Chrysler is, probably, dying.Slowly, yes. But dying all the same. If I were writing this for a so-called mainstream newspaper, they probably would not allow me to say that; or at least suggest I change it to "terminally ill."
Now I can just see your eyebrows raising. (I shaved mine off years ago.) There you go again, somebody is bound to think. Scaring people for the sake of selling newspapers. Doesn't the media always exaggerate, sensationalize and blow things out of proportion?
In my experience the opposite is actually true — when it comes to stories that really matter. Yes, the mainstream media love to hype the latest bad-weather story, and someone is probably on CNN right now hinting that we'll all be killed by a tornado tonight.
Yet they tend to pull their punches on the really important stories of our time, such as what is really happening to either the environment or the economy, both of which are in deep long-term trouble. One consequence of that is what's happening to Chrysler, once a proud member of the now Not-So-Big Three. Chrysler can no longer possibly compete in today's environment. There was enough in the news last week to allow even an automotive expert to figure that out, but it was, again, muted. (Don't want to panic the kiddies or the markets just now, babs.)
Chrysler no longer trades on the stock exchanges, but if it sinks into the deep, it will have deep ripple effects on other firms, and on all of us in Detroit. So here's why I say the company is sick as a dog:
They don't have a product mix that allows them to compete in today's market. Chrysler has trucks and SUVs and minivans and off-road vehicles and gas-guzzlers of every size and shape. Those vehicles are, in fact, designed to make up 70 percent of Chrysler's sales.
Chrysler is perfectly positioned for 1998; when the economy was booming and gas was $1.25 a gallon. But those days are gone. The economy is shrinking, unemployment is rising, and $4.19-a-gallon-gas is heading toward $5-a-gallon gas. Not only does Chrysler make all these cars we can no longer afford, they have nearly no small, fuel-efficient vehicles. Their one wildly popular car of the last decade, the PT Cruiser, is near the end of its product cycle.
Too many of their "different" vehicles are really costly, and not very efficient, versions of the same car. The Dodge Nitro, for example, is really the same thing as the Jeep Liberty. The Chrysler Sebring, one of the few sexy cars the company has, is the same as the Dodge Avenger, with different taillights. The Grand Caravan is the same minivan as the Town and County, and on and on.
Some people who have good memories will read all this, and say, "yes, but — we've been here before. Chrysler always comes back." They have a point. Chrysler has, in fact, had more lives than your average alley cat. For years and years, back when the big three were really the Big Three, it was the most blue-collar of them all.
Poorly educated workers in huge sprawling factories like Hamtramck's Dodge Main turned out vast hordes of mediocre Dodges and Plymouths, cars they often drove themselves. The company built them even when they could not sell them, stacking them up in lots in what the company called its "sales bank." Eventually, this woeful sort of mismanagement almost did Chrysler in.
The company was on the rocks in 1979. But it was saved by $1.5 billion in federal loan guarantees, not to mention the showboating and shrewd business savvy of Lee Iacocca, who actually persuaded people it was their patriotic duty to buy some not-very-good cars. The company returned to relatively good health.
Then, 10 years ago, it sold itself to Daimler-Benz, the German luxury carmaker. (This was misleadingly billed as a merger in Detroit press reports.) The result was approximately what you'd expect if a Hazel Park High School homecoming queen were to marry the latest heir to the Porsche fortune. It was a mismatch.
The wonder was that the marriage lasted nine years. Last year, Daimler cut Chrysler mostly loose, selling it to a private equity firm called Cerberus Capital Management. That marked the first time that one of Detroit's giants would no longer be run by "car guys."
That meant that the top priorities of this company would no longer be tailfins, but making money. These are not sentimental car guys, and they don't pray to Harley Earl. Cerberus hired an executive from Home Depot to run what was now renamed Chrysler LLC.
What you can reasonably expect is that Cerberus isn't going to be content to lose billions year after year. Their books are no longer open to the public, but they admit to losing $1.6 billion last year.
That collection of grim facts was previously well-known. But last week, the news got worse, much worse. Chrysler sales fell a staggering 25 percent in May, compared with the year before. Early indications are that June may be worse.
True, none of the automakers has been doing well this year. But because of its lopsided product mix, Chrysler is doing worse. Through the first five months, all U.S. car and truck sales were down about 8 percent. But Chrysler's were off 19.3 percent.
That's bad enough. But J.D. Power and Associates and another top ratings firm predicted that U.S. vehicle sales were headed for the tank, running 20 percent below expectations, which were pretty damn low to start with. That's terrible news for everyone — and, more than likely, far worse for Chrysler.
That's because those people who are going to buy cars this year are certainly not going to want to buy a gas hog. There are exceptions; virtually every kid in my classes at Wayne State University seems to want a Jeep. Jeep sales, in fact, were down "only" 16 percent last month. But Chrysler car sales were down a staggering 33 percent. They don't have stuff people want to buy. As if to underline that, a separate J.D Power report on quality rated Chrysler brands as a whole "below average." As for the much-desired Jeep brand, it was dead last.
Last week I asked Brett Smith, a manufacturing expert with Ann Arbor's Center for Automotive Research, if Chrysler could survive. Yes, he said, under one condition.
"They have to find a (merger) partner who is strong where they are weak." Renault/Nissan is one possibility; Volkswagen might be another. The Chinese are coming, but are probably not ready.
How long do they have to pull this off, I asked? "Six months." Otherwise, well, Cerberus is putting a brave face on things, but their patience and money are not limitless. Chrysler could be disassembled. The most desired portions (Jeep) could be sold off to the highest bidder, others closed, abandoned or messed with in some serious way.
Trouble is, Chrysler almost certainly has been looking for a partner for some time (as in, since Cerberus took it over) but so far has not found a suitor. Nor do the latest numbers make it any more desirable. There may indeed be a company called Chrysler in five years, or there may not. But even if there is, it won't be what it was.
Neither will Detroit, a town that needs new jobs, new industry and, most of all, new vision. And we need them all damn soon.Jack Lessenberry opines weekly for Metro Times. Contact him at [email protected]