Chrysler On Death Watch - Update
GM & Ford are not going out of business. They are two of the three largest auto makers on earth, they have sustainable business models, they are two of the greatest sources of private intellectual capital on earth, they are design leaders outside of the U.S., they are technology powerhouses, they are leaders in manufacturing best practices and they have strong global brands. The only thing they have suffered from is poor management. Both are rectifying that problem as the market demands change.
One or the other may suffer bankruptcy at some point but we first wrote of that possibility three years ago. The auto industry problems didn't start a month ago and they won't be fixed a month from now. I'm not even sure bankruptcy has any substantial bearing on their long term viability. It would be short-term devastating economically but they've been ravaged economically for decades. Chrysler could not only go bankrupt but may fail to survive for reasons we've highlighted in a handful of posts. Possible white knights could be an Asian or European automaker looking for greater market penetration or brand recognition in North America. Hyundai, Fiat, Renault or Peugeot come to mind but surely those are all guesses. Some or all may have no interest at all. Chinese automakers would have a significant interest but the politics involved are very serious and I don't believe any such action would be allowed given China's restrictive policy toward investment in its auto industry.
Today, Chrysler reports nearly unbelievable sales figures - car sales down 49%. In an industry where fixed costs are incredibly high Chrysler must continue hacking away at its cost structure while spending freely on new product development. The problem? There is likely little fat to hack before they start hacking away at muscle. In other words, cuts become a self-fulfilling spiral toward death. Chrysler is in serious crisis and relevant new product is years away courtesy of the terrible management at Daimler.
Just released sales numbers:
-36% decline in June U.S. sales to 117,457 vehicles from 183,347 in June 2007
-Car sales fell 49% to 29,858 vehicles
-Truck sales fell 30% to 87,599
One or the other may suffer bankruptcy at some point but we first wrote of that possibility three years ago. The auto industry problems didn't start a month ago and they won't be fixed a month from now. I'm not even sure bankruptcy has any substantial bearing on their long term viability. It would be short-term devastating economically but they've been ravaged economically for decades. Chrysler could not only go bankrupt but may fail to survive for reasons we've highlighted in a handful of posts. Possible white knights could be an Asian or European automaker looking for greater market penetration or brand recognition in North America. Hyundai, Fiat, Renault or Peugeot come to mind but surely those are all guesses. Some or all may have no interest at all. Chinese automakers would have a significant interest but the politics involved are very serious and I don't believe any such action would be allowed given China's restrictive policy toward investment in its auto industry.
Today, Chrysler reports nearly unbelievable sales figures - car sales down 49%. In an industry where fixed costs are incredibly high Chrysler must continue hacking away at its cost structure while spending freely on new product development. The problem? There is likely little fat to hack before they start hacking away at muscle. In other words, cuts become a self-fulfilling spiral toward death. Chrysler is in serious crisis and relevant new product is years away courtesy of the terrible management at Daimler.
Just released sales numbers:
-36% decline in June U.S. sales to 117,457 vehicles from 183,347 in June 2007
-Car sales fell 49% to 29,858 vehicles
-Truck sales fell 30% to 87,599
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