Wednesday, April 11, 2007

For Sale

Psst - buddy. Want to buy a car company? We're talking bargain prices here ..
Trying to placate restive shareholders, DaimlerChrysler confirmed for the first time that it was in negotiations with a number of bidders about a deal for the troubled American unit, which lost $1.5 billion last year.

Chrysler, with some $20 billion in health care obligations for retired workers, will not be easy to sell, according to analysts. Some estimate it may fetch no more than $5 billion to $7 billion, or even nothing at all — a humbling comedown for a merger originally valued at $36 billion.
$5 billion is one heckuva bargain. Of course for the money you've bought Chrysler so maybe not so much.

Among problems that the company has is that the Mercedes engineers had nothing culturally in common with the Chrysler guys. The latter used to worrying about pennies while making choices the former saying "Meh - so the car costs $55,500 and not $55,000 - who is going to quibble - it's a Mercedes." Imagine that with an Ahnold accent, it works better. Imagine Ahnold as an engineer for that matter ..

Also a bone of contention? Mercedes would not let Chrysler use Mercedes parts in their low-end automobiles for fear of devaluing the brand. Buh-bye economics of integration.

Culture .. economics .. didn't anyone in the board room ask for a sanity check before proceeding with the merger in 1998? Okay, yes, hindsight but the problems they're having seem so .. obvious.
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