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What's Driving Chrysler's Comeback

How DaimlerChrysler stanched the fiscal blood flow at its U.S. division with a return to its heritage of edgy innovations and a model that has been turning bling into ca-ching
Paul A. Eisenstein
From the Print Edition:
Jimmy Smits, May/June 2005

Nothing was lost in translation when Chrysler Group CEO Dieter Zetsche picked up the phone a few months back only to discover a voice mail from Snoop Dogg. "What I gotta' do to get that brand new 300 up outta' you?" the gangsta-rapper asked. "Get back in contact with my nephew so he can make it happen, then it's official like a referee with a whistle." Zetsche might not be a fan of rap, but it didn't take the German executive long to figure out the message—or to make sure that Snoop and fellow rapper, 50 Cent, both got brand new 300 sedans.

With their mammoth grilles and chopped roofs, Chrysler's 300 and especially the Hemi V-8-powered 300C are equal parts hot rod, muscle car and luxury sedan. Brash, bold and bordering on the outrageous, it's not surprising that the model has connected squarely with hip-hoppers—for whom it's the ultimate example of bling—and hip business executives alike,

becoming one of the biggest, if unexpected, hits of the past year. The 300C has been featured in music videos and played a starring role in an episode of the TV series, "ER," and Chrysler is losing count of all the awards piling up. In January, a panel of 50 top automotive journalists named the 300C as North American Car of the Year, perhaps the industry's most sought-after award.

In an era when rebates and subsidized loans are the norm, rather than the exception, the 300 carries lower incentives than even some of the most popular Japanese products, which is not surprising since Chrysler can barely keep up with demand and is ramping up a nearly 50 percent increase in production capacity. What is remarkable is that nearly half of all buyers are opting for the fully loaded 300C in order to get their hands on Chrysler's muscular Hemi engine. That means lots of cash falling to the bottom line for an automaker that was hemorrhaging red ink just a couple of years ago. Things were so bad, recalls Zetsche, that analysts and shareholders alike were calling on him to close or sell off Chrysler's passenger car operations and focus on the still profitable truck side of the business. Of course, fortunes in the auto industry are a lot like Michigan's weather. Just wait, and things will turn upside down. And in the case of Chrysler, the latest turnaround is laden with irony.

An All-American Automaker
The 300 sedan may be the most unabashedly American automotive design on the road today, but for many, Chrysler has traditionally been viewed as the most classically American of the Big Three. In his memoir, founder Walter P. Chrysler recalled being denied a spot at the 1924 New York Auto Show, forcing him to stage his own introduction at the Commodore Hotel. Experts say that's little more than myth, but what's fact is that a freak snowstorm left thousands of commuters stranded, and as they wandered into the hotel lobby, Chrysler took advantage of this unexpected audience. The automaker always cultivated a reputation as a maverick, with a fittingly cowboy corporate culture that often led it to shoot from the hip.

Engineering was Walter P.'s strong suit, and it paid off in the muscle-car era, when products powered by the original Hemi, like the Challenger, Charger, Barracuda and Road Runner, dominated the road. Innovation was another company hallmark, underscored in 1984, when Chrysler rolled out the first modern minivan. Today, despite a flood of competitors, it remains the dominant player in this profitable, if oft-maligned, segment. To stand out in a domestic market ruled by the better funded Ford Motor Co. and General Motors, Chrysler has often played a trump card with the sort of cutting-edge styling that its larger, risk-averse competitors shied away from. In the early 1990s, that led to a lineup of products as bold and unusual for their day as the 300 sedan is today. The so-called "cab forward" look, with its short nose and sumptuously large cabin, revolutionized automotive styling and heavily influenced the industry for the next decade.

That first generation of cab-forward cars, including the Chrysler Concorde and Dodge Intrepid, every bit as successful as the 300 is today, provided a perfect backdrop for the oft-delayed departure of legendary Chrysler Chairman Lee Iacocca. But his successor, Bob Eaton, had a nervous eye on the past. Shortly after signing on at the number three automaker, Eaton pulled together 90 of his top managers. The company had just reported a record-breaking quarter, but if the executives were expecting a celebration, they were in for a surprise, for the bulldog-mannered Eaton started waving a pile of newspaper and magazine clippings, all raving about the carmaker's comeback. Or, more precisely, comebacks, for some of the clips dated back to 1934, when founder Walter P. Chrysler had to dig the company out of debt. Every single chairman in Chrysler's history, Eaton hammered, had to save the company from bankruptcy, "and some of them did it twice," he added, in reference to Iacocca's tumultuous tenure.

It was a realization that dominated Eaton's own turn in office, for while he was there, he seemed unable to enjoy Chrysler's thriving success. He was bound and determined to avoid another repetition of the bankruptcy scenario—even if it cost Chrysler the very independence that seemed its most precious core value.

Merger of Less Than Equals?
Secrets in the auto industry typically don't last very long. Most manufacturers have a pretty good idea of what the competition is doing, thanks in part to a vibrant press and the spy photographers who snap pics of products years before their formal launch. Yet when the early edition of the May 6, 1998, Wall Street Journal hit the stands, one could hear the collective sound of jaws dropping all over the automotive world.

Never confident of Chrysler's chances going it alone, Eaton had led a handpicked team of associates to a secretive series of rendezvous with their counterparts from Mercedes-Benz AG. The man sitting opposite Eaton was, by the staid and cautious rules of German business, himself something of a cowboy, and the plan that the MBAG chairman, Juergen Schrempp, had in mind clearly would enhance that reputation. It was audacious, at the least, and completely unexpected. For more than a decade, industry analysts and planners had come to realize that their world would be getting smaller. Weaker players, like Jaguar and American Motors, were either going belly-up or being gobbled up by bigger automakers intent on expanding their global grasp. But what Schrempp had in mind went far beyond anything yet attempted.

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