Can Cerberus teach Chrysler new tricks?

The forced separation of Chrysler from Daimler A.G., Mercedes’ parent, is bound to shake up Detroit as all eyes focus on Cerberus Capital Management, the private-equity company that that just bought Chrysler for the fire-sale price of about $7.5 billion. Although the United Auto Workers have signed off on the deal, it’s hard to imagine that they will be happy with the new owners, who are known for ruthless cost-cutting in pursuit of profits. Recall that in Greek mythology Cerberus is the snarling, three-headed dog that guards the gates of hell. Plainly, Cerberus Capital Management didn’t pick up Chrysler out of philanthropy. One way or another they will turn it into a cash machine.

The woes of the domestic auto industry are largely self-inflicted. Chrysler, Ford, and GM are all hobbled by “legacy costs”--pension and medical coverage for untold thousands of former employees. Foreign competitors, based in countries with nationalized health care and other government benefits, don’t have the same financial ball and chain. But the real problem has been the products. Too often, domestics come late to the party with technical innovations and too rarely produce cars with world-class quality and reliability.

The fact is, Honda and Toyota have proved successful because the cars are good, not because they’re cheap. The American consumer has been quite logically migrating to Japanese cars for more than 20 years for precisely that reason.

In recent years Chrysler has made a name for itself in just one area, styling. The PT Cruiser and the 300 sedan have been hits because they look different from everything else and because they offer the spaciousness and/or utility that American consumers want. But you can’t cruise on looks alone. Even though Chrysler has broadened its product portfolio in the last few years, its newest offerings, such as the Chrysler Sebring and the Dodge Avenger, Caliber, Charger, and Nitro, and the Jeep Commander, Compass, and Patriot are all mediocre performers lacking in refinement based on Consumer Reports testing.

About ten years ago I asked Bob Eaton, then Chrysler’s chairman, why the company had so many product-quality problems. He replied, “Well, unfortunately, in our last reorganization we fired everybody who knew how to make a car.” If Cerberus repeats that mistake, Chrysler could finally come to the end of its long, sad road. Let’s hope this new owner can teach the old dog a few tricks.

--Gordon Hard

Comments

[Joel]

Chrysler built the K-car in the 1980's. I bought a Plymouth Reliant Station wagon and after 50 thousand miles everything went bad to worse. Since then, I buy only Toyota or Honda. No problems, why can't Detroit realize its quality that people want. Period.

[Jeff]

In 1988 I bought a Dodge Caravan. We had a young child with another on the way. We wanted utility and needed economy. With seating for seven, a four cylinder engine, and a five-speed manual transmission, that vehicle it delivered us to countless destinations for 15 years and over 200,000 miles. Did things break? Yes, but it was mechnically simple and easily repaired. Our 1999 Grand Caravan was more stylish and powerful, and provided more "creature comforts". But it is far less reliable and significantly more expensive to drive and maintain. It is still running though, with nearly 150,000 on the odometer.

Our driving needs have changed since 1988. The automobiles Chrysler offers no longer match the needs of my family. They seem to have designed themselves our of our market.

[dave]

I had94 Caravan. The only problem was we lost the automatic transmission at 60000mi. Bought a Ford Windstar in 2000. Had the same problem. Still driving the ford though. I've been looking for a new car but can't find anything with any size that gets decent milage. Even the the Rav 4 only rates around 29 and it's a little smaller that i would like. Seems like Chrysler and the other US makers should try and make a car with a little less power but moremilage. Gas is killing us all.
The Smart car is suppost to show up next year. but even that doesn't get the mileage it should for the size. It's tiny but only gets in the 40's i think.
Anyway I hope Chrysler can give us some products we want to buy and keep the jobs in the U.S.
I had 2 Toyotas in the past 73 and 77. I have tried to buy American since but they make it hard!! I'd like to keep the money here rather than sent the profits over seas.

[mark]

I always bought jeeps. While they were not as reliable as the Japanese, the jeep people always took care of problems without drama. However, after Daimler took over, they tried to get out of every problem, they would not take corporate complaints, and would not give rental cars when we had repeat problems. They started treating customers as an annoyance, so I switched to Acura and I have never looked back. Better resale, better reliability, same price for a the cars. Why would anyone get a jeep now when there are much better alternatives?

[mike]

As long as the tremendous health care costs continue to stand in the way Chrysler, let alone GM and Ford will never make a profit now. Hopefully Cerebus can get this dramatically reduced. Let's see bout that. but auto parts like koni shock -http://www.speedyperformanceparts.com/koni_p.html - could be greatly affected.

[Dale Tripp]

I grow tired of hearing all of the negative press from Consumer Reports and others about Chrysler! Chrysler makes the finest automobiles in the world with exceptional styling and reliability! I too have owned 2 different Plymouth Reliants both of which went well beyond 150,000 miles without any problems! Chrylser has been the innovative leader in the US market for over 40 years and has invented everything from the modern pickup truck, the minivan, and the modern luxury car. Why is it that Toyota can have every Tundra ever built recalled for serious safety defects and yet we label Chrysler with the negative quality image?