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Is it time for DC to sell off Chrysler?

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Chrysler's slide riles investors

Automaker's management on hot seat as losses hurt DaimlerChrysler; some call for sale or spinoff.

Christine Tierney / The Detroit News

PARIS -- Eight years after the DaimlerChrysler merger, Mercedes is back riding high and investors are once again questioning whether Chrysler should remain a part of the global automaker.

Last month, DaimlerChrysler AG said Auburn Hills-based Chrysler would lose $1.5 billion in the third quarter, more than twice the loss it had forecast less than two months earlier. Chrysler now expects to lose $1.2 billion this year.

For investors, the swift and unexpected deterioration of Chrysler's performance recalled its stunning profit warning in the second quarter of 2003.

Adding to their concerns, the top management in Stuttgart, Germany, appeared to be just as surprised by the troubles at Chrysler as they were. "This raises serious questions," DaimlerChrysler CEO Dieter Zetsche told reporters at the Paris car show.

Zetsche, who had been the CEO of Chrysler until last year, said Chrysler continues to aim for a profit margin of 5 percent of sales. "More importantly, we have to derive the formula to make that sustainable," he said.

But investors are losing faith -- and patience.

Chrysler has lost "$4 billion over the past five years against a $32 billion accumulated profit for the group," Deutsche Bank said in a report last week. "This might be time for DaimlerChrysler to reconsider whether Chrysler should remain part of the group in its current form. We believe seeking a partial or entire spinoff or an industrial alliance with another party could be a route to higher and more predictable earnings."

At an investor conference last week, Zetsche said DaimlerChrysler was not considering selling Chrysler. As the executive who led Chrysler and carried out its last restructuring, Zetsche is as invested in the U.S. automaker's success as was Juergen Schrempp, his predecessor and the mastermind of the 1998 deal.

When DaimlerChrysler revised its loss forecast, Zetsche could barely contain his anger in a conference call with reporters and analysts. He criticized Chrysler's sales forecasts as being overly optimistic. While he said he was not planning management changes at Chrysler, President Tom LaSorda, sales chief Joe Eberhardt and Chief Operating Officer Eric Ridenour are under intense pressure to resolve the problems by the end of the year.

In an interview at the Paris motor show, Eberhardt said the ground shifted under Chrysler this summer. The employee discounts offered to reduce bulging inventories were undercut by the aggressive discounting by its competitors. "Those are events you can't anticipate," he said.

With most of Chrysler's model launches for 2006 coming out toward the end of the year, he expects a sales rebound soon.

"In relative terms, our performance is clearly significantly better than other players in the market," Eberhardt said. But Chrysler still has to reassess its product portfolio and business structure, he said.

For most of this year, as General Motors Corp. and Ford Motor Co. moved to restructure their domestic operations, investors worried that Chrysler would buckle under the intensifying competitive pressures.

Deutsche Bank said Chrysler was hobbled by serious structural handicaps -- its reliance on light trucks, its scant presence in markets outside North America, and high labor costs, including $2 billion in health care costs.

DaimlerChrysler's management was stunned in September when United Auto Workers union President Ron Gettelfinger said he would not extend the company the same cost-saving concessions given to GM and Ford. "I never expected him to come up with that position, and it's not acceptable," Zetsche said.

While Chrysler is sputtering, Mercedes has rebounded after a couple years in disgrace. Zetsche said the brand's recovery is on track. "I'm convinced we'll see the 7 percent return on sales for next year," he said. "Seven percent can't be the end of the story for a luxury brand, and a brand like Mercedes."

Also, someone over at GMI pointed this out...go check out the Chrysler website. There is a button for "Ask Dr. Z" that takes you nowhere. On the Sebring page, there is a contest titled "My life. My car. My mess." to find the messiest car. :huh:

Then, on the Sebring page, you click on details for more info and just get some pictures, like clicking on the 2.4L button just shows you a picture of the Sebring engine. And on the exterior pictures link under "style," all the Sebrings are photoshopped into the background image. Seriously, what gives?

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Spin off Chrysler?! I doubt it. There is so much potential in Chrysler that Daimler could exploit. Like them or not, the LX cars are products of thinking outside the box and gave the sedan world bold and brash design.

That being said, I think they've gotten complacent or lazy. Look at the Jeep Compass. Yes it'll sell, but it ain't going to win any design awards soon. Chrysler Aspen, anyone?

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Like them or not, the LX cars are products of thinking outside the box

201596[/snapback]

I think the LX cars are an example of thinking inside the box.... a big one.... with a waffle iron for a grill.

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And Hail Mary for it.

I believe Chrysler would make it on its own. They've pulled themselves out of so many other messes. And even though the 5-speed automatics (and other equipment) are Mercedes-Benz sourced and designed, they are built under license the Kokomo plant. So Chrysler wouldn't be without parts, and they could soon develop their own.

And, did you know that real Chrysler engineers breathed life into the R-Class?

Also, it's funny isn't it? How they are so quick for the want to eliminate Chrysler during a stutter-step and never question Mercedes-Benz when it was hurting itself?

Edited by MyerShift

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I have to wonder if the LX’s are losing their luster in customer’s eyes. Sales are to the point where they’ll be blacking brampton out for a week or two in Nov because of all the unsold cars

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And, did you know that real Chrysler engineers breathed life into the R-Class?

Where did this little tidbit come from? According to Mercedes-Benz, the R-Class was developed entirely within the Mercedes-Benz side.

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Where did this little tidbit come from? According to Mercedes-Benz, the R-Class was developed entirely within the Mercedes-Benz side.

203609[/snapback]

And if my grandmother had wheels she'd be a wagon.

What else did you expect DCX to say, "Your $60,000 'Sport tourer' was designed by our Dodge Caravan team"?

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And if my grandmother had wheels she'd be a wagon.

What else did you expect DCX to say, "Your $60,000 'Sport tourer' was designed by our Dodge Caravan team"?

Understood. But if it weren't true, do you think they'd introduce the Pacifica and R-Class literally minutes apart at the NAIAS?

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I have to wonder if the LX’s are losing their luster in customer’s eyes.  Sales are to the point where they’ll be blacking brampton out for a week or two in Nov because of all the unsold cars

203384[/snapback]

Wrong again!! ...just making up sales figures?......as usual. :rolleyes:

Actual Sales numbers for the LX lineup for September 2006:

Posted Image

Total LX sales are up 24% for the year.

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