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Chrysler: Crafting a Reprieve

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Recent rumors that some of Kerkorian's holdings have been put on the auction block lend credence to such a prospect.

But a key to a resolution of the growing crisis is evident in earlier events back in the United States. There were reasons Chrysler became such an attractive target in the first place. It was easy to see why from the Chrysler side.

After all, the company had virtually reinvented itself after its near demise at the beginning of the 1980's. It lobbied for and won some $2 billion in U.S. government loan guarantees to prevent it from going under.

Biting The Bullet

In order to rejuvenate itself, Chrysler bit the bullet and learned to develop its products and manufacture them for the lowest cost in the industry. It was so successful in its recovery that it paid back its outstanding debts before the five-year deadline.

The company had become the darling of the industry. Design, manufacturing, even marketing flowed so well that everyone in the business, including the formidable Japanese, wanted to learn how they did it.

And Chrysler profited from an accident in timing, according to David Cole, head of the Center for Automotive Research in Ann Arbor, Michigan, near the heart of the auto industry in the U.S.

Twenty years ago when Chrysler was in deep financial trouble, it had plenty of company, said Cole. Everybody was hurting.

During the industry lag in the early '90's, Chrysler still owned much of the light truck market with its popular Jeep sport utilities. That was before competitors, including foreign nameplates, got heavily into the truck race.

At the same time, General Motors Corp., a major competitor with the industry's highest production costs at the time, was being condemned as the industry's problem child.

All those factors bode well for the company's image. Chrysler had the magic, it must have been tantalizing to imagine gaining such magic without having to develop it from within.

That must have made it irresistible for Schrempp.

A Hidden Weakness

Besides, there was that nagging industry soft spot behind the issue of manufacturing. The cheap lease problem in the U.S. was becoming evident. It had the potential for hurting the Mercedes brand which was gaining popularity among Americans.

A merger would combine the strength of two viable companies if there was an industry downturn. It would blend Chrysler's ability to produce cheaply on a broad scale with Mercedes' elite, technically-refined craftsmanship. The possibilities were enormous.

But making a marriage work between two such disparate manufacturing entities was not the root of the failure, even as the promise of swapping all that knowledge never materialized.

Forever Strangers

Rather, it was the oil and water mix of Germans and Americans that remained at war internally, even as they put on a united front outside.

In reality, there never was a true merger between the two industrial companies. There had been much talked-about sharing of technology, of using common vehicle parts, perhaps of even using the same vehicle platform base and topping it with distinctly different products. But none of that ever came about.

Despite the optimism, there never was a real possibility of sharing platforms either, said Cole.

"When they first came together, they had all these wonderful synergies. But they have not materialized, and for a very good reason," he said. "There was not much (possibility) in terms of platform compatibility. From the Chrysler side, the German (Mercedes) platforms were just too expensive. It was harder to achieve synergies than they thought."

In a hint of what was to come, German officials earlier had staunchly denied that a Chrysler-side product ever would ride on a foundation of Mercedes wheels. It became clear that without some synergies, the expected savings of a combined company couldn't be achieved.

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