August 9, 2009
Evolution of Chrysler
(Good History Lesson & Interesting Read) Rick
Born the son of a Union Pacific Railroad engineer in 1875 -- the same year as Alfred P. Sloan -- Walter P. Chrysler always was fascinated by mechanisms and machinery. Rather than going to college, he took a job as an apprentice in the Union Pacific's maintenance shop in Kansas. By age 35, he was the yard superintendent of the Chicago Great Western Railroad and then became works manager of the American Locomotive Company in Pittsburgh.
In 1912, Chrysler took the job as works manager at the Buick division of General Motors. At that time, Buick was still manufacturing cars by procedures used in the luxury carriage industry. Chrysler immediately copied the automated assembly line developed by Henry Ford. Production skyrocketed from 45 cars per day to 200. Buick became the cash cow of GM and Chrysler got the credit and was promoted to President of Buick at an annual salary of $500,000 -- today's equivalent of more than $9 million.
After retiring in 1920, he was coaxed back into the auto industry to save the ailing Willys-Overland. As progress was being made at Willys, the Maxwell Motor Company asked Chrysler for similar assistance. He took on both, but then bought Maxwell and re-incorporated it as the Chrysler Corporation. Chrysler acquired the Dodge Brothers Manufacturing Company in 1928, making Chrysler the second largest auto company in the U.S.
When Chrysler saw something he liked, he used it. Not Invented Here -- didn't apply to him. As mentioned before, he copied Ford's automated production line and now he copied Alfred Sloan's ladder of success. He installed a four step ladder -- Plymouth, Dodge, DeSoto and Chrysler. Plymouth had the four cylinder engine. Dodge was sportier with a more powerful engine and a well accepted line of light trucks. DeSoto had an eight cylinder engine and many amenities. Chrysler, the flagship, was a luxury car. He was as adept at marketing as he was at high volume automated production. Chrysler retired in 1935 and died in 1940.
Chrysler's fortunes peaked with Lee Iacocca -- a real "car guy" "K-cars" along with the development of the "mini-van," which was copied by the entire industry. After that Chrysler's market share started to slip, the company was sold to Daimler in 1998, then to Cerberus Holding in 2007 and into Chapter 11 -- preceding GM -- in 2009. Its major stockholder is now the United Auto Workers whereas the major stockholder of GM is the U.S. Treasury. Ford is the only U.S. auto company where one can see a light at the end of the tunnel.
What happened? To begin with, in the 1950s and mostly thereafter, the company's leaders were drawn from the ranks of the financial departments of the company -- exception, Iacocca. They were not "car guys," they were "bean counters."
As a result, there was a strong tendency to make decisions for what was financially good for the company's short term, rather than what was good for the customers. Car lengths, weights and engine horsepower continued to increase until we arrived at the Excursion V-10, SUV, just as gasoline hit $4.10 a gallon.
In the 1950s, when the four passenger Volkswagen Beetle arrived in U.S. showrooms, the Detroit-3 pooh-poohed it, saying it would never last. In the 1960s, a half dozen Datsun Bluebirds arrived for field testing in southern California -- they were made by Nissan. They were so bad that Nissan quietly shipped them back to Japan where they were re-tooled and re-introduced. That's when the battle really started. Ever since then, the Japan-3 has been building new transplant factories in the U.S. as the Detroit-3 were shuttering old ones.
Aiding the Japan-3 were two additional important factors. First, after the Bluebird fiasco, Japan built more and more quality and reliability into their cars. Second, was a lengthened style cycle. Detroit liked to have frequent model changes, thus making the status conscious Americans appear to be out of date unless they frequently purchased a new car. This was consistent with decision making of what was good for the company, not the consumer.
The Japan-3 did the opposite. With the increased reliability of their quality, they stretched the period between model changes. This would let the working American appears to remain in style for a longer period with the extra advantage of reliability for a longer period. Nearly every thing Japan did was the anthesis of the Detroit-3 strategy.
The final nail in Detroit's coffin was top management's cave-ins to union contract negotiators, to the point where workers were being paid for not working and receiving life-long health care benefits just as good as our elected officials in Washington.
If I seem cynical it is because I am. I believe our great U.S. auto industry has been mis-managed for decades. Bill Jackson, an earlier president of Diamond Power always said, "Keep your eye out for what you can do for a customer, and be very careful of what you do to a customer." I wish Detroit had heard Bill.
Article Link:Evolution of Chrysler | lancastereaglegazette.com | Lancaster Eagle Gazette