Chrysler: Pulling the Three Pointed Star Down

I remember my first experience with a Chrysler growing up. My father, who ran a small printing and graphic arts business, had picked up a K-car station wagon to use for deliveries. Since I was too young to drive at the time, my friends and I decided to show our respect for the vehicle and everything it stood for by using it as a target for a custom-engineered bottle-rocket launcher we had created by hollowing out a wiffle ball bat and measuring and projecting launch angles. After going through a few dozen packages of bottle rockets, our suburban scud was ready for G/A, and we could hone in on Lee Iacocca's ode to American mediocrity on just about every shot.

Those days of innocence -- for both Chrysler and myself -- are, of course, long gone. Now, Chrysler is finding itself as the dog of the Daimler line-up, the runt of the pack that Dr. Z would love to drop-kick to any bidder. There's no need to start from scratch on Spend Matters coverage of the Daimler Detroit soap opera. Why? Because over on Supply Excellence, Tim Minahan has done a great job covering it already. His latest post on what went wrong at Chrysler provides an informative automotive history lesson. According to Tim, "Lackluster product innovation and cultural challenges were largely to blame for Chrysler's downturn. However, part of the automaker's ails can be attributed to a wholesale abandonment of the core supply management principles that had once differentiated the brand."

Where has Chrysler gone wrong on the Spend Management path? According to Tim, "cost myopia" was blunder number one. "Soon after acquiring Chrysler, Daimler abandoned the collaborative SCORE program in favor of a more simplistic and combative approach of demanding price -- and cost -- concessions from its suppliers. (Can you say, "Pull a Lopez?") The move alienated many of long-time suppliers and failed to give Chrysler a cost advantage against most of the world’s automakers." Second, Tim sites an "inferior stepchild complex" as contributing to the problem. Here, "Daimler also quickly abandoned one of the early selling points for the Chrysler acquisition -- the promise of sharing pats and vehicle architectures between Chrysler and Mercedes-Benz models. Company officials were concerned that Mercedes buyers would abandon the high-scale brand if it shared attributes of the more pedestrian Chrysler." As Tim points out, this has not hurt Toyota's image at all with Lexus.

Clearly, the future of Chrysler is not looking bright. Whether it ends up spun-off as an independent entity, acquired by a PE firm or even if GM picks up its pieces from the potholed streets of Detroit, one thing will be for sure. And that's Chrysler's next management team will have to transform a procurement strategy which has left it at a competitive disadvantage in the market.

Jason Busch

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