Detroit Dilemma

Dec 3, 2009

It’s not easy being lean.

Chrysler LLC looks to be on the ropes, battled by both the economy and Congress. And in its corner, even its majority owner, Cerberus Capital Management, a private equity company, doesn’t seem to want to refresh its weakening fighter with an infusion of any more cash (plus, Cerberus and Daimler, the German automaker that had owned Chrysler for 10 years, look to sue one another over Daimler’s remaining near-20% Chrysler ownership).

No other car company – or anyone else for that matter – had come forward by mid December to help old No. 3 Chrysler. Except, maybe, Uncle Sam, that is us, we the taxpayers, could assist the failing carmaker…is it too soon write Chrysler’s obit? With the marketing of its Dodge-branded Hemi Ram trucks and the comeback of its retro Challenger, would we want to see Chrysler and its Dodge nameplate rust forever in the auto graveyard?

Chrysler’s CEO, Bob Nardelli, had to defend the No. 3 of the Big Three automakers as a viable, survivable operation before Congress in early December. But many members of Congress had grave concerns about pouring money into a carmaker they think won’t survive.

Nardelli, you recall, along with his Ford and GM counterparts, performed a mea culpa as he and his counterparts returned to Capitol Hill in much more modest means of transport than those they used the month before when they arrived hat in hand via their private corporate jets. Oh the hubris of it all. This time, Nardelli and his fellow CEOs actually presented some concrete strategies about how they will bring their companies back to profitability. Yet while some of what the Big Three’s big boys presented the second time around demonstrates real-world thinking, how late is it in the game?

Ford’s Alan Mulally claims his company’s not in the dire straits GM and, certainly, Chrysler are in, despite wanting a backup $9 billion line of credit that, he says, Ford might not even use. He even told The Wall Street Journal he’s worried GM and Chrysler won’t survive. Ford has seen modest success with its Escape SUV and Fusion sedan hybrids, the Fusion receiving favorable reviews, especially in comparisons with Toyota’s Camry hybrid. Ford, then, certainly may be in the game for long haul.

Mulally said back in June, as fuel prices continued then to rise unabated, that the shift to small- and medium-size vehicles was not a temporary phenomenon, as it was during the fuel crises of the 1970s and early ’80s. This time it would be permanent: Fuel-efficient vehicles would be the requirement from now on.

GM’s guy at the top, the beleaguered Rick Wagoner whose CEO head has been called for, added to his self-contrition (beyond the private jet blunder) by admitting, “We made mistakes.” Maybe, though, as the guy at the top, “I made mistakes” would have been a more contrite response.

How quickly, though, will Detroit turn out quality, consumer-appealing fuel-efficient vehicles? Chevy has its Malibu hybrid and the expected all-electric Volt to begin production next year. Of course, having big SUV hybrids such as Cadillac’s Escalade, Chevy’s Tahoe and GMC’s Yukon, with MPGs “up to” 21 highway, doesn’t put GM in the forefront of fuel efficiency for the future. And poor Chrysler is still in the 20th century with its hybrid offerings; and that could be its downfall.

As I write this, the White House and Senate aren’t sure they have the votes to bail out GM and Chrysler, and to back Ford with a line of credit. The art of gentle persuasion – or arm twisting, as needed –  and compromise continued.

U.S. taxpayers are mixed in their feelings, perhaps in their ire, as to whether, even for national security reasons, saving the Big Three and its thousands upon thousands of blue- and white-collar jobs (millions, when one considers all those people interrelated to the auto industry) is worth the risk of seeing their own dollars go into a black hole, especially as the $700 billion, too-few-strings-attached Wall Street bailout hasn’t jolted the economy forward and as more people lose jobs.

It might be that sometime this year or next, the lean-earnings of Chrysler, or even GM as we know it, bring an end to one or two of the Big Three.