Chrysler Is Kaput
In December, 1956, Chrysler Corporation's president "Tex" Colbert issued the following apology to his company's dealers: "At the moment we are embarrassed -- and seriously -- by a shortage of automobiles." And embarrassed he was. Despite expanded production capacity to meet expected demand for the 1957 product line of Chrysler, actual customer purchases far exceeded projections. That was Chrysler, then.
And now? On the verge of extinction, having initiated bankruptcy proceedings, a torrent of unsold inventory clogs dealership lots, while the dying company seeks to decapitate those same dealerships. In just over half a century, how did Chrysler, and the wider domestic automobile industry, traverse the road from riches to ruin? It is a complex story, far too long to be fully documented in this space. However, there are a couple of themes related to Chrysler's imminent demise that warrant reflection.
In 1957, engineers, real practitioners of the automotive art, still had a significant voice within the corporation, alongside the finance and marketing gurus. In fact, Chrysler at that time was renowned for the quality of its automotive engineering. In 1957, its hemi V-8 engines were considered among the finest mass produced powerplants in the industry. Its TorqueFlite automatic transmission was unsurpassed by any of its competitors. In 1957, Chrysler introduced torsion bar suspension on its vehicles, making them the most roadable American cars of their era. And not only in engineering was Chrysler dominant. In the late 1950s, Virgil Exner created the "Forward Look" for Chrysler, making the company's cars among the most cleanly and beautifully styled on the American road. At that time, what were then Toyota, Nissan, and Honda were technologically and stylistically light years behind the supremacy of Chrysler.
Sadly, in 2009, we observe this once proud and powerful automobile company in a state of lethargy, with the embalming fluid about to be poured over the scattered remnants of its once thriving industrial empire. When we reflect back on the forces that led to the downfall of Detroit, and especially Chrysler, we see the inverse of what occurred in Japan. As solid engineering became redundant in Detroit, largely replaced by so-called "badge engineering," Japanese firms built up the quality of their automotive engineering to a point where it ranked as world class.
When Toyota decided to create a luxury brand, Lexus, they did not merely slap a Lexus grill and some extra chrome on a jazzed-up Toyota; they invested in the most sophisticated engineering available to insure that a Lexus would be perceived by consumers as a first rate product. Chrysler, along with the other Detroit automakers, preferred to use common chassis designs and powertrains, and differentiate their brands with a different badge on the grill, and perhaps an opera window on their luxury models.
American consumers caught on, and began deserting the domestic car manufacturers in droves for the Japanese alternatives. Too late, Detroit began to recognize some of its mistakes. When the Global Economic Crisis exploded, demand destruction shrank the American automobile market by millions of units annually, at the same time that Detroit was losing market share.
Now the course of history is supposed to be reversed by, of all things, a bankruptcy filing. Is President Obama, as sincere as he is, really serious in believing that this is the path to a renaissance for Chrysler?
We are also informed that the Italian automaker, Fiat, will help to save Chrysler by offering its own automotive technology. The same Fiat that had a disastrous commercial experience in the United States, abandoning the American car market decades ago. Fiat may have excellent experience and engineering for the European car market, but to expect a merger with the Italian firm to prove more efficacious than Chrysler's previous calamitous merger with Daimler-Benz, is simply whistling Dixie in the dark.
Chrysler is headed for oblivion, and the history books. The late "Tex" Colbert must be turning in his grave, aghast that the successful industrial behemoth he once ran so successfully is left with the forlorn hope that technology imported from Fiat is the path to salvation for a company that once stood at the top of the world in engineering excellence.
This epic is more than tragic. It is a metaphor for the reasons why the U.S. economy, once the center of manufacturing for the world, is in free fall collapse.
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Breakthrough technology will rapidly make possible future electric and hybrid cars that need no fuel or external battery charge.
They can turn into power plants when parked. Imagine vehicles need no fuel and that pay for themselves - by wirelessly selling power to the local utility.
This will become a cost-competitive alternative to building new coal and nuclear power plants.
It reflects one application of new technologies that tap energy sources never before commercialized.
Scientists will be understandably skeptical until independent laboratory validation takes place.
That is on the horizon, as is production of self-powered generators - as well as demonstration devices for schools and universities.
See http://www
They are inherently inexpensive and have surprising potential to accelerate rapid reversal of our economic and energy concerns.
It remains to be seen if Chrysler will look into these new possibilities. They can restore the auto industry.
Am I the only one who can remember "planned obsolescence" I believe the term was invented by GM, but it was standard practice in ALL of the big3.
That is part of the foundation of their culture
I would say the miles per gallon limit the government imposed on our car manufacturers aided in
their demise. Obama just raised the mpgs standard to 27.3, what a joke. Our car industry would
be in good shape had they been allowed to manufacture cars with 45 mpgs.
Allowed to manufacture cars that get 45mpg? Forced is more like it.
That's the function of government. They force you not to steal other people's property. They force you not to kill other people. They force you to give money so we can all have roads and hospitals and a host of other things. And, yes, they also have to force you to save energy because, as we can tell, you are not going to do it out of insight.
