Chrysler Is Playing Catch-Up, But The Game's Already Over

Implications: The American OEM automotive industry bankrupted its supply base by demanding ever increasing price concessions while absconding with the uncapitalized value of its supply bases's technology and using the stolen technology to buy low labor costs from outsourced suppliers. GM led the parade of short sighted OEMs until Ford caught on and joined in. DaimlerChrysler was no where near as brainless and focused its outsourcing on eastern Europe where quality control could be monitored from Stuttgart and nearby locations and raw materials could be hedged. Now that Daimler is gone Chrysler is simply operating on half of a brain and looking more like Home Depot each day and thinks it can simply catch up with GM and Ford by squeezing blood from the turnips left over from the OEM automotive industry's supply base.

Analysis: Chrysler has lost its way if it thinks it can force its supply base, both domestically and overseas, for margins they do not have to give.

The sales of Chrysler's large cars, SUVs, and remaining trucks are crashing, as are those of all OEM American assemblers. This was totally unforseen by Cerberus which hoped to keep Chrysler from becoming a cash drain, so that it could be off-loaded to a Chinese or Indian car maker as an outlet for their vehicles in America's domestic market complete with a dealer and service parts network and a financing arm.

Phase one of Cerberus' plan seems to have consisted of stopping Chrysler's North American production and design operations and outsourcing both to potential buyers such as China's Chery and India's Tata. Then Cerberus would cash out and head down the road as fast as possible.

Panic must now be setting in at John Snow's offices as the American large car market collapses under the crushing weight of gasoline rapidly approaching world price levels. To sell the dealer network and service parts distribution operations to the next sucker they at least have to be functioning, and its not really too much to ask that they be functioning at a profit, is it?

Chrysler has already exhausted its bottom line maintenance through elimination of jobs; it seems to have hoped that it could go on a little longer by trying out the GM and Ford tactic that ruined the American OEM automotive industry in the first place, squeezing the suppliers.

I guess we'll get to see how Bob Nardelli comes out of this one. he ran Home Depot stock way down and got $200 million for that performance, but I think he was supposed to make Chrysler profitable before he got paid this time.

Maybe Nardelli should exchange places with John Snow; they seem to be equally competent.