Chysler’s Turn To Take The Whipping

Stocks:  (DCX)(GM)(F)(TM)

Early in the year, GM was viewed as the one of the Big Three most likely to fail. Its stock fell to $18 (it now trades at $31) as the market doubted that it could hold share while cutting costs by $9 billion a year. Wall St. now at least half believes the story. Then Ford took its position as the company in trouble. It admitted that its Way Forward program was not taking out enough costs as sales feel sharply. Bill Ford was even forced to replace himself as CEO. The stock feel to $6.17 in June (it now trades at $8.50) Although Ford cound not find a car executive to take the job, getting an aircraft executive seemed a good second.

Ford is now at least viewed as having an even chance at escaping.

Now, according to an AP story in The Oakland Press, one of Michigan’s largest newspapers, Chrysler’s sale in November will be poor. Based on research from Edmund’s, the online car site. overall US car sales should rie 6%. The research operation expects all six of the larges car companies to post November gains, except Chrysler. Even with incentives as large as $7,000 a vehicle, Chrsyler’s sales could fall as much as 4%. Its reliance on SUVs and pick-ups wil simply be too much to overcome.

The Chyrsler unit has become a special pain for parent DaimlerChrysler. While its Mercede unit is doing well, the Chrysler division is dragging overall sales down.

Daimler has countered by sending German executives to the US to try to take $1,000 in expenses out of every car.  However, it is unclear that suppliers and labor will cooperate. The UAW has thumbed its nose at Chrysler’s request to cut health costs.

Chrysler is hurt by the success of its parent. Parts suppliers and unions can fairly claim that Daimler is much better of financially that Ford and GM.It sports a $61 billion market cap. GM’s is $18 billion, although its is a larger company. Ford’s is $16 billion.

Chrysler simply miscalculated the demand for its products, as GM and Ford did before it. Toyota has had not such problems, gaining share by bringing fuel-efficient cars to the US and crossover vehicles, smaller SUVs.

Tom Lasorda, Chrysler’s CEO, has said he may lose his job over the miscalculation. And, well he should.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.