Who kllled Chrysler? The same klller of many other American Industries ... unfair international trade agreements. Last month Geithner said China is not manipulating their currency for a competitive manufacturing advantage.
Nuf Said
Yawn. Most Chinese don't have the dough to buy a Chrysler. And the ones who do rather drive a BMW or Mercedes. The Chinese are big time into prestige, you know. And driving a Chrysler doesn't give you that.
Sorry to disappoint but the prestige car in China is not a BMW or Mercedes. It's a BUICK! In fact, GM unveiled a Buick Riviera hybrid concept for the Chinese market at the 2008 Detroit Auto Show.
You kind of overromanticize things. The first Lexus started essentially as a secret project for a luxury Camry and shared a LOT of parts. Parts sharing is something the Japanese companies do a lot of and was common enough in the 50's Chrysler.
And you don't have to go all the way back until the 1950's to show the company's decline. Its minivans were the top of the industry until the second generation Honda Odyssey and the 2001. The Dodge Viper and Plymouth Prowler were head-turning concept-to-street cars and gthe PT Cruiser was so popular in its first year of production that there were regularly sold for three thousand dollars above sticker price. In 2000 when Chrysler engineers were really allowed to they could produce cars with great style and spirit. They could also produce clunkers like the Sebring.
The best car I ever drove was a 2000 Olds Intrigue. We bought it used in the spring of 2001, with 30,000 miles on it and traded in for a new Pontiac in 2007. When we traded in, that car had 165,000 miles on it and still got over 30 mpg on the highway, and by that I mean I would put the cruise control on 80 and still get that kind of mileage.
So why did you trade it in, then? A seven year old car made by such a "high end manufacturer" would have lasted you another decade. Or not...
I don't think trading in a 7 year old car, with 165,000 miles on it, is anything to jeer at. Had he/she kept it another 10 years it would likely have close to 400,000 miles on it. I don't think there are many cars, by any manufacturer, that would last 400,000 miles. And if they did last that long their technology would be woefully outdated- reason enough to trade it in for something newer.
For the past fifteen years, the principal product of American coporations has been b.s.: paradigm-shifting, vision statements, mission statements, down-sizing, right-sizing, re-branding, value propositions, ... the list goes on and on. Don't fix the problem, fix the perception. All that spin and vapor is not enough to sustain an economy. Chrysler is far from alone in this.
If we keep buying the snake oil, we shouldn't expect things to change.
Actually that should read "Chrysler ist Kaput".
The author of this post is looking way too far back. Chryslewr went from king of the hill to kaput in 5 years not 50. And the answer is simple; the incompetent German managers at Daimler.
At the time of the Chrysler/Daimler merger, Chrysler was sitting in top of more than 18 billion in cash reserves. More than ample to have seen it through this downturn. The first thing Daimler did was siphon that 18 billion off to support its German operations.
Daimler also never truly shared their technology with Chrysler. The Chrysler 300/Charger is engineered with Mercedes technology, but previous generation Mercedes technology. Maybe FIAT will give more. Of course the question is, is FIAT technology superior?
"Of course the question is, is FIAT technology superior?"
They make extraordinary chairs on wheels. Isn't the new 500 pretty?
http://cac
Don't write Chrysler off just yet. I'll be there were the same predictions back when Lee Iacocca was president of the company. In way you are correct, but let's not forget that they retained the live axle/semi elliptic leaf spring rear suspension all the way until they began making fwd cars. Seems like the car companies are FINALLY getting it right but at the very worst time the the economy. The 300 is a really really good car and the Pontiac G8 is too but if they were smart they shoulda been building these cars back in the 1990's (esp. after the next gen. cab forward Chryslers-oh and they should done a heritage style as a homage to Exner's cars, instead of that block high sill style they use now...but I could live with that)
Iacocca paid the loan back in 3 years because Japan agreed to import quotas. This time around the Wall Street car Czar Rattner is bent on gutting our auto industry. When the dollar devalues to half price against foreign currencies, then Chrysler will be competitive ... except Chrysler will have lost the ability to ramp up production because of the GUTTING.
Wall Street caused Chrysler's bankruptcy with illegal oil speculators and fraudulent toxic debts. Wall street caused high gas prices and frozen credit which is why cars stopped selling. Now that Rattner forced Chrysler into bankruptcy, car sales will be down 75%.
Chrysler is symptomatic of America as a whole. Long term viability through making high quality products was pushed out in favour of fancy finance and marketing tricks for a quick buck. Thank god you still have the software companies that still harbour and nurture excellence, or else America would really be intellectually bankrupt.
Bravo for being spot on. Short term profits are KING, while QUALITY of anything is not.
Another phrase for this might be: How to become a third world country in 20 years or less.
"...the software companies that still harbour and nurture excellence, or else America would really be intellectually bankrupt..
Gee, would that be like....Mi
I would have more hope in the Fiat merger had not the Daimler merger proved that it cannot work.
In the 1980s business schools were teaching America's future CEOs that product did not matter. Be it cupcakes, clothing or cars, the principles of making a profit were the same. So the finance guys supplanted the car guys at the Big 3. Remember, Wagoner at GM was just such a person.
