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Where’s the value in Chrysler?

Kai Ryssdal May 14, 2007

Where’s the value in Chrysler?

Kai Ryssdal May 14, 2007

KAI RYSSDAL: Micheline Maynard is the Detroit bureau chief for The New York Times. Micki, good to talk to you again.


RYSSDAL: How bad can it possibly be that Daimler’s actually willing to, in essence, pay money to get rid of Chrysler?

MAYNARD: Well, I guess it could be worse. They could be stuck with Chrysler. And, in fact, there has been sort of a parallel track of trying to figure out, you know, “If we can’t find a buyer for Chrysler, what would we do with it?” But, you know, DaimlerChrysler is just ready to get rid of Chrysler and go back to being Mercedes. Its shareholders have been beating on it for years, telling it, “Get rid of this albatross. Let us go back and be a luxury car division again.”

RYSSDAL: Why, given all the problems that cars worldwide now are having . . . Why would Cerberus want to spend this kind of money to get into the car business?

MAYNARD: Well, they certainly see some value in Chrysler. And, indeed, just 18 months ago, Chrysler posted a profit in 2005. The problem is when car companies go bad, they go really, really bad. And you can see your revenues and your profits just dribble away quickly.

RYSSDAL: Right, so how much fun is that if you’re up $1.5 billion one year and down $1.75 billion the next?

MAYNARD: Well, it’s interesting. I think, hopefully for Chrysler, under Cerberus we might see some stability. I mean, the idea is if anybody’s business model could change, Chrysler is the best possibility.

RYSSDAL: Is Chrysler, in effect, gonna disappear now?

MAYNARD: Chrysler will disappear from the public radar. It certainly won’t disappear from the automotive scene. But this is the big question for those of us who cover the automobile industry and are used to getting statistics on companies, you know, just at the click of a mouse. I’ve covered some private companies — there are a couple of airlines that are private — but there’s really no parallel for this . . . as big of a company in the automobile industry.

RYSSDAL: Do you think that what might happen with many private equity deals might happen here? That is to say, Chrysler would be stripped down, sold off and then, somehow, taken public again at some great profit to the people who own Cerberus?

MAYNARD: Well, in fact, a month ago union leaders here in Detroit were warning of just that. Ron Gettelfinger, the president of the UAW, had said he was afraid that a private equity company would strip and flip Chrysler. And today, actually, Mr. Gettelfinger came out and he said he thought the deal was in the best interests of Chrysler workers. I think there is a very real fear. I mean, there are some attractive assets at Chrysler. There’s the Jeep brand. It has a beautiful headquarters and product development building in Auburn Hills [Mich.]. It has many, many dealerships that would be attractive to, say, the Chinese, if they wanted to come into America and sell their own cars. So, there are definitely things there that Cerberus could strip and flip if it chose to do so. It’s saying that it will not do that. But, you know, private equity is sort of in the business to make money. And if they think they need to make money, they’ll sell something.

RYSSDAL: Yeah. Are there gonna be any goods coming out of this, you think?

MAYNARD: What I think might happen out of this is that fresh eyes will take a look at Detroit. The people involved in Cerberus . . . There’s a gentleman named David Thursfield who was a Ford executive. And then Wolfgang Bernhard, who was the president of Chrysler. You know, they were always people pushing their companies to move faster, cut deeper, become part of this swiftly moving global auto industry. You know, it could rejuvenate Chrysler. It could finally break it away from the old Detroit mold and get it into the sort of third lane of traffic with the faster moving car companies.

RYSSDAL: You know, just to spin that off for a second. You and I have talked about this before. About how the restructuring of the car industry is nowhere near done yet. Is this a seminal moment, do you think?

MAYNARD: I really think this is a seminal moment. I mean, I’ve been saying for years that one of the Detroit carmakers would not survive in its present form. And I think that the door just opened to a real change at Chrysler.

RYSSDAL: Micheline Maynard in the Detroit bureau of The New York Times. She runs that office. Micki, thanks a lot.

MAYNARD: My pleasure. Thank you.

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