Naked Strategy 1 - Chrysler
The audio for this podcast can be downloaded at http://www.management-issues.com/2007/8/2/podcast/naked-strategy-1-chrysler.asp
| [Intro Music] Laurence Haughton: Hi, I'm Laurence Haughton. Max McKeown: And I'm Max McKeown. Laurence Haughton: Welcome to Naked Strategy! Our show shines the spotlight on the untold stories that lurked behind those spin doctored business headlines. If you think that we are irreverent and perverse, that's great! Our mission is to help you make sense.To connect the dots between what you read and what you're told and what's really going on and what that means to you. This is Naked Strategy, the twice monthly x-ray for business leaders. Hi Max! Max McKeown: Hey, Larry! Laurence Haughton: What have you got for me today? Max McKeown: Well, now here's the thing. I've been reading about Chrysler. We've got Chrysler who'd just been sold for about $6 or $7 billion. And I remembered that in 1998, the German company Daimler, it's Mercedes essentially, they bought Chrysler for $36 billion. And I'm just wondering how they screwed that up | |
| 01:13 | Laurence Haughton: Well you know, I'll tell you something. I have been looking around in the material that I've got and the stuff that I've collected over the years. Let me give you just one thing. Chrysler has gone through booms and bust for their entire history. It's constantly been a lurching-type company. And so what's happened with this, I think, is they've gone through a bust period and these guys are just impatient. Max McKeown: OK, so we've got Chrysler on a high when they bought it but it has a nervous GM, sorry, CEO. Then Mercedes buy it because they want to take over the world. Some kind of forthright thing going on. That's not just a joke, unfortunately a bad joke. If this is what Juergen Schrempp was saying, "We're going to take over the world and the world of cars." Takes it over on a high then it messes with their management. And then it goes into a low. And then it goes so low that they sell it before it gets to another high. So they're completely misunderstanding the kind of company they bought into. |
| 02:21 | Laurence Haughton: They're completely misunderstanding that kind of company. And let me give you something that shows that. Look, they bought it in 1998, right? I'm going to read you something that I saved from 2005. Listen to this. Nearly seven years after the mega-merger that created the Mercedes-Chrysler company that we're talking about right now, the German, the Mercedes side and the American, the Chrysler side, it says in this article, "are undergoing a striking role reversal", OK . 2005 now they're writing this. Chrysler for years of burden on the merged company is on an upswing. And its profit market shares are growing and Mercedes was on a downswing. This is 2005 that they're writing this article in February and now we're looking 2007 and they're on a downswing there. And they're saying, "OK that's it! It's just a bad company." |
| 03:11 | It seems unusual to me that if you've got a tennis player who does very, very well and does very, very poorly following doing well and they do this over and over again. And you and I are sitting there. We're watching Wimbledon. And he wins or she wins Wimbledon this upcoming year. What would you naturally expect to occur next after they've won Wimbledon? Max McKeown: We'd expect they'd go to the US Open and they'd lose. Laurence Haughton: And they'd lose. And it's like, OK now we're going to give up on their career? For goodness sake, we know that they go through upswings and downswings! This is the rhythm of men. [Cross-talk] Max McKeown: OK, we're not mixing up. We're combining here the idea of rhythm and the idea of memory. Remembering that rhythm to do something smarter in the future. So you've got individual CEO's, they're on their own rhythm. Most of them, the older ones, they're on a rhythm that says, "How much can I get out of here in the next three years?" Not much but a fair amount. We've got people who are under pressure, quarterly, from their investors; their shareholders. And then you have big companies that might be on five or ten-year cycles. And there's almost nothing they can do about it apart from make it worse. |
| 04:38 | Laurence Haughton: Yeah and if they don't understand the rhythm, which means you've got to remember the history in order to identify the rhythmic patterns. If they don't understand the rhythm they're likely to 'zig' when they should 'zag'. Max McKeown: Yeah! And then you have a whole different trend that's over the charts. So you've got the individual thing going on very quick. You've got the company thing maybe on a number of years. And then you've got trends. And sometimes those trends cut right over the top of everything. |
| 05:07 | So you got a position in the US where I think it was a quarter century ago, 80% of new cars were bought because the old one had died. 15 years ago that figure had fallen to 60%. And now they reckon today only 20%. One in five cars are bought out of necessity. You don't wait until it dies. You just buy a new one because it looks good with your other car or your new girlfriend. That's the kind of trend that the faster, faster, faster trend the Big Three, or as they are now, just the Detroit Three, don't seem to have understood. Laurence Haughton: They haven't understood it at all. And so now, you have got the whole problem of we're sitting here watching these events. We're not remembering history. A lot of the journalists that are writing about it are not remembering history. I mean they're not pointing up this little bits that we're talking about right now. And so everybody ends up confused. |
| 06:00 | I mean, is it healthcare that wrecked Chrysler? Was it some other strategic move? I mean what we're talking about is maybe the first thing we should be looking at is, isn't this just part of the natural rhythm of Chrysler and part of the natural rhythm of the way that business goes today rather than 15 years ago in the car business? Max McKeown: I remember when I was a kid that time. Do you remember a thing called "biorhythms" that you could do? If you can calculate in your biorhythms to know whether you're going to be in a high or a low on any day. Laurence Haughton: Mood rings. Max McKeown:Mood rings, is that what it is called over there? [Laughter] Max McKeown: So mood rings, I think there's some sense of mood rings in the world of business, certainly. You got up, you got different times all laid over each other. And you got to figure out where the industry's going. You got to figure where consumers are going. Where your company's at. And then what you individually have to work out at the time you were on. That's what you got to remember to change the future. That's how I'd wrap that up. |
| 07:03 | Laurence Haughton: I think that you've wrapped it up well because when I look at people, I noticed that they don't recognize the rhythm of things. And so therefore they 'zig' when they should 'zag'. They add force when they should lay back. They get mad when they should be patient. They get patient when they should be mad. Across the board, they apply the emphasis to the wrong syllable. Max McKeown: So we're saying in a sense that one secret of all of these successes in life, on business is timing. Laurence Haughton: Recognizing the rhythm of things Max McKeown: Yeah, OK , That's another good chat. You take care. Laurence Haughton:Yes, let's talk again soon. Max McKeown: OK . See you. [Ending Music] |
