Word: chryslers
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...though, Chrysler is in the red (it lost $2 billion in the first quarter alone) and will soon be on its own, and the UAW's four-year contracts with the D3 expire in September. All eyes in Detroit are on how much Cerberus--a 15-year-old firm with a reputation for cost cutting--will be able to squeeze...
...there's no denying that Daimler, as the company will be known once Chrysler is driven off the lot, is forking over $675 million to make the deal happen--a remarkable repudiation of its $36 billion purchase of Chrysler nine years ago. And there's also no denying that the sums changing hands in the current transaction pale next to the $18 billion in health-care obligations that Chrysler owes its retirees...
Like the other members of what is now called the Detroit Three--the traditional Big Three moniker having been rendered obsolete last year when Toyota sold 2.5 million vehicles in the U.S. to Chrysler's 2.1 million-- Chrysler has long pledged to take care of virtually all its U.S. employees' medical expenses when they retire. Faced in recent years with stagnant sales and rising health-care costs, the automakers have been ratcheting down those benefits (mainly by requiring co-pays and contributions) for retirees without union contracts. Then, in 2005, General Motors and Ford persuaded the United Auto Workers...
...follows the usual private-equity script, Cerberus will try in a few years to take a slimmed-down, more competitive Chrysler public on the stock exchange or sell it to another automaker. More than any other single factor, it will be Cerberus' efforts to cut health-care spending on retirees that will determine whether it can do so at a big profit...
Really, it's both. Chrysler, like Ford and GM, has considerably narrowed the quality gap with foreign-car brands but perhaps not the perception gap. Critically, though, Chrysler hasn't designed enough vehicles that are attractive and fuel efficient, despite having the Mercedes crew to help...