Automania by Dr. Iain Corness

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.

Walter P Chrysler

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 up.
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 collectives.
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 well.
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 April 2009.
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.

Autotrivia Quiz

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 [email protected]
Good luck!


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]

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 now?
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 substandard performance.
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 team.
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