Chrysler has been dead since 1975.
The problem is, no one has the heart to tell them.
Lee Iacocca was the hope and the redemption. He brought them back from the brink. But Lee’s been gone 16 years.
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In 1979, Iacocca got Congress to pony up billions in loan guarantees to keep the struggling carmaker from slipping into oblivion. True, Chrysler went on to bring the world Soccer Mom dream cars such as the mini-van. But they also built the Volare, Aspen and K-Car.
When gasoline prices leveled off following the 1970s’ oil shock, Chrysler returned to its most successful core business, trucks, vans and muscle cars. Under Iacocca’s reign, it acquired Jeep-Eagle and began building the Cherokee, one of the first successful SUVs.
Why Chrysler Retreated
Although Chrysler eventually paid off the loans guaranteed by Congress, it never recovered from the departure of Iacocca in 1993. Without the charismatic Iacocca at the wheel, Chrysler lacked leadership and vision.
The Auburn Hills-based carmaker tried life as a Mercedes when it merged with Germany’s Daimler in 1998. Not exactly a match made in heaven. Chrysler execs loved the schnitzel and beer, but they hated the German obsession with efficiency and quality.
In 2007, Daimler effectively had to pay billionaire Stephen Feinberg and his Cerebus Capital Management hedge fund to take Chrysler off its hands. Even though Daimler retains about a 20 percent stake in Chrysler, it no longer has any influence over management of the troubled American automaker.
Cerebus brought in former Home Depot CEO Bob Nardelli to rebuild the company. Despite Nardelli’s best efforts, Chrysler could not be revived, and it has remained on life support.
In October of last year, Daimler announced that its stake in Chrysler had a zero book value. On Dec. 17, the automaker said that it would close all of its North American plants for at least one month. That same day, the Bush administration released a plan to provide $13.4 billion in bailout funds to failing American carmakers, including Chrysler.
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Yesterday, the White House gave Chrysler an ultimatum. President Obama said no more bailout unless Chrysler is able to cut a deal with Italian automaker Fiat within the next 30 days.
If you thought Chrysler and Mercedes made for strange bedfellows, consider the merger with Fiat. It sounds like the absurd premise for the plot of a movie by filmmaker Federico Fellini.
While the Italian car manufacturer has a storied history dating back to its founding in 1899 by the legendary Giovanni Agnelli, it’s also a company in the midst of its own recovery. (Fiat actually is the acronym for Fabbrica Italiana Automobili Torino.) The maker of the Alfa Romeo already has tried partnering with another American automaker, G.M. It was a miserable failure.
These types of mergers rarely work. Even though Fiat has access to a broad array of markets from Eastern Europe and Africa to South America, the real issue whether is the two companies can merge their two very disparate corporate cultures.
Americans are looking for quality and value. Neither Fiat nor Chrysler has a reputation for either. Putting Fiat and Chrysler together will be like putting American cheese on pizza, not very appetizing.
Current Chrysler owner Cerebus is a hedge fund not a carmaker. It took over Chrysler because Feinberg thought he could make a few bucks. Feinberg took a flyer. He knows it’s over.
It is time to address the inevitable. While G.M. may be able to survive, no heroic measures will save Chrysler from its date with a bankruptcy judge.
No matter whether it merges with Fiat or gets an additional government bailout, it will not survive unless and until it is restructured. Stop wasting time and taxpayer money.
Pull the plug on Chrysler.
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
