You have probably read the basic news story on the Chrysler buy out deal (check out the latest on the Detroit News Auto Insider page).
On the way home, I heard this public radio Marketplace story about how Daimler is basically paying cash out to unload Chrysler. Not only did they sell Chrysler at a loss, but, again, they are PAYING to dump the company. It was cheaper than keeping Chrysler, analysts suppose. What’s described as a “$7.4 Billion deal” doesn’t mean Daimer is taking in $7.4 Billion in cash. Go figure.
It got me thinking, will Chrysler’s new private equity ownership (80% stake held by Cerberus) will allow Chrysler to use Lean to improve the business or if they’ll fall into short-term thinking to slash Chrysler and sell it off again (or take it public) at a profit.
The new ownership has given a vote of confidence to Chrysler CEO Tom LaSorda, who is a very vocal advocate of Lean, going back to this GM days, and we’ve written about him a lot on the blog (click here for previous articles including Newsweek’s “The Blue Collar CEO” piece from 2005).
With the German ownership, Daimler quickly moved away from Tom Stallkamp’s supplier partnership model (reminiscent of Toyota) and moved back to a more traditional “beat up your suppliers and demand price reductions” model. Additionally, even though LaSorda must know about the “Waste of Overproduction” (as described by Toyota’s Types of Waste), the company still fell into a trap of overproducing vehicle configurations that dealers couldn’t dump, just earlier this year (keeping factories running instead of building at the pull of the customer).
So you might say Chrysler doesn’t have a perfect Lean track record, even with strong leadership. The company, in its struggles, has had to resort to massive layoffs (over 10,000 announced) and Daimler says the sale won’t halt layoffs and the Canadian Auto Workers is calling for a pledge to avoid new layoffs. Update: The WSJ says LaSorda has pledged “no new layoffs.”
LaSorda put out a statement with an optimistic idea that the new ownership will allow Chrysler to focus on the long term instead of quarterly numbers:
As a private (non-public) company, we will be better positioned to concentrate on our long-term plan for recovery, rather than on short-term results. With the financial strength and additional operational expertise brought by our investment partner Cerberus, Chrysler will renew its focus on what has always made us special: the passion, creativity and commitment of our employees, suppliers and dealers to delivering exciting Chrysler, Jeep and Dodge vehicles and quality Mopar parts to our customers.
What do you think about the deal? What does it mean for Lean at Chrysler, for it’s employees, customers, and suppliers? Click “comments” to chime in. I’d like to know what you think.
Click on the “Chrysler” link below for historical Lean Blog posts about the company.
Thanks for reading! I’d love to hear your thoughts. Please scroll down to post a comment. Click here to be notified about posts via email. Learn more about Mark Graban’s speaking, writing, and consulting.