Stevie Sometimes Makes You Wonder

“I think there wouldn't be a Chrysler today, quite frankly, if there wasn't a Daimler with a fatter purse than we have here in Michigan.”
— Stephen P. Yokich, president of the United Auto Workers union, as quoted in the Detroit Free Press in April.

Steve Yokich relishes his role as the tough-talking president of the United Auto Workers union.

That's why his startlingly conciliatory nod toward DaimlerChrysler AG as it struggles to restructure its troubled “Chrysler Group” is mystifying, to say the least.

Chrysler Corp. was a viable enterprise with more than $8 billion in the bank when the two companies combined in November 1998. DaimlerBenz AG had only about half of that on hand. So which one had the financial firepower?

As the world now knows, the Chrysler Group is in serious trouble. Nearly all of the top people on hand when the marriage took place have exited voluntarily or have been fired. Since late last year German managers have been running the business, and a three-year, $3.9-billion restructuring plan was revealed in late February.

Clearly, the Chrysler Group took its lumps in 2000. Losses in the final two quarters totaled $1.8 billion, and red ink this year is forecast in the $2 billion to $2.5 billion range. The group's sales, despite huge rebates and other incentives, dropped 4.4% in 2000 while overall industry sales climbed 2.7%. Chrysler's market share fell to 14.5% in 2000 from 15.6% in 1999.

As a result, 26,000 hourly and 6,000 salaried cuts are under way, six plant closings are scheduled and some product programs have been slowed or eliminated.

Searching for someone to blame, critics now say the “old,” pre-takeover Chrysler management failed to prepare the automaker for troubling times, and that Chrysler cars and trucks had become dated.

Both allegations carry little weight. By all measures, Chrysler was a viable company with plenty of cash, modern plants and the industry's smartest-looking vehicles, hardly any long in the tooth. Its fullsize cars were redesigned for 1999, small Neon and the successful PT Cruiser for 2000, midsize models for 2001 and the company's vaunted minivans, also re-engineered for 2001.

All of this was planned before DaimlerBenz set its sights on Chrysler, and there was plenty of cash — it must've looked like a tasty morsel to DB Chairman Juergen Schrempp — to weather the rough times.

Moreover, Chrysler had the best supplier relations in the industry, and it paid off on the bottom lines of both parties. Now the opposite is true, with the Chrysler Group's new German top management demanding 5% price cuts, prompting threats of mutiny in some supplier quarters.

So what went wrong? Anxious to get Chrysler management's support, DB in effect adopted an “open door” policy, giving the team that made it the automotive darling of the ’90s so much cash in the process that they could — and most did — walk out wealthier than they'd ever dreamed. They were paid off, of course, with Chrysler's own funds. Mr. Schrempp may well have had another motive: The Chrysler execs, by Stuttgart standards, were vastly overpaid. If they departed, he could put people in those jobs with salaries and perks based on Germany's lower reward system, mollifying his lesser-paid lieutenants at home.

But that turned out to be like replacing the New York Yankees with the Detroit Tigers. And only when the “new” Chrysler team failed did Mr. Schrempp throw in his own trusted managers. Indeed, if there was mismanagement it was on the part of Mr. Schrempp, who failed to see that the American managers he installed simply weren't cutting it.

But to say Chrysler could or would not have made it remaining as a stand-alone company is ludicrous. For one thing, its cash horde would not have been absorbed by DaimlerBenz to be used for whatever purposes Mr. Schrempp chose. Since the takeover, for example, he has acquired a 37.3% slice of Mitsubishi Motors Corp. and control of Detroit Diesel Corp. in his drive to transform DC into the world's largest automaker. If nothing else, that raises a question of priorities: As his crown jewel, Chrysler should have been No.1 on his list.

Having said all of that, and with his members facing layoff, why is Mr. Yokich uncharacteristically coming off as Mr. Nice Guy? Maybe it's because he has no choice. If he fails to go along with DC's Chrysler turnaround, it's possible that the UAW could be an even bigger loser if the plan doesn't work. And maybe he's convinced that the worst is over and that the German management will save the day.

But the fact is things could get much worse. Chrysler's first-quarter sales trailed 2000 by 16%, and although U.S. car and truck sales haven't eased as much as expected so far this year, uncertainty remains. Unfortunately, during a downturn, Chrysler usually fares poorest among the Big Three.

That's different, however, than saying that if DaimlerBenz hadn't taken over, Chrysler would have tanked by now. “If we didn't have Daimler, where would we be right now?” Mr. Yokich told reporters in April. “I think I know where we'd be.”

Maybe it's because by hewing to the DC line he'll eventually organize the Mercedes-Benz plant in Vance, AL, long a UAW target, with DC's blessings. Even so, that would be a small victory for writing Chrysler's epitaph had not Mr. Schrempp engineered his coup.

Yokich Stays on Until 2002

When Steve Yokich was elected UAW president in 1995, WAW featured a painting of him at a UAW lectern brandishing boxing gloves to illustrate his feistiness.

Raised in a UAW family, Mr. Yokich rose through the ranks to head the big Ford Motor Co. Dept., followed by the same role at General Motors Corp. At 65, he is now serving his second term as the UAW's chief.

UAW presidents historically have served three-year terms. The union modified that policy in ’98 by adding a year to his second term so he could stay on past traditional retirement age. He's now scheduled to retire in 2002.