Why Chrysler went bust
The writing was on the wall for Chrysler when it
was bought by bean counters. Successful car companies are founded by
auto men. Successful car companies are killed by bean counters.
Famous American race car engineer Carroll Smith once said, “The
function of a bean counter is to tell me how many beans I have to
spend – not to tell me how to spend my beans.” Amen.
Back to Chrysler. In 1998, Daimler Benz effectively took control of
the ailing Chrysler Corporation, but America is not Europe and the
Daimler Benz people struggled with the American unions and the
American public’s rejection of large SUVs as the price of oil went
In May 2007, Daimler Benz gave up, handing Chrysler to the bean
counters, called Cerberus, whose founder Stephen A. Feinberg said he
wanted to save Chrysler, one of the Big Three of the American auto
industry, not to strip it of its assets and value. However, remember
that asset-stripping is the modus operandi of bean counter
When the dust settled, or the ink dried, Daimler Benz had literally
given Chrysler to Cerberus, as a debt free entity. On the other page
of the agreement Cerberus agreed to invest $5.4 billion to move
Chrysler onwards and upwards. But to do all that, Cerberus needed
money, which it produced by mortgaging plants, property and anything
else which had a monetary value. J.P. Morgan Chase & Co., Citigroup
Inc. and Goldman Sachs were the lead banks who provided the cash,
but by 2007, the writing was on the wall for the big lenders as
The thinking at Cerberus was that the auto-leasing arm of Chrysler
would be a great money spinner, after all, when had you heard of
finance companies going broke? Unfortunately, Chrysler Financial was
also borrowing to stay afloat and in 2008 needed to renew a $30
billion credit agreement, but the banks were by then very nervous.
Chrysler Financial was able to get a credit line for $24 billion,
but the terms were tough. It had to stop offering leases on cars and
trucks, and it couldn’t offer loans to consumers with marginal
credit. Now was the time for the house of cards to collapse. Making
fewer loans, it would have a harder time raising new funds, and
Chrysler’s ability to sell vehicles would be crippled.
In August 2008, the first full month without leasing, Chrysler’s
sales fell 35 percent. One month later Lehman Brothers collapsed and
Wall Street imploded. With shaken consumers staying away from
dealerships, Chrysler cut production, but by then it was too late
and revenue went down and Chrysler (and others) went down with it.
Cerberus tried to hand over what was left of Chrysler – but what was
left? All fixtures and fittings were already mortgaged. GM sniffed
at Chrysler but said no, they had enough troubles of their own.
Nissan/Renault sniffed and also declined. Fiat are looking, but
there is still a long way to go before there will be a workable
arrangement (it will not be a ‘partnership’).
The US government had already loaned billions, but there was to be a
limit and Chrysler had to come to arrangements with its lenders. The
offer was 33 cents in the dollar, but not all the lenders would
agree, sending Chrysler into bankruptcy protection at the end of
A sad end to the Chrysler Corp., founded by Walter P. Chrysler in
1925. He was a former star executive at GM, who purchased the ailing
Maxwell Motors and renamed it after himself. He sold cars with
touches of luxury at modest prices, and by the mid-1930s, Chrysler
was at the top of the U.S. auto business, along with GM and Ford.
Chrysler Corp. developed the ‘hemi’ and became a dominant force in
American auto racing. Chrysler were the first of the Big Three to
use monocoque construction, now a universal engineering concept in
car building, and was once very successful, expanding to purchase
the Jeep brand. All these advances were the results of auto men at
the helm. Unfortunately it has all been downhill since Lee Iacocca
left, the last of the real auto men at the top of Chrysler. Since
then, the bean counters have turned into death watch beetles.
Last week I mentioned muscle cars. I asked which American muscle car went into
the record books in 1967 as the world’s fastest accelerating production car?
Hint, it did 0-96 kph in 4.2 seconds. It was the mighty seven liter Shelby
Cobra, and remember that it was a road car and those performance figures are
from 32 years ago.
So to this week. The first overland trip from the UK to Australia by car left
London 19 October 1927 and finished in Sydney 15 July 1928. Who was it, and what
car did he drive?
For the Automania FREE beer this week, be the first correct answer to email
Chance of a lifetime for future stars?
