The crisis that Detroit’s Big Three auto makers find themselves in today holds as much drama, intrigue and betrayal as a Shakespearean tragedy.
Every aspect of the industry is in meltdown: slowing vehicle sales, falling market share, sliding profits, bankrupt suppliers, the decimation of union ranks and institutional memory through extensive employee buyouts, bloated dealer networks and the leveraging of major assets to finance restructuring efforts.
The cast of characters who continue to strut across the stage would fill any playbill: from rebel GM stockholder Kirk Kerkorian to- Alliance CEO Carlos Ghosn to former Boeing executive/new CEO Alan Mulally.
But the poster child for the industry’s collapse arguably is, which was forced onto the chopping block with dizzying speed by parent DaimlerChrysler after tumbling into the red for the third time in six years, with a 2006 full-year loss of $1.4 billion.
, which blames a hostile market that saw consumers move away from large pickups and SUVs and towards fuel-sipping passenger cars, has a new recovery plan that calls for 13,000 job cuts – 11,000 hourly and 2,000 salaried – plus a production decrease of 400,000 vehicles through shift reductions at three light-truck plants and the mothballing of its Newark, DE, plant in 2009.
Chrysler’s plan modestly falls in line with much larger restructuring efforts at, which lost $12.7 billion last year, and GM, which has yet to announce 2006 earnings but in 2005 lost $10.6 billion.
Indeed, between 2005 and 2009, the Big Three will close an estimated 27 U.S. plants, scrapping about 82,500 hourly jobs through buyout or early retirement agreements, a scenario Sean MacAlinden, chief economist for the Center for Automotive Research in Ann Arbor, MI, refers to as an “economic Katrina.”
Disgruntled German DC shareholders, who long have looked to kill what they consider an inferior sibling, are using the opportunity to plunge a dagger into Chrysler’s back by demanding it be sold.
Ironically, as GM’s Rick Wagoner and Ford’s Mulally work tirelessly to turn their beleaguered operations around, with some notable success at GM, DaimlerChrysler CEO Dieter Zetsche – the kindly Dr. Z in Chrysler TV commercials – is abandoning the U.S. division over which he presided from 2000-2005 and for which he has blood on his hands for its rapid slide.
As The Wall Street Journal notes, Chrysler’s strategy to develop more and larger SUVs, leaving it vulnerable to last summer’s skyrocketing fuel prices and resulting market shift, took place under Zetsche’s watch.
No one can say with any authority right now what the third and perhaps final act for Chrysler will be, nor what effect its fate will have on the U.S. industry, although media rumors are rife.
Will a leveraged-buyout group bail out the company, as happened at? Will GM ride to the rescue in a defense maneuver? Will a government-backed Chinese car maker seize on opportunity?
Or, as with most failed auto makers, will key assets, such as the Jeep brand, be siphoned off, leaving one more fallen American icon to litter the industrial landscape?