Death of a legend

22 October 2008

At its peak Chrysler was a brand of legendary status. This year the motoring legend is destined to fall from grace and get tossed on the brand scrapheap by private equity.

Herein lies the story of yet another monumental hi-octane blunder fuelled by private equity greed and incompetency. Cerberus – the private equity owner of Chrysler since 2007 looks certain to offload its investment. Described as ‘this terrible mistake’ by a former CEO of American Motors, the purchase from Daimler only last year was widely seen as an ill considered move. Even the transfer of ownership to Daimler in 1998 – an uncomfortable liaison that spawned DaimlerChrysler Motors Company LLC – had many motoring scribes scratching their heads. Auto manufacturer madness.

Here are some interesting facts – Daimler bought Chrysler for US$37 billion, then spent billions more trying to keep it afloat. Cerberus Capital bought Chrysler back from the Germans for US$7.4 billion! Bet the Daimler shareholders were mighty pleased. Perhaps the Daimler brand value took just a slight dip after waving goodbye to US$30+ billion?

So what price will Cerberus now get in this financially battered market? General Motors is seen as the favoured suitor which is presently scavenging in the ruins looking for tasty morsels. Not that General Motors is without its own problems, with estimated debts of US$300 billion – which makes Daimler’s US$30+ billion loss look almost acceptable. All victims of a consumer society once fixated on ‘big is beautiful’ and now too slow to respond to environmental concerns and a global shift to smaller and more economical vehicles – cars that were great for the 1980s but dinosaurs today. Global warming and public sentiment sealed their fate.

So what value is put on the Chrysler brand now? Apparently precious little. Peter DeLorenzo, a former auto ad exec commented “After you get Chrysler, you take Jeep and the minivans, and get rid of the rest”. It seems that in order to restore brand strength and sales of the legendary GM Hummer (down 47.3% this year) all GM needs to do is to align it with Jeep ‘a brand with worldwide appeal’ (sales down 26% this year). What do you end up with? You get two brands with declining sales – one being the most despised and environmentally unfriendly auto brand of them all, sold alongside an honest and reputable ‘fun 4WD lifestyle vehicle’ albeit with a distant military heritage. Guess which brand will tarnish the other? You think Hummer will revitalise, or will Jeep’s brand suffer after the initial showroom frenzy and PR spin die down and everyone checks the sales figures? I’ll leave it up to you to figure that one out. What will all those loyal baby boomer brand diehards, who grew up with the ‘classic’ Chryslers think of these well heeled, smart talking, suntanned, quick buck merchants from Cerberus? Do we need to mention gun laws here? I guess here’s another brand going down the toilet big time, that’s likely to get its ass shot off or run over before it does so.

Chrysler brand RIP. 1925-2008

STOP PRESS 27 October
Chrysler has announced it is to cut 25% of its white collar workforce.
Daimler has announced it is to suspend production for one month after unveiling a big fall in profits.

Tony Heywood is a Fellow of the Design Institute of Australia, founder of Heywood Innovation in Sydney Australia and joint founder of BrandSynergy in Singapore.

View some of Heywood’s work on www.heywood.com.au

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