Death with Dignity: The practical history of Chrysler, and why it has reached its logical end – Part I

WHILE IT HAS PUT MANY EXCITING PRODUCTS INTO THE MARKET IN ITS 85-YEAR HISTORY, CHRYSLER CORPORATION HAS ALWAYS EXCELLED IN PARTICULAR AT SELLING ITSELF. FOR THE THIRD TIME IN 10 YEARS, CHRYSLER HAS ATTRACTED A NEW PARTNER TO DANCE WITH, FIAT. BUT IT’S TIME TO ACCEPT THE FACT THAT THE MUSIC HAS STOPPED PLAYING. PART I: CHRYSLER, A GREAT AMERICAN ENTERPRISE In 1924, Walter P. Chrysler made a stir with his new car during the New York Automobile Exposition by placing it in the lobby of the nearby Commodore hotel, where he could buttonhole the journalists and financiers without the distraction of the other makes on the Exposition floor. But good as the car itself was, what Walter P. was selling was his management of the successful Buick brand until 1920, and the prospect that his new Chrysler Corporation would emulate GM’s success. Walter P. got the investment to put the Chrysler B-70 into production.

Beyond Viability: Conceiving a GM strategic identity for the 21st Century

(c)2009 Joshua Davidson

 

Viability is only the first step in General Motors’ marathon to save its position as one of the world’s leading automobile manufacturers. Long-term success demands a visionary strategy implemented through forward-looking policies, which together will express a 21^st Century strategic identity for General Motors.

 

In approaching a 21^st Century strategic identity, GM should consider its history as the world’s most dynamic industrial company for nearly four decades. Most historical analysis concentrates on the mistakes GM has made since the 1970s, and attributes them to the policies established in the 1920s. While those policies’ obsolescence did indeed fail to meet the dramatic changes that arose five decades after their conception, the fault lies preponderantly in the failure since 1958 to effectively act from established principles of policy creation and recreation – one element of a solid core of timeless enterprise principles originally developed by GM, and which endure as the framework for successful business around the world.

 

Unquestionably, it is imperative to keep a spotlight on past mistakes and guard against their repetition. But focus on avoiding its past failures has also prevented GM from appreciating its own historical success, and obscures the philosophy from where that success originated. Indeed, the great value of GM’s history is less in ensuring vigilance against past mistakes than in illustrating the principles that fueled GM’s success through such volatile times as the Great Depression.

 

General Motors is unique in having the history of its long success captured in Alfred Sloan’s universally admired memoir, My Years with General Motors. While the details of GM’s advance are fascinating as history, the true value of Sloan’s book to GM’s future is its crystallization of the techniques for creating a current culture of enterprise. In explaining how he and his colleagues approached General Motors’ emergence from its 1920 existential crisis, Sloan writes:

 

“Thus [we] took the opportunity that comes rarely in the initial stage of a business, to stand back and review aims and deal with the matters at hand, both in particular and with a considerable degree of generalization. It was not going to be easy to get willing agreement on specific and immediate issues … I believe it was for this reason that we first idealized the problem.  We started not with the actual corporation but with a model of a corporation for which we said we would state policy standards.”

 

From that perspective evolved the strategies and policies that catapulted GM from a near-bankrupt also-ran in the 1920 automobile industry to its undisputed leader, characterized by these durable principles:

 

·         Consenting to Creativity within the organization

o        Mass-marketing the genius of Kettering and Earl

o        Shaping dissent into initiative

·         Arranging an integrated line of products

o        Products that mean something individually and in relation to one another

o        The product line as competitive advantage

·         Creating event-proof policy

o        Aligning efficiency with market demands

o        Responding to circumstances, not acting on them

 

·         Rendering a service to the community of customers

o        Escaping the “Transaction trap”

o        Industrial efficiency serving individual expectations

 

·         Devising a current concept of the global automobile industry

o        What distinguishes GM from other manufacturers?

o        Approaching the market through value, not price

 

In the current crucible, GM must appreciate that it is once again at that rare “initial stage of a business,” and that management is newly obliged to “stand back and review aims.” The Plan for Viability should properly focus on freeing GM from government support for its survival over the next several years. But for that plan to work even in the short-term, GM must project a long-term basis for succeeding in a new era, and in the face of changes yet to come.

