Chrysler: Fiat or Bust.

As you all know, Chrysler filed for bankruptcy last week. The reorganization looks like a nightmare from 1970's Europe: Unions in charge, and a minority shareholder who hopes to salvage the company. Fiat is in a massive global power grab which includes GM's German Opel and British Vauxhall units and may even include Saab. You can't say the Italians are not daring. The British and Germans are reluctant, for purely xenophobic reasons, to accept the idea of Italians running their major car manufacturers. They are also afraid of job losses, which may be inevitable anyway, if GM goes the way of the Dodo bird. The latter may be the reason that Fiat agreed so readily to the huge stake the UAW is taking in Chrysler: if Fiat is good for unions in America they may be good for unions elsewhere - and unions count in this industry.

The question still arises if Fiat has the depth of management to take on such a huge spurt of growth. Chrysler alone has sapped billions from its last two owners, namely Daimler Benz and Cerberus. The red ink shows no signs of slowing for Chrysler. Years of sub-par quality, an ageing product lineup and deep discounts will take many years to remedy. Yes, fresh new Fiats will increase traffic in showrooms, but if these products do not shine, they will merely add to the woes of Chrysler. And if Chrysler's passenger car offerings continue to age and decline, there will be little point in attracting car buyers to showrooms filled with new Fiats and old Chryslers. The Fiats MAY sell, but the Chrysler woes will continue.

For Fiat, the current power grab is an all-or nothing gamble. As such, little changes for Chrysler except that it has one last, tenuous lifeline.

Fiat's Big Power Grab

Fiat is in one of the biggest power grabs in history in a huge gamble to become a truly global automotive giant. You can't blame them for trying. The time is ripe for a shrewd player to grab huge chunks of the market - especially if it is free, or almost free. Let me explain.

Fiat wants to get a chunk of Chrysler with no money down. Given the synergies here, it is not a bad thing for Fiat to want to do, and for Chrysler it appears that it will save billions in the development of small, trendy vehicles, which Fiat already produces. Fiat is eyeing the Jeep brand which would bring showroom traffic to their dealers worldwide. Rugged SUV's have never been Fiat's forte: at best it has produced some beefed-up versions of its regular lineup, and they are, well, beefed up versions of their regular lineup. Fiat may make a killing selling off the Chrysler and Dodge brands in the future - especially if they come free.

The surprise, announced in Saturday's Wall Street Journal, is that Fiat is now eyeing Opel, GM's German brand. This could become the Buick of Fiat: a soft line of semi-luxurious (and practical) vehicles placed somewhere between the quirky and cute Fiat brand and the raging sports cars of Alfa Romeo, Lancia and Ferrari. Fiat could probably drum up some money from Germany and the EU to make this happen, especially as the alternative is rather more unpleasant.

So a free Chrysler, a subsidized Opel and a company that grows exponentially for very little money down. the only risk for Fiat is hubris: in order to make this work, Fiat must admit that its management may not be up to the task, and may have to call in reinforcements from the long list of consultancies and unemployed executives that are already hovering at the side door.

If You Have a Lemon, Is It You or the Car?

Years ago n Brazil, I had a client who had an Alfa Romeo 164. I questioned him as to whether the car was reliable. He said it was extremely reliable because he said he read the owners manual. By way of explanation, he told me that the owners manual states that you should never drive off until the temperature needle moved off "cold". Few drivers have the patience to do this, so the vehicle broke down, and owners blamed the car, when they should blame themselves.

I have no idea if he was being truthful, but I had a similar experience this week. I own a Land Rover, and the passenger side windshield wiper stopped working in the middle of a rain storm. Cursing the lack of reliability of European vehicles, I took the car into the dealership. the wiper was fixed with the flick of a cover and the turn of a bolt. It seems that this happens in winter sometimes because the wiper sticks with ice accumulation. Rather than break the motor, the wiper is designed to unscrew itself when it encounters too much resistance. It will often loosen over winter but the fix is simple - and free.

You see, we, as a nation, are notorious for not reading the owners manual of our vehicles. When a German buys a car, they read the manual cover to cover. The British are the same. We, on the other hand, just expect everything to be simple and straightforward and project the blame on the car if something unexpected happens. The Europeans make some pretty ingenious cars, often using a design which must be used around the world from Africa to China, Latin America to Alaska. That is a lot of design criteria and it often means that avoiding costly and complicated repairs in the Arctic Circle (as in the case of my Land Rover) is a priority, rather than conforming to rigid American norms and expectations. Sometimes reading the owners manual is pays off.

Chrysler and Fiat - An Opera

Ironically, it may be that the car maker that makes arguably the poorest quality vehicles made in the USA, which is joining Fiat, whose quality has always been suspect, may in fact be the basket case that gets itself out of hot water.

The current owners of Chrysler are resigned to getting nothing at all. They bet big, and lost, just like Daimler did with Chrysler. The difference here is that Fiat is betting nothing, and is understandably reluctant to put any cash in the deal. Given the last two affairs Chrysler has had, who can blame them? Talk from Washington demanding that Fiat put in cash is simply huffing and puffing at a brick house. If Fiat backs out, Chrysler is history and the politicos know that. They must ante up or quit playing, with predictable results.

