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from Daniel Howes' Opinion column Detroit News:

The partial dismemberment of Chrysler LLC, coming less than a week after ratification of its new union contract, may enrage the automaker's hourly and salaried employees.

Who could blame them?

But the folks in Auburn Hills and in plants around the country shouldn't be surprised that the privately owned Chrysler is taking out another 10,000 union jobs, dropping shifts at five plants, cutting 1,000 salaried heads, dumping 1,100 contractors and killing four models.

It was inevitable, given a softening U.S. market and economy, Chrysler's rising inventories and the results-driven culture of CEO Bob Nardelli and his masters at Cerberus Capital Management LP, which holds 80.1 percent of Detroit's No. 3 automaker.

From the get-go, the assumption has been that private-equity shop control of Chrysler would, at some point, culminate in draconian, if logical, actions like these. Considering Nardelli pulled the trigger, oh, five days after getting a contentious UAW contract ratified suggests he isn't screwing around.

The latest black day in Chrysler's bleak history -- of acquisitions by the Germans and restructurings, of spinoffs to Cerberus and yet more restructurings -- also is a nasty reminder (if another is needed) that it's more prudent to devalue whatever executives say and pay attention to what they do.

One more brutal pruning is what happens when the harsh light of cold business logic, as practiced by Chrysler owner Cerberus, shines on a company that spent the past nine years under German owners whose misunderstanding of the American volume car business is unmatched in recent times.

This is also what happens when smart business heads unencumbered by a dysfunctional Detroit culture discard the foggy, self-justifying lens traditionally favored here and instead look at conditions as they are, not as the brass and union leaders want them to be.

Daimler's failure exposed

Former CEO Dieter Zetsche called his effort to revive Chrysler "disciplined pizzazz" and rode the spin of its initial successes to the top job at Daimler AG. But the net result a few years on -- when product decisions can be better assessed -- is that Chrysler didn't get enough discipline or enough pizzazz to forestall one bloodletting after another.

Instead of Chrysler staying part of a well-capitalized global company like Daimler and reaping the benefits of its technology and market reach, Daimler essentially paid Cerberus to take Chrysler away.

Instead of leaving Chrysler with a solid, well-conceived and market-savvy product lineup, Daimler left a welter of middling-quality cars and SUV wannabes that overlap in the crowded U.S. market. It infuriated its dealer body, and it missed the full-size crossover trend.

And its midsize Toyota Camry fighters, the Chrysler Sebring and Dodge Avenger, are disappointments easily outmatched by entries from General Motors and Ford, too. All this from a one-time chief engineer of Mercedes-Benz and his sidekick, former COO and wunderkind Wolfgang Bernhard.

Nardelli's Chrysler essentially is cleaning up a mess the Germans left behind, but to what end? Cerberus executives have said they intend to stick by Chrysler, exactly what its people and politicians want to hear. Achtung: Sound familiar?

Stripping? Or shrinking?

We don't know yet whether these moves by Nardelli are the opening gambit in a systematic campaign to "strip" Chrysler on the way to "flipping" what's left to a rival, to another private-equity house or to the Chinese, the Russians or the Indians.

The plant closings, job cuts and product winnowings could be exactly as they're being portrayed -- a culling designed to shrink Chrysler, strengthen its core and then position it for growth and new alliances.

A cynical view would hold that this is just the beginning of the "strip and flip" that UAW President Ron Gettelfinger says he loathes about the private-equity world, Cerberus and its CEO, Stephen Feinberg, apparently excepted.

Here's another view: If top execs like Nardelli and his vice chairs, Tom LaSorda and Jim Press, would get big payouts once Chrysler is restored to profitability -- and they would -- why would their current motivation be simply an asset strip play? Answer: It wouldn't.

What they're poised to revive (create?) at Chrysler is a rational business model that builds only what it can sell, sells only what the market wants and changes course when the market moves in a different direction.

Getting there will be a painful and scary transition for Chrysler's employees, for Michigan and for communities like Toledo, Belvidere, Ill., and Brampton, Ontario, all of which will lose shifts and the jobs that go with them.

Sales beget 'job security'

Less than a week after a slight majority of Chrysler 45,000 UAW members ratified a four-year contract that sets second-tier wages for some new hires, creates an independent trust for retiree health care and offers limited "job security" guarantees, Chrysler says it will kill between 8,500 and 10,000 hourly jobs.

Who at Chrysler wouldn't feel angry, deceived, uncertain? How many Michigan homeowners wouldn't say, "Not again?" Which politician, from Gov. Jennifer Granholm on down, wouldn't wonder whether the automotive carnage and what it means for state economy will ever end?

It will end when Chrysler finds its bottom, when its cars and trucks and all the permutations in between are attuned to a market that exists in fact, not in perception, when revenues sustainably exceed expenses.

Chrysler plans to make early retirement and other buyout offers to ease the transition for thousands of its employees. But that doesn't change the toll this seemingly continuous turmoil -- at Chrysler, at GM, at Ford and at suppliers -- has on individuals, their families, their mortgage payments and their plans for sending a kid or two to college.

Last week, on local TV, I heard a Chrysler hourly worker wisely acknowledge that there are no "guarantees" and very little security for people like her if the vehicles they build don't sell.

Of course, that reality has coexisted alongside the parallel universe of Detroit for years. Yet it has taken bankruptcies, tens of thousands of jobs lost, plants closed, corporate assets mortgaged, home values decimated and a state economy in ruins to drive home the point, which is the saddest part of it all.

Buy American
509 Posts
Mr Daniel Howes:

I miss the point of your article. Are the German's the bad guys? Should Cerberus Capital Management LP hire everyone who needs a job in Detroit? Should Cerberus not lay-off employees when sales are down or a vehicle is not being purchased?

I own three vehicles as you can tell from my signature. The newest was made in Sterling Heights, Michigan, and contains 77% US/Canadian parts. My Avanti was made in Youngstown, Ohio, and contains 100% U.S. and General Motors parts. My Mazda was made in Japan, but controlling interest of the Mazda Company is by Ford Motor Company, Dearborn, Michigan. (My personal opinion is that the profits from Mazda are greatly helping Ford survive.)

I am supporting the American automobile industry, are you and your fellow workers at the Detroit News?

Why don't we let Cerberus attempt to offset the hugh loss of Chrysler so more jobs are not lost. Or we can continue to undermined Cerberus and someday we can all be driving Toyota's, Nissan's, Hyundai's, and Kia's.

May we not forget South Bend, Indiana (Studebaker/Packard Corp.) and Kenosha, Wisconsin (American Motors Corporation).

1,055 Posts
"This is also what happens when smart business heads unencumbered by a dysfunctional Detroit culture discard the foggy, self-justifying lens traditionally favored here and instead look at conditions as they are, not as the brass and union leaders want them to be."

That statement pretty much sums it up situation perfectly. Its a shame what is happening in Detroit, but it is not to be unexpected.
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