Watchwords at Chrysler Are Hurry Up and Wait
FRANKFURT, Feb. 22 — One week after DaimlerChrysler signaled its plans to put the Chrysler Group on the auction block, the company indicated on Thursday that it might be weeks or months before the future of the ailing American automaker can be determined.
That word came in an e-mail message sent to employees by the Chrysler chief executive, Thomas W. LaSorda, which the company posted on a media Web site.
Last week, DaimlerChrysler’s chief executive, Dieter Zetsche, said the company was keeping all options open for Chrysler, including a sale or spinoff. DaimlerChrysler has hired JPMorgan Chase to explore strategic alternatives for Chrysler.
In his message, delivered on Wednesday, Mr. LaSorda counseled employees to stay focused on revamping efforts, which include closing all or part of four plants and eliminating 13,000 jobs.
“We are a good company with great talent and a clearly defined plan,” Mr. LaSorda said, adding, “It may take weeks or months before official comments can be made on some issues.”
The prospect of more uncertainty is not likely to sit well with employees on either side of the Atlantic, company insiders and analysts said.
Morale is already sagging in Stuttgart, where DaimlerChrysler has its corporate headquarters, and is even lower in Auburn Hills, Mich., where Chrysler is based, according to several people with ties to the company.
The prospect of a protracted auction, resulting in significant job losses or even the dismantling of Chrysler, could further discourage a work force that has already slogged through waves of layoffs in Europe and North America, these people said.
While the anxiety in Auburn Hills is understandable, it is deepening in Stuttgart, where some employees view Chrysler’s woes as a growing threat to the group’s flagship Mercedes-Benz division.
“There has been a general belt-tightening in Stuttgart,” said an executive who advises DaimlerChrysler, and who spoke on condition of anonymity because of his ties to the company. “People, rightly or wrongly, assume that this is a function of funneling money to Chrysler.”
The problems at Chrysler have overshadowed a rebound at Mercedes, which had also suffered from poor sales, as well as quality concerns. Mercedes reported a $3.1 billion operating profit in 2006, compared with a loss of $661 million in 2005.
The turnaround at Mercedes is the result of popular new models, like the redesigned S-class sedan, as well as a rigorous cost-cutting program. Among other moves, Mr. Zetsche moved his top lieutenants out of their modern campuslike headquarters in Stuttgart to drab, aging offices overlooking a big Mercedes assembly plant.
The seesawing fortunes of Chrysler and Mercedes have been a recurring theme since the 1998 merger that created the company. In 2005, when Mercedes was bleeding, Chrysler made a $2 billion profit.
The difference this time, analysts said, is that Chrysler’s problems may not be fixed soon. Last week, Mr. LaSorda said Chrysler would lose money again this year, though less than the $1.5 billion last year.
That could jeopardize the long-term prospects of Mercedes by distracting senior executives like Mr. Zetsche, who oversees Mercedes in addition to his DaimlerChrysler duties.
“Daimler is beginning to wonder whether it will ever pay off,” said Garel Rhys, director of the Center for Automotive Industry Research at Cardiff University in Wales. “A great deal of management time has gone into it. The question is, are they looking at a permanent black hole?”
For those trying to handicap a sale of Chrysler, DaimlerChrysler’s experience in Europe may be instructive in another way. In April 2005, faced with mounting losses at its Smart minicar unit, DaimlerChrysler announced that it would cancel two models and lay off 700 employees.
Mr. Zetsche considered selling Smart but received no acceptable offers. Last year, the company settled for yet another overhaul of the unit, and it now plans to sell the Smart two-seater in the United States in 2008.
Analysts said such a situation could happen again, though with the stakes much greater. This time, failing to sell Chrysler would impose a heavier penalty on the stock price and the credibility of the management.
Already, a series of car companies, including Hyundai of South Korea, Nissan of Japan and Volkswagen of Germany, have said they are not interested in bidding for Chrysler, which DaimlerChrysler wants to sell in one piece.
But a British newsletter, SupplierBusiness, said this week that there was speculation that a potential buyer for Chrysler could be Magna International, the big Canadian parts supplier. According to one possibility, Magna would buy Chrysler and install Wolfgang Bernhard, the former Chrysler executive who recently left V.W., to run it, the newsletter said.
A spokeswoman for Magna said the company had no comment. But there are several connections between Magna and Chrysler. In 2002, Magna’s European subsidiary bought the Chrysler assembly plant in Graz, Austria, where Chrysler began building minivans in 1991. Magna assembles European versions of the Jeep Grand Cherokee and Commander as well as the 300C sedan.
Moreover, Mr. LaSorda and Magna’s president, Mark Hogan, worked together at General Motors, whose name has also been raised as considering a Chrysler purchase. G.M. executives have refused to comment.
As JPMorgan prepares to circulate an investment book to would-be bidders, the company has to be mindful of something else, analysts and people close to the company said.
The social cost of deals comes under far greater scrutiny in Germany than in the United States. Siemens, the German industrial conglomerate, sold its cellphone unit in western Germany to a Taiwan firm, BenQ. The unit later went bankrupt and BenQ laid off the former Siemens workers, resulting in harsh criticism for the German company.
That example will weigh on the minds of DaimlerChrysler executives, analysts said, particularly if they receive offers for Chrysler from Chinese carmakers, which are thought to be interested.
No comments:
Post a Comment