The good thing is that Fiat may begin importing vehicles to the US soon, and make them here later. This would put foot traffic in Chrysler show rooms, where fresh design is about as prevalent as beef at a vegetarian convention. Fiat is no design wallflower, and their lineup could add some real flavor to Chrysler, and hopefully revive the fortunes of the Chrysler Design Department, which is being held hostage by the bean counters.

Chrysler has a life line, as does GM if it goes into bankruptcy. This should be interesting.

Obammie Get Your Gun - The Wagoner is Gone!

Finally! It took the President of the most powerful nation on earth, but the entrenched leader of GM, Rick Wagoner is gone! The only thing that is surprising about his departure is how long it took. GM has been a hodge-podge of problems for the last 8 years, at least. Despite much rhetoric from the GM management about how things have and are changing at GM, it is evident that the changes they are talking about - whatever they are - were neither profound enough or grounded on a firm reality check of the current situation.

Now Mr. Wagoner is a history, all eyes will be on GM. It seems evident, however, that the following moves will come about in short order, if the giant is to have any hope of (a) getting the bailout billions they are begging for and (b) survive.

(1) Drastically reduce the duplication in the model lineups. For instance, having essentially identical vehicles badged as Chevrolet's and GMCs is plain silly in the face of the current crisis.

(2) Reduce the dealership network.

(3) Reduce the number of brands. Pontiac lost its sporty image back when big hair was cool, and Buick, long on life support (but helped by vitamin Enclave) needs to go as the second luxury brand. Cadillac is enough.

(4) If you can't sell Hummer, develop it. Yeah, this is counter-intuitive, but Land Rover just celebrated 50 years of Hummer-beaters, and go-anywhere vehicles are still needed around the world. Go global with Hummer products and give Tata Motors a run for their money.

(5) Find out why people love certain models (like the successful Malibu) and hated others (Chevrolet Blazer, Pontiac Aztec). Develop. Repeat.

GM can turn around, with or without bankruptcy. But the question remains: does it have the internal willpower to do so?

Toyota and the Art of Veneration.

Toyota is deservedly revered in the Automotive industry. It has produced a quality product that people find attractive enough to buy and they have an extremely competent management. For many years, automotive publications started to blurt out praise as soon as they saw the "T" in Toyota. Yes, they WERE that good. As a consequence, word has filtered out that a Toyota is a good car, regardless of anything else. It has been wonderful and subtle marketing that has left the competitors in the dust.

Recently, there have been signs of problems, however. Toyota built a huge factory in Texas to churn out full-size pickups and the new Sequioia. The location of the factory, by the way, was not a coincidence - deep in the heart of Pickupland, the idea was to get hard core American Pickup buyers to get in a Texan Toyota. The plan failed big time. The plant opened as the pickup market faltered. There we some recalls early on. Then the Tundra based Sequioa was launched to yawns, as the bottom fell out of the large SUV market as well. The new Venza has been praised for its interior but pelted for its ugly exterior. There are signs that the fabled Toyota quality may be slipping as their ranking falls slightly in JD Powers surveys and others.

The point here is: Beware the media hype. Yes, Toyota does make a good product, but they, just like everyone else, are fallible. Sometimes the industry and its media have great difficulty in separating hype, fiction and genuine facts. Do you remember the 1980's? Japan could do no wrong, we should all learn Japanese, they are the new rulers of the universe. In the early 1990's it was Mexico: it was the land of opportunity, the government was stable, could do no wrong, put your money there today. The car industry and its media is as susceptible as and industrial sector to the art of hype leading to veneration. We can and should learn from successful companies and countries, but learning includes examining mistakes and missteps, and blending them into the whole canvas. By examining only the positive, we create hype which serves only those who are hyped, not the community (consumers, industry and media) and produces a lopsided view of the market.

Technology and Technology Challenged.

There is no doubt about it. Technology in the automotive industry is a good thing: we are safer, cars are greener and passengers revel in entertainment impossible to imagine in the 1970's. There is a point, however, when the auto makers become obsessed with their own technology smarts and run amok.

The prime example is BMW's i-drive. When it was first introduced, you had to labor through screen after screen in order to change the radio station or the volume setting, using a knob on the center console. The latest version is more user friendly but still heavily criticized in the press. Why? Because no-one at BMW asked "why?" that's why. It gets to a point that a simple button is a better alternative to a screen. It has tactile qualities that allow you to feel around for it and punch it without taking your eyes off the road, for example. "i-drive" is complication for complications sake, and as such, reflects the arrogance that exits in BMW's management.

The other piece of technology that sounds awesome but in practice is hardly ever used by the average consumer is voice activated operation. When you see it in advertisements, you see a person crisply ordering the machine to carry out tasks such as calling Mary or taking the happy driver to Zing Ho's House of Dumplings. Having had cars with this feature, know that you must speak in a very specific language that takes up pages of the owners manual, and still gives you answers like "System does not recognize that command" and "Locating Zingers Mouse Droppings". Again, sometimes simpler is better.

Technology for technology's sake is pointless. We can all appreciate improved safety and emissions, an love our high end stereos. But adding gizmo's because they are cool is not a long term trend and is therefore, a waste of time and effort. Does anyone still have a car with a push-button transmission? Chrysler tried that back in the late 50's and it not exactly become the norm.