Monday, February 19, 2007

Dark Days at the House of Chrysler; What Goes Around Comes Around

The business press is abuzz with rumors concerning the pending demise of Daimler Benz's flirtation with owning a domestic car maker-in this case, what was left of the empire that Walter Chrysler created.

Daniel Howes has an interesting column with the local perspective from the Motor City. What he points to is the real possibility of a Douglas style meltdown where Chrysler gets bought by someone for salvage value or to idle productive capacity.

That's a common gambit in industry that we see here on the prairie. The large packers come in and buy up and idle productive capacity, like the Jimmy Dean plant in Osceola a few years back. Any time a bunch of local farmers and businessmen start making noises about becoming more independent, the big packers make some noises about reopening the plant until things quiet down again and people learn their place.

This accomplishes two things. First, it idles the productive capacity of potential competitors and it raises the bar for anyone wanting a turnkey foothold in the relevant industry.

On the other hand, lest we forget, it was Chrysler that bought and scrapped American Motors, once the pride of Kenosha. They bought it for the Jeep plant in Toledo, which had formerly been the Kaiser Willys, Willys Overland and Overland Car Company factory. The stack still said Overland when I briefly lived in Toledo in the eighties. The rest of American Motors went in the crapper and the same fate may be in store for the House of Chrysler as well. One might well hear the oldsters in the bars near the old AM plants mutter "What goes around, comes around!" into their Stroh's.

Make no mistake about it. The sharks smell blood in the water and are circling hungrily. Daimler Benz, having failed to graft its business model onto its fractious and contentious American partner, is getting ready to cut the cord and bid Chrysler adieu.

Stay tuned. This could get ugly, especially in Michigan where getting laid off is a way of life.


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