 

Examining the strategies of the past for this purpose doesn’t portend their resurrection; looking through them as a lens into the conception, implementation and evolution of successful enterprise philosophy provides a singular resource in devising a 21^st Century strategic identity that will propel General Motors in a new, lasting era of success.

 

Bailout report: Shaking out Chrysler

• Bye-bye Chrysler passenger cars
• Bye-bye Dodge Truck
• Bis morgen Minivan
• A new mission for Jeep

GM and GMAC have received between them enough of the magic liquid to sustain GM until March, whereupon it will have to prove that it is truly committed to the radical surgery necessary to save itself. The $13.4 billion (plus $6b for GMAC) is enough, seemingly, to hold GM’s position as it makes the tough deals with labor, dealers and bondholders that are imperative to its survival.

But let’s face it, $4 billion for Chrysler is just about enough to wind things up in Auburn Hills. Nardelli has said as much in his grovels, and Chrysler has no hope of ever being a global company, which is going to be the key to salvaging the North American industry. So what’s going to happen? Here’s my take:

Chrysler, LLC declares bankruptcy – stop kidding yourself, you know it’s the first best choice for amputating excess industry capacity. But is there anything to salvage? No and yes. Chrysler, LLC is in possession of five meaningful brands, Chrysler passenger cars, Dodge passenger cars, Dodge Trucks, the minivan, and Jeep.

First of all, Chrysler and Dodge passenger cars cease production, and that asset loss is the grounds for a “structured” bankruptcy, wherein the Federal funds and whatever else is rattling around in Chrysler’s piggybank are used to give salaried and hourly workers some kind of “buyout,” to pay suppliers most of the money they are owed, while Cerberus gets a chunk of newly-issued stock in a new entity, explained below.

Dodge Truck also ceases production. Forget about an Indian or Chinese company buying it. Toyota and Nissan can tell them that the North American light truck market is a lot tougher scrum than they ever imagined (ask Cerberus, too). So, as fine as the new Ram pickup is, the light truck market is so overstocked with good products that the competitors might call a truce, take a collective breath and duck the next product cycle.

Volkswagen already has a piece of the Chrysler minivan, and maybe takes the whole ball of wax for a billion or so more mop-up money. If they can keep the price down, Volkswagen gets a competitive platform in a reliable high-volume segment, and closes in on becoming a real mainstream U.S. competitor. The minivan market becomes an exclusive Honda-Toyota-VW playground. And with the way things look in terms of the VW-Porsche tie-up, we will no doubt see a Porsche minivan by 2012.

That leaves Jeep. Who gets that prize? Furriners need not apply for this totem of American greatness. Jeep lands under the GM umbrella (dump Hummer), and Cerberus and the Fed end up with GMJ stock. Ford won’t bite because Alan Mullaly is too smart to distract Ford from its current plan, which seems to be functioning. And believe it or not, within the GM orbit, Jeep will serve as the key element in achieving the drastic change that is necessary for GM’s long-term survival.

No Way? Way. The key for GM is to not cast Jeep into the stew from which the General is trying to extract whatever of its brands are still identifiable. Instead, GM leaves Jeep to function as an autonomous division, continuing to design and develop its own platforms down in the old Detroit Nash-Kelvinator plant, where Chrysler has had the good sense to leave it be since absorbing it from AMC in 1987. Strategically, Jeep becomes the fulcrum of GM’s long-term strategy for success as the pathbreaker for GM’s return to the decentralized operating structure that made it the most dynamic company in the world for decades.

So there you go.