Why Chrysler’s bankruptcy is a good thing

I’ve never liked Chrysler. 

It’s no secret to regular readers that very few Chrysler vehicles have ever impressed me. My dislike began when my parents used a 1987 LeBaron to drive my brother and me to San Diego. My brother got locked in by a seat belt that wouldn’t unlatch, and then the engine exploded. Thankfully not on the same day.

I’ve kept a wary eye on Chrysler products ever since. When I wasn’t able to talk my sister-in-law out of a 1997 Sebring convertible, I managed to keep the “I told you so”s to a minimum when she’d finally had enough and took a major hit on its trade-in value.

That said, I’m relieved to see the company begin a bankruptcy process that I hope will inspire real change and begin a new era of quality cars.

I also want to take a moment and acknowledge some of the Chrysler vehicles that were actually pretty darned good, in spite of the spectacular failures that have seemed to define the company.

Chrysler’s entire minivan lineup can be summed up with the word “innovative.” From DVD systems to dual sliding doors to stow-n-go to swivel-n-go seating, Chrysler defined the minivan in the 1980s and then redefined it through the years. 

I mention this car mostly because Chrysler has sold so many of them. From the day it was introduced in 2000, I’ve thought the PT Cruiser is one of the ugliest bodies to ever sit atop four tires. Since more than 1 million of my fellow Americans disagree and seem to adore their PT more than the kids they haul in it, I’m forced to acknowledge that it must be a dang good car. 

This car has a 6.1-liter, 425-hp Hemi and brakes good enough to stop all 4,160 pounds of it in just 110 feet. That’s right up there with the mighty BMW M5.

Well done, Chrysler. 

In Chrysler’s future, I hope to see more of the innovation, fun, and quality I know the company is capable of. Help from Fiat might be just what it’s needed.

What are some of your favorite Chrysler vehicles? Any you hope to never see again?

-tgriffith

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The Future Looks Clearer . . . and Dimmer

Chrysler Assembly Plant, Belvedere, IL

Yesterday we explored some headlines about the auto industry bailout.

Today we create three more, based on what Chrysler and GM revealed in their submissions to the feds yesterday:

We Need $21.6 Billion More Now, $39 Billion by 2012

GM Says Bankruptcy Would Cost the Government up to $100 Billion

Nobody Is Going to Be Willing to Foot This Bill

GM Assembly Plant, Janesville, WI

Ford Assembly Plant, Atlanta, GA

Both Chrysler and GM offered the by now familiar cost-cutting measures—and the projections of people out of work, cities in decline, factory closings, parts and feeder industries affected all make your stomach turn. See details of the companies’ proposals here. But there has to be a lot more bullet-biting. For Chrysler, the Fiat alliance won’t be enough.

And, as we all know, there are too many brands. Brands require vehicle development, production, marketing, dealers, and more. So the companies are being given old business advice: Focus on your core business. The Saturn story is a particularly sad example of how GM lost its way. That brand was left to languish for too long, and now that they have good cars that aren’t selling, they’re being put on the block. Hummer and Saab also reflect bad business decisions.

The problem goes well beyond cutting costs, however. It’s really about boosting sales, and how is that going to happen in this economy? Getting people to buy cars still comes down to the same old value proposition: Building sufficient value into the product so that “buyers” will part with their coin. Today it’s impossible to make people overcome their economic fears and forego savings to buy outmoded vehicles.

At the same time, we believe the auto industry has got to survive, and most authorities reflect that if that is to happen, there will be a whole lot more pain.

“I don’t know what you’re going to call it, but they’re going to go through bankruptcy, whether outside the bankruptcy system or with the benefit of the courts,” said Maryann Keller, who has written about the U.S. auto industry for three decades. “At the end of the day, the United Auto Workers are going to have to take a haircut, creditors are going to take a huge haircut, and equity is gone. What will effectively happen is exactly the same as bankruptcy.”

The companies’ decline (and we include Ford) didn’t happen overnight, and reconstructing the auto companies (all of them) into viable, lean competitors will take years.

Anybody reading this who has bought a Saturn? How do you feel about GM’s abandoning the brand?

—jgoods

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A Car Industry Revolution in the Making

The gloom is everywhere, but we see some patterns emerging that may bring healthier days for the industry—at some indefinite, down-the-road time. What these patterns basically mean is that everyone will do more business abroad.

First, the bad news: One week from today GM and Chrysler will have to face the music publicly in Washington about the viability of their companies. God knows what Chrysler can say, other than play up its connection to Fiat and its capabilities.

GM workers fear more shutdowns in power train and parts factories, assembly plants, plus assorted bad deals with bondholders and the UAW. Some 10,000 salaried jobs recently were blown away; “thousands” more will undoubtedly go.

Nissan just announced 20,000 job cuts over the next year, including some 12,000 in Japan, where the country’s third-largest carmaker posted a $2.9 billion loss, its first in 9 years.

The outlook: If GM can survive, and many doubt it, the company will grow smaller in the U.S., as Bob Lutz predicted, and do more business abroad, particularly in China. That country, by the way, beat out the U.S. in auto sales, as announced today, and may be the world’s only viable car market left, though it, too, is down.

The future for a good piece of GM’s production will be abroad, particularly in China. Edmunds’ Michelle Krebs sees “tremendous opportunity” there for GM, VW, and maybe Ford—if it can sell its Volvo unit to Chery. “Buick,” she says, “sells more cars in China than it does in the U.S.”

Nissan and Toyota may be on the prowl, too. Since the yen is very strong now against the dollar, Nissan is clearly looking to foreign markets and hoping its cost-cutting strategies will position it as a smaller, leaner company. CEO Carlos Ghosn has a great record in that department.

To spur development of the car market, the Chinese government has put forward a “multibillion-dollar economic stimulus package while it also tries to promote cleaner, more energy-efficient engines.” And it’s cutting the sales tax on small-engined cars in half. Sound familiar?

If you needed more proof of a global car economy, this is it. For U.S. auto producers to thrive in it, cars will need to become more fuel-efficient, electric or hybrid-powered, and price-competitive. . . . Except for Buicks, that is.

“Buy American” hasn’t made sense for years in the car industry. Do you still believe in it?

—jgoods

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