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June 24, 2008
Chrysler and reality

DURING the last few decades, Chrysler has been through so many ups and downs that it has sometimes seemed like the world's first bipolar corporation.

It was on the rocks in 1979, when only a federal bailout prevented it from going out of business. Then came the resurgent Chrysler, powered by Lee Iacocca's vision and ego.

Then another slump, followed by a Cinderella-like marriage with the German luxury car firm Daimler. That turned out to be a mismatch, however, and last year, Chrysler was sold off to a private equity firm called Cerberus Capital Management, and fans of the Pentastar began hoping that now Chrysler was freed from the Germans, another resurgence would be on the way.

But that isn't happening - and indications are that Chrysler may in fact be in worse shape than commonly understood. Last month, Chrysler sales fell by a frightening 25 percent. For the year, Chrysler's U.S. car and truck sales are down more than 19 percent, compared to 8 percent for the industry as a whole.

And indications are that worse is yet to come.

Chrysler's main problem is that its sales mix is designed to be 70 percent SUVs and trucks. That made some sense in the go-go 1990s. It makes no sense at all in a world where $4-a-gallon gas is threatening to become $5-a-gallon gas. Chrysler also has too few cars, let alone small cars, that buyers find attractive. Too many of its "different" models are essentially similar vehicles, such as the Dodge Nitro and the Jeep Liberty.

And quality remains a problem. Overall, Chrysler vehicles were rated below average in quality in the most recent survey by J.D. Power and Associates. Embarrassingly, Jeep, Chrysler's most popular brand, was rated lowest of all.

We point this out not - repeat, not - to cast aspersions on the talented men and women of Jeep's Toledo work force, who, after all, can only do so much with what company managers give them.

Most industry experts already thought Chrysler needed to find a merger partner with a complementary inventory, or risk seeing Cerberus sell off the company piecemeal rather than continuing to take what must be sizable losses.

Last week's news makes it that much more urgent that Chrysler CEO Bob Nardelli manage to do that sooner, rather than later. The sad fact is that the full-service, stand-alone Chrysler Corporation of bygone years isn't coming back.

What's important is that those in charge recognize that, and take the necessary steps to make sure that an auto company that can compete in this century continues to exist at all. -- Chrysler and reality
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