to discuss any negotiations under way about Chrysler.

They stress that all options are possible, not just a sale. But European auto analysts who spent time with Zetsche last week came away with the impression that the main choices under consideration are a sale or a spinoff.

Zetsche isn't telling

Zetsche, who ran Chrysler for nearly five years before becoming CEO of DaimlerChrysler in January 2006, has not shown his feelings publicly.

He is scheduled to be at the Geneva show this week, but Chrysler CEO Tom LaSorda will not attend the press preview Tuesday and Wednesday, even though Chrysler recently announced a push to boost sales outside North America.

DCX struggles elsewhere

Schrempp, the CEO who engineered deals with Chrysler and two Asian carmakers, has come in for a fresh drubbing from Germans critical of his grand plan to form a Welt AG -- or World Inc.

In 1998, Schrempp was widely praised for his strategy to create a company that would sell cars for every taste and pocketbook, and generate huge savings.

Now, hardly anyone in Germany defends that concept. A report in Germany's popular Bild-Zeitung tabloid calculated that the merger had cost $24 billion in shareholder value -- enough to buy half a million Mercedes-Benz E-Class cars.

In recent years, DaimlerChrysler struggled first with its Mitsubishi Motors Corp. partnership, then with its Smart minicars, twice faced financial setbacks at Chrysler, and experienced problems at Mercedes-Benz, which suffered a dangerous deterioration in quality.

Meanwhile, in neighboring Bavaria, Mercedes' archrival BMW AG was thriving.

In 2000, BMW shed Rover, the middle-market British carmaker it had bought six years earlier, and sold Land Rover to Ford Motor Co. BMW's profits and stock surged as it concentrated on the luxury car business.

No sympathy for Chrysler

On the night of Feb. 14, a former Mercedes manager who was flipping through channels was struck by the fact that none of the DaimlerChrysler and Mercedes employees interviewed by TV reporters expressed any sympathy for the plight of Chrysler employees.

He said former colleagues tell him they're burned out from doing multiple jobs, traveling constantly, grappling with two crises at Chrysler within seven years -- all while dealing with Mercedes' own problems.

They don't blame Chrysler for their difficulties, but even so, "no one's in the mood to try to reach a positive outcome together," said the manager, who spoke on condition of anonymity.

But another employee, an information technology specialist who gave only his first name, Buelent, said his co-workers were divided on whether to split from Chrysler. "There are two opinions," he said. "Two years ago, Chrysler was in the black. Especially the people who go often to the States on projects are not eager for a sale."

"People think it would be great if someone would pay money for Chrysler, and the problem would be solved," said Georg Licht, head of industrial organization and international management at the Center for European Research in Mannheim, a city an hour's drive from Stuttgart. "That's the majority opinion, but who will do this?"

When Germans first heard about the deal, Chrysler was described to them as a rich, nimble and successful automaker.

"Back then, there was loud applause for the merger," said analyst Georg Stuerzer at investment firm HypoVereinsbank in Munich. "It was a super constellation. One profitable company buys another," he said. "Nobody realized how vulnerable Chrysler was to fluctuations in the American market."

Last year, when DaimlerChrysler issued two profit warnings for the Auburn Hills carmaker, "people stopped believing that Chrysler could ever be stabilized," Stuerzer said.

'Daimler is overstretched'

Just as analysts seemed unanimous in praising the merger nine years ago, they are unanimous today in criticizing it, Licht said. "The rejection of the merger at this point is as irrational as the euphoria that reigned at the time of the merger. People forget that two years ago, Chrysler was making profits, and not the German part of the company."

At the German Institute for Economic Research in Berlin, Alfred Steinherr, head of forecasting, said ordinary German citizens now think Daimler and Chrysler should go their separate ways.

Those who follow the auto industry always had their doubts, he said. Many people think Daimler-Benz wasn't up to the task of building a profitable future for Chrysler.

"Over time, not just the experts, but the interested public has realized that Daimler is overstretched with the management problems at Chrysler," Steinherr said.

"Daimler was never very good at absorbing other companies," he said. "They're very good at running Mercedes-Benz, but whenever they've tried to extend to other areas and products that don't have anything in common with the ones they usually produce, it's a flop."

I have to disagree, though it may not necessarily still apply in today's world. In the 60's and early 70's....the cars I grew up with......GM was not only the largest company but, in general, except for the lousy GM acrylic lacquer paint, had the best-assembled cars overall from the factory too, although Chrysler generally made more durable engines and automatic transmissions.
In fact, many times I could tell a GM car from its competition with my eyes closed.......just from the tactile feel of the interior materials, hardware, sheet metal, bodywork, and the sounds of the doors and hood closing.