The news is not good at Chrysler, General Motors

By Jim Meachen
MotorwayAmerica Editor

(November 2009) We are a little dismayed at the state of affairs at two of the three domestic automakers. Chrysler's seemingly unstoppable slide into automotive obscurity continued with a 25  percent drop in sales from November 2008 to November 2009. It continued a precipitous 2009 drop from 2008 sales, now measured at 38 percent with just a month left in the year.

Hours after sales figures were released on Dec. 1, it was announced that General Motors CEO Fritz Henderson was ousted at the government-owned company. Yes, Henderson was an insider. But under his guidance the GM ship was slowly being turned in the right direction. Sales are up. Plant hours are being added.

The criticism of Henderson, apparently, was that he wasn't moving fast enough. Translated, this means Henderson was increasingly at odds with board direction. And under Henderson's stewardship, the sale of Saturn and Saab were lost. We think those events would have occurred whether Henderson was CEO or whether Ed Whitacre, Jr., was CEO. Now the company will be run, at least temporarily, by board chairman Whitacre, who has no experience in running a car company. He has experience at turnarounds, but AT&T is not a car company.

The search for a new CEO is on, Whitacre announced. But quickly attracting a top-level CEO is problematic at best. First, the government-enforced salary cap will be unattractive to any top-level manager. The compensation is just not there. And second, who wants to come into a situation with a government-appointed board of directors led by Whitacre second guessing every decision?

We have always felt that Henderson was an interim selection after former CEO Rick Wagoner was fired before the bankruptcy proceedings, and eventually would be replaced by the "right man at the right time." But this seems to be the wrong time to oust an experienced manager, especially considering the drain of experienced top-level executives at GM over the past few months.

We have been skeptical of GM's ability to return to the black and start repaying taxpayer money. Now we are convinced more unnecessary potholes have been created in GM's road to recovery.

Things are even more gloomy at Chrysler, which has very little product to foster a turnaround. At least GM has some good vehicles that are in demand. If you have nothing to sell, there is no hope.

At Chrysler, car sales have dropped 48 percent year-to-date and truck sales have declined 24 percent in an overall market that is down roughly 24 percent. The flagship Chrysler brand has declined 50 percent. One sliver of hope — the Chrysler Sebring sedan, Dodge Avenger, Dodge Journey and Dodge Grand Caravan all reported year-over-year sales increases.

The company has extended its sales incentives in an attempt to stop an industry-leading decline. But until new product is put on the market, Chrysler's slide will continue. And part-owner Fiat is still a year or two away from adding small cars to the lineup. And even then, who is to say the American buyers will embrace the Italian-designed vehicles?

Despite its recently announced five-year plan, Chrysler's future is questionable.