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A changing of the guard at Chrysler
May 15, 2007
1. Where have you gone, Lee Iacocca? The sale of Chrysler this week to a private equity firm shows two things: 1) the power private equity has in today’s business landscape; 2) how very difficult it is to fit a square peg into a round hole.
The $7.4 billion sale of 80% of the Chrysler business to private equity firm Cerberus means that Daimler Benz lost almost $30 billion of what it paid up front – and probably double that in development costs over the past decade – trying to put German technology in American cars.
But that’s lost money. For Cerberus to pay even $1 for Chrysler, they believe they can get their money back by turning a profit. To do so, they have to cut costs, drive down legacy entitlements such as pensions and health care benefits and get more nimble in developing vehicles that drivers want.
The upcoming UAW negotiations will determine how Chrysler’s new management and its existing labor force will work together. One leading voice in the Detroit auto market thinks working together is the key.
2. Too soon to date? Most news pundits described the breakup of Daimler Chrysler as a divorce; we’ll see if it’s too soon for Chrysler to start dating again. UAW leaders are meeting with Cerberus today to begin that process, and while mostly it’s all happy talk to start, there are some serious negotiations to come.
UAW president Ron Gettelfinger said, “We’re going to make it happen in the best interests of our membership. We expect that we will hear the commitments echoed that have been given us through DaimlerChrysler.”
The good news for the UAW? “There will be an infusion of cash put into this company, and a lot of things are going to happen that are in the best interests of moving forward,” Gettelfinger said. ‘We have to believe they are very concerned about the future of the U.S. auto industry.”
3. Finding products online: A new study by GlobalSpec finds that vertical and general search engines are used by a majority of industrial managers to find new products. The study finds 78% go online first to find new distributors. The study also found a gap between the things managers need, such as a searchable online catalog, and what the distributors’ Website provide.
The 2007 GlobalSpec Distributor Buying Trends Survey is available online. A really good source for supplier information can be found here.
4. More foreign outsourcing of manufacturing: At some point we need to come to grips with what’s really going on in manufacturing. This story is yet another example of it. A $5 billion deal has been reached to put telecom and LCD crystal manufacturing in China from (wait for it…) India.
The deal between a contingent of Indian and Chinese business leaders points to just one more example that manufacturing is a global enterprise. We need to stop viewing it as a uniquely American process. Those days are past.
5. Someone else’s Top Plant: French business school INSEAD and the Chair of Production Management at the German business school WHU (which, if I spelled it out, would take up three lines) have named Siemens’ Amberg, Germany plant winner of the Best Factory / Industrial Excellence Award 2007. Part of Siemens’ automation and drives business, the Amberg plant was honored for excellence in operational strategy, supply chain management and continuous improvement.
Think your plant does all those things well? Enter the 2007 Plant Engineering Top Plant competition now by clicking here.
Posted by Wolseley on May 15, 2007 | Comments (2)