In asian countries cars and their parts are engineered to function as designed, so a window regulator or trunk lock will last the life of the car. In America cars and their parts are engineered to meet specifications, regardless of how long they last or how well they function. Think about it: cars are manufactured to government motor vehicle safety standards. All cars sold here must meet that standard. So, why don't all cars have same quality?
I am not an engineer, but I believe that is something the Japenses learned by spending decades reverse engineering our vehicles to keep the good and improve the bad.
"...1980s business schools were teaching America's future CEOs that product did not matter..."
precisely. In fact they taught that management didn't need to understand the characteristics of the product nor the market. The insane idea was, and still is, that management is fungible.
And you wonder why US businesses are spinning down the drain.
Agreed.
"In America cars and their parts are engineered to meet specifications, ..."
That is a fairly glib way of putting it. There are all kinds of specification, and some qualitative measues cannot be quantified (I suggest you read Zen and the art of motorcycle maintenance). There are tests that help determine whether components are designed for a decent lifespan, but they cannot fully anticipate real-world usage. Often a specification can be more of a hinderance than a help. I cannot tell you how many times my designs have violated specification but performed well in real life. It's not that I wanted to violate the specification, but the specification had no idea what the component had to do. Also, every engineer has encountered specifications that are simply irrational. The way American cars are manufactured means some elements are made to simply the wrong specifications. In fact, they have been made to financial spec for a long time now.
The Japanese were really good at using the real-world to evolve their designs. Right from incorporating feedback from the assembly line to feedback from repair and maintenance, the Japanese have steadily made better and better cars. I suppose you could say they always measured their car against meaningful specifications.
"Chrysler is kaput" for exactly the same reason that 21-or-so US banks are also kaput: it forgot (a) that it was "in business," and (b) that business success depends upon great products and most of all upon the customer's success.
Chrysler produced crap. In so many words, that's it. And the customer chose with his wallet.
We see the same thing happening today in a small-yet-huge segment of banking. The companies insist that they are "too big to fail" and fight against the "discovery" that they have already failed. But the customer already knows.
Companies, big or small, old or new, collapse in the same way and for the same reason: they forget their customers and their product.
Banks make money from handling money. Over the last twenty years they drained money from the productive economy under the guise of creating a consumer economy, which is based on the premise that it doesn't matter where or how something is made, it is only how it is sold that matters.
Chrysler discovered that financial value trumps engineering value in a consumer economy. It became a car dealership and made the mistake of trying to manufacture the cars it was selling.
In short, the problem isn't customers and product, it is the perception that an economy can be based on money instead of industry.
cam, you have hit the nail squarely on the head. This is not just a problem at Chrysler but is a problem everywhere in industry. Moving money around does not create wealth, i.e. add value. Industry took raw material and created products, i.e. added value. That is what built this country. Now the Chinese are creating wealth the way we once did. The author hit it as well when he stated "In 1957, engineers, real practitioners of the automotive art, still had a significant voice within the corporation, alongside the finance and marketing gurus." The voice of the "engineers" in companies have long ago been replaced with those of more financial types who only care about tomorrow, not about next year.
I will answer your question, but you can also do it for yourself..
In just over half a century, how did Chrysler, and the wider domestic automobile industry, traverse the road from riches to ruin? Because the industry ignored the market! The industry continued to build for 1957 right into the 21st century, despite the fact that consumers were defecting to Japanese cars. Why? Let's see, do I want something that gets maybe 15-20 miles a gallon, if I'm lucky, for most of my driving, or do I want something that's way cheaper to operate? Do I want to invest in a car that will last, maybe, 100,00 to 150,000 miles if I'm lucky, or do I want to invest less money in a car like a Toyota that will go maybe 200,000 miles or even 300,000 miles? Oh, and let's see, do I want to buy a car built by an industry that is in denial about the fact cars pollute, and that that pollution is destructive to the health of the whole planet, that fights and delays for as long as possible to make environmental changes, that lobbies and spends millions to fight those changes, but who still then threatens the consumer by loudly exclaiming that any changes they are finally forced to make will only make the car more expensive; or, do I want to buy a car in which environmental considerations are part of the basic design? It is not only Chrysler who is kaput because of this reactionary attitude, but, sadly, the whole American car industry.
The simple truth is most car buyers do not keep their cars until they have 200k or 300k miles on them. And if they did, any manufacturer would have a hard time staying in business because product turnover would be so low. The most popular vehicle in America is the Ford F-150 pickup. The second most popular is the Chevrolet Silverado pickup. American manufacturers still sell 11 of the top 20 selling vehicles in America, 3 of which are full size pickups. More American made full-size pickups are sold than Camry's and Accord's. The Toyota Tundra gets worse fuel mileage than the Chevrolet Silverado. Both GM and Ford offer several models of hybrid vehicles. Until everyone wants or needs a Camry or an Accord there will be people buying American made vehicles, or Japanese copies of them.
I believe drug lords, war lords and terrorists prefer Toyota built trucks to US trucks for the superior driving performance under combat conditions
:-)
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