Formula BMW Pacific has announced details of its driver evaluation
and Scholarship Trials for the 2010 season. From September 1 - 2, 2009, at
Malaysia’s Sepang International Circuit, young karters from across the region
are invited to take part in a professional training and assessment program
organized by BMW Motorsport.
A number of Formula BMW Pacific scholarships will be offered, which includes a
50,000 euro contribution towards a full season in Formula BMW Pacific, plus free
enrolment in the Education and Training program.
Drivers aged between 16-21 who have not previously participated in any
international race series and no more than 10 national meetings, are eligible to
compete for a scholarship. However, the trial, which gives all young drivers an
important assessment and driver training from BMW Motorsport professionals, is
open to all.
An early-bird registration fee of 2,600 euro, which covers the cost of
everything except transportation and accommodation, is available until July 1,
after which the cost is 2,900 euro. For entry forms and information on
scholarship eligibility, potential applicants should contact Formula BMW Pacific
Series Manager Mark Turner ([email protected] partner.formulabmw.com).
What did we learn from the Spanish GP?
Well, we learned (as if we didn’t know before) that the layout of
the Catalunya track produces processional boring races, and it certainly
lived up to its reputation. After the race settled down, the order after pit
stops remained basically the same for the duration, for example, Vettel (Red
Bull) being behind Massa (Ferrari) for 99 percent of the race, only getting
by when Massa ran out of fuel.
The actual racing at Catalunya was so enthralling that viewers in Jameson’s
pub descended to debating whether facial hair was a fire hazard in an F1
driver. Hopefully Jenson Button will get sponsorship from Braun shavers and
get rid of that wispy imitation beard. (In answer to the question, it’s not
a fire hazard as the driver wears a fireproof balaclava.)
Top marks to Ross Brawn and his Brawn GP team, providing yet another
dominant performance, and cleverly putting the two drivers on different
strategies, almost like putting money on all the horses in the race. And it
worked with another 1-2, though Barichello was unhappy that Button was the 1
and he was the 2.
We also saw that the reason for the Ferrari dominance in the past was in no
small way because of strategist Ross Brawn. It was in the Brawn years that
Ferrari was the top team. Compare that to now, where Raikkonen did not even
make it to Q2. Raikkonen saying, “We made a stupid mistake. I didn’t get any
particularly good laps on my only run in Q1, but we thought my best time
would be enough to make it to Q2 and so I stayed in the garage.” It was
obvious to anyone watching the televised Qualifying that Raikkonen’s time
had him in the relegation zone. It’s about time the Finn started reading
this column, in which I suggested that leaving it all to one run was dead
set dozy. However, it didn’t really mean much when he broke down, yet again.
Raikkonen, being the master of the one-liners, saying “The car is better,
but we must fix these reliability problems.” Unfortunately, he has much to
worry about, with team boss Stefano Domenicali saying. “We must all react to
get back to our usual standard.” And what pray tell, is that standard right
Red Bull continue to impress, and Webber drove well to claim the last rung
of the podium, finishing ahead of Vettel, der wunderkinder.
McLaren continue going from hero to zero, with 9th the best that (current
world champion, remember) Lewis Hamilton could do. Kovalainen continues to
seal his eventual fate of a DCM (Don’t Come Monday) with another woeful
Renault? Good drive by the sulky Spaniard and for once Piquet Jnr finished a
race. Nowhere near the points, but did finish. That’s a plus for the repair
The FIA’s budget cap regulations for 2010 has certainly caused a major
fracas in the teams, as undoubtedly it will lead to two categories of car in
the one race (“budget capped” and “open”). Ferrari is making withdrawal
noises, and now Toyota threatens to pull out. “Under the rules as they are
published, we cannot submit an entry (for 2010),” Toyota President John
Howett has said. Pressed to clarify whether Toyota will lodge their entry
for next year’s Championship by the May 29 deadline, Howett said, “I would
say it is very likely we won’t enter unless something changes
significantly.” This has given the loss-making Toyota company the ideal
face-saving way to bow out from the sport. You can expect BMW to be next.
You read it here first.
Toyota’s new Head of Design?
One of the Toyota people movers for sale in the grey market was
designed in Thailand. Please look at the finished product ‘in the metal’ and
look at the design penned by my three and a half year old son. We await
royalties from Toyota Motor in Japan!
Toyota people mover
Toyota people mover design