Will the Chrysler Deal be Good for Lean?
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.
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Time will tell, but knowing one of the executives mindset at the Capital Equity Group, which I briefly worked for, I would expect nothing short of a full pillaging of Daimler. Sorry for the pessimism.
I was in my first days working for Yazaki’s Chrysler Business Unit on “Day One” back in ’98. Those were heady days. Daimler’s superior quality was going to be brought together with Chrysler’s creativity and manufacturing prowess. It was a merger of equals. Instead, within months it was obvious that the Germans were taking over and, by the way, they never had much quality on the Daimler-side.
Good for lean? It doesn’t matter. It only matters if it is good for Chrysler and the stakeholders.
I’m wondering what’s up with Cerebus. They now have the finance arm (GMAC), the OEM (Chrysler), and soon will have the tier one supplier (Delphi). Are we going to see a new automotive powerhouse? Just wondering…
Good question, Mike.
I guess my headline really should have asked if the transaction will be good for Lean at Chrysler. My assumption is that, since Lean is good, that “good for lean” equals “good for Chrysler.”
I guess I assumed Lean *would* be good for Chrysler… or are in they such a mess that they no choice but to slash and burn? I don’t know, that’s why I’m asking.
Mark, nice post. You win the award for the most links in one post!
As long as you find the links to be “value added.”
Chrysler can’t fight fate. As Toyota wizzed by GM, the view from the cheap seats needs to be that Lean Manufacturing and the Toyota Production System delivers the goods and works. If Chrysler doesn’t want to join its Plymouth offspring in the bone-yard it needs to alter course and figure out a better way – no shame in applying another manufacturer’s successful philosophy. To the UAW and the first-tier suppliers Chrysler can offer that they will ALL be just as unemployed if the auto-maker doesn’t try something more adventurous than building more products that customers won’t buy.