Daniel Howes

Daniel Company's future? All bets off

AUBURN HILLS -- The Chrysler Group may not be for sale yet, but there's no doubt the automaker is in play.

How could it not be when DaimlerChrysler AG Chairman Dieter Zetsche said Wednesday that "we are looking into further strategic options" and "our thinking does not exclude" anything for beleaguered Chrysler, undertaking its third restructuring since being acquired in 1998 by its German parent?

Even as seven Chrysler teams worked feverishly in recent months on "Project X," which will eliminate 13,000 Chrysler jobs, cut 400,000 units of production and deliver $1.5 billion in material savings, Zetsche and his successor, Chrysler CEO Tom LaSorda, two months ago began a strategic reappraisal of Chrysler and retained investment banker J.P. Morgan Chase & Co.

That means they're dead serious about fixing Chrysler's chronic problems, and they aren't too concerned about whose legacy -- including their own -- might get tarnished in the process.

It also raises two questions: How much more economic evisceration can Michigan, set to lose 3,655 hourly and nearly 2,000 salaried jobs, take? And even if Zetsche, LaSorda & Co. do fix Chrysler as part of their "recovery," does the "transformation" part outlined during Chrysler's Valentine's Day Massacre mean the Germans could dump it anyway?

Yep, they could.

Options good and bad

In a global automotive industry fueled by vast liquidity, hyper-competition and a tension between fast growth and high costs, the arrival of hired outside guns mean just about anything is possible for the future of Chrysler and its parent back in Stuttgart.

There could be no change in Chrysler's relationship with sister Mercedes-Benz and parent DaimlerChrysler, probably unlikely unless Chrysler dramatically exceeds its profitability targets. Don't bet on it.

There could be a push for more joint programs with Mercedes or rivals like China's Chery Automobile. Or there could be the rationale for a broader tie-up with the likes of Renault-Nissan, whose CEO, Carlos Ghosn, has made no secret of his desire to ally with a North American partner (Chrysler) or gain a foothold in the global luxury business (Mercedes).

There could be an outright sale of Chrysler to an automotive rival like Ghosn or the Koreans or even a rising Chinese player, who likely would see in Chrysler an established dealer network, recognized North American brands and, most importantly, legitimacy in the world's richest market.

Not that any of that would be easy. Cultural clashes, operational problems and political backlash inside the United Auto Workers and a Democrat-controlled Congress would be likely, especially if the successful suitor hailed from China.

Unwinding Chrysler from the Mercedes and the commercial truck groups wouldn't be cheap or without embarrassment, either. As little as Chrysler and Mercedes product development are integrated nine years into this fusion, the company's financial, purchasing, human resources and other administrative functions are tightly interwoven.

Blame, failure acknowledged

And then there's the blow to egos: The very act of separating Chrysler from the old Daimler-Benz AG, or allying vast parts of it with a third party, would be an admission of failure for the most audacious business deal ever undertaken by Deutschland AG.

Blame would most likely be heaped on the Americans. But the truth is that the Germans, whose national character tends to assign blame instead of accept it, have controlled DaimlerChrysler since the get-go and mostly called the shots.

If it ever comes to that. The more near-term effect of Zetsche and LaSorda's "everything-is-on-the-table" play, endorsed by the governing supervisory board, is that it conveys a series of vital messages to key constituencies feeding off DaimlerChrysler.

To the German critics clamoring for Stuttgart to dump the Chrysler and hew to Mercedes' traditional business, it says you may get your wish if we can't get this thing fixed.

To business rivals from Detroit and Paris to Tokyo and Shanghai, it says, "Let's talk," even as it tells private-equity investors to take a look and Wall Street that the days are long gone when DaimlerChrysler was managed only for the egos that masterminded the transatlantic deal.

To Chrysler's unions in Canada and the United States, set to begin contract talks this summer, it says the automaker needs relief -- and fast -- on health-care costs, operational efficiency and manufacturing flexibility.

A classic squeeze play

Anything less than revolutionary deal-making will accelerate Chrysler's move to build more new products in non-union plants based outside the States and Canada. One telling example -- LaSorda's tentative deal with Chery to build subcompact cars in China, badge them as Chrysler and ship them to North America.

Which, I suspect, is the opening gambit of more of the same.

Whether the timing of Chrysler's last stand is accidental or propitious, it comes when LaSorda most needs to rally his troops and extract fundamental change. And it should remind them that the devil you know is oftentimes better than the one you don't.

Daniel Howes' column appears Mondays, Wednesdays and Fridays. He can be reached at (313) 222-2106, dchowes@detnews.com or his blog at http://info.detnews.com/danielhowesblog