Chrysler Doomed, Analyst Claims

DETROIT – Chrysler LLC’s situation is so dire, it’s unlikely it will be able to survive the year, a top industry analyst says.

“I think some of their product will be around, because some companies will acquire some of the key products,” says Laurie Harbour-Felax of Michigan-based Harbour-Felax Group.

But Cerberus Management LP, which owns a controlling interest in Chrysler, “wants out bad, so I think (the auto maker) will be done.”

Chrysler, whose top executives are in Washington today to press their application for an additional $5 billion in government aid, bristles at the suggestion that its days are numbered. The auto maker says the plan it submitted last week to the U.S. Treasury Dept. demonstrates “long-term viability,” spokesman Stuart Schorr says.

The plan promises 24 product launches in the next 48 months, including new small cars; a Dodge Ram HEV; an all-electric vehicle described as an “EV roadster;” and the introduction of a new family of V-6 engines, dubbed Phoenix, that are expected to deliver improved fuel efficiency.

Jim Harbour, father of Harbour-Felax and the originator of the renowned Harbour Report on manufacturing productivity, shares his daughter’s sentiment on the future of Chrysler.

Laurie Harbour-Felax

“(Chrysler) said they will sell 2 million vehicles this year,” he says, joining Harbour-Felax, his daughter at an Automotive Press Assn. event here. “There’s a certain breakeven level in the company, and I don’t think 2 million is it.”

Harbour does express optimism the Obama Admin. will endeavor to keep the auto maker afloat, noting the president does not want to “see any more people on the street.”

A Chrysler bankruptcy could create a ripple effect through the industry that would eliminate thousands of jobs.

As for the fate of General Motors Corp., which also is relying on government loans to remain solvent, Harbour-Felax says the auto maker has a much better chance of survival than Chrysler, although it will morph into a much smaller company.

“I think they (will) end up as a 16%-17% market-share company, and Toyota (Motor Corp.) will become a 16%-17% company, and Honda (Motor Co. Ltd.) will grow.”

In January, GM held 19.6% of the U.S. market, while Toyota owned 17.9%, according to Ward’s data.

“The U.S. industry will become more like Europe, where five or six smaller companies have a smaller piece of the pie,” says Harbour-Felax, who credits GM Chairman and CEO Rick Wagoner with implementing sweeping changes to reposition the auto maker to take advantage of the economic turnaround widely forecast for 2010.

GM is “building common platforms and using common equipment, all of the things Toyota has done to be successful,” she says. “They are doing things as good, or better, than Toyota. I’ve seen GM do stuff and take Toyota’s process to the next level. But they don’t get the credit for any of that.”

Harbour-Felax says the primary reason Wagoner has not been credited with transforming GM is a negative perception of Detroit auto makers permeates both Wall Street and Washington.

Changing that perception falls to the government, she says, noting there are too many ignorant pundits on the airwaves commenting on the auto industry.

“The government can back (auto makers) more supportively,” she says. “It’s very difficult (to change perceptions) when people that are uneducated keep making (negative) statements. That would never happen in Japan. They back their industries, they talk about them and they’re helping (news) media understand.”

GM executives are scheduled to press their point for aid in Washington on Thursday, the same day the auto maker releases its final financial report for fiscal 2008.

As for Ford Motor Co., which has yet to access government loans, Harbour-Felax says the auto maker’s situation is much worse than it lets on.

“They mortgaged the farm a while ago, so they have some cash. But they’re in trouble,” she says, referring to the $23 billion loan Ford secured two years ago. “And they are five to six years behind GM in their efforts to make the company better.”

Meanwhile, Harbour-Felax says she thinks auto industry sales may have hit bottom, but a rebound only can occur if the government is able to unfreeze credit for potential buyers.

While visiting dealerships, she is often told that floor traffic is not an issue. But when it comes time to seal the deal, the lack of available credit keeps customers from driving off with a new vehicle.

As industry sales begin rebound, the ongoing restructuring by the Detroit Three will pay dividends, Harbour predicts.

“When the volume comes back from 10 million units to 15 million, these (auto makers) will be cash cows; it’ll be like minting money,” he says. “But you have to get there. Somebody has to turn on the (credit) spigot and let people buy a car.”

Harbour was on hand to promote his book, Factory Man, published by the Society of Manufacturing Engineers. It tracks the U.S. auto indsutry from the 1950s to the early 21st century.

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