The delicate interdependency between automakers and suppliers took center stage again yesterday when Chrysler saw five of its plants shut down when one of its suppliers, Plastech, filed bankruptcy last week.

Plastech has long worn the moniker of “troubled supplier” requiring bailouts three times in the last 12 months, and apparently the Dearborn, Michigan-based supplier’s latest request for help finally sent the new regime at Chrysler over the edge. Chrysler agreed in principle to a plan — along with Ford and GM — on the evening of Jan. 31, then went to court on Feb. 1 asking to get the tooling used to make a variety of components back as well as sending Plastech a “Dear John” letter informing the company that Chrysler was terminating $200 million worth of contracts: immediately.

It’s akin to breaking up with a girlfriend and demanding all your “stuff” back: now.
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GM’s Product Czar Bob Lutz told the media who had surrounded him like overly polite sharks looking at a meal that the likelihood that GM would produce a $2,500 car is highly unlikely.

Tata Motors’ new Nano is basically a step above a moped, which is what many folks in India are carting their families around on right now. He also noted he’d like to see which version of the Nano is available for that price, suggesting that the version that was rolled out for the media was going to be $2,500.

He also noted that GM’s Wooling Motors venture in China has been turning out $2,500 minivans and other small commercial vehicles for several years now and that it was ultimately not that big a deal.

Finally, Lutz reminded everyone that in order to develop a $2,500 vehicle for the North American market, there would need to be a demand for a $2,500 new car…or even a $6,000 new car for that matter.

“You can get a seven- or eight-year-old Taurus with 60,000 or 70,000 miles on it for about that much money and will have a lot of miles left on it,” he said after a speech during the Automotive News World Congress in Detroit last week.

Ultimately Lutz reminded us all that basically the way to meet the needs of consumers while achieving government-mandated requirements is not a moped on steroids, but working on a variety of new technologies simultaneously to figure out how best to make everyone happy.

Ford continues to live up to its pledge to do something interesting with the Mustang every 12 to 18 months with the introduction of the the Bullitt version of the Mustang.

The new version, which will start at just over $31,000 U.S., holds true to the original movie version: understated, but masculinely ominous in hunter green with charcoal wheels and absolutely no badging anywhere on the exterior of the car. In fact, the color on the original was called highland green and this version is called dark highland green.
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Chrysler announced that it plans to cut as many as 12,000 more employees from its hourly and salaried ranks, while cutting four vehicles from his product lineup.

The Dodge Magnum, the convertible version of Chrysler PT Cruiser, Chrysler Pacifica and Chrysler Crossfire all get axed for 2008, although the company is adding the Dodge Journey crossover and Dodge Challenger, which won rave reviews at during the 2007 auto show circuit, as well as two new hybrids: the Chrysler Aspen and Dodge Durango.

Sales on the Pacifica in particular have dropped off the table and it was time to move onto a newer and more exciting crossover, like the Journey. The Challenger helps keep Dodge’s reputation as a muscle car machine intact. The elimination of the low-volume Crossfire is not a surprise as it never developed the allegiance that they expected.

Many of the hourly job reductions are coming through the elimination of third-shift production at five plants. Three of the five plants affected by this action are the result of elimination of third shifts in Belvedere, Ill.; Toledo, Ohio, and Brampton, Ontario. The company is cutting second shift production at Sterling Heights, Mich. and Detroit, Mich. plants as well.

The cuts are being made in response to the drop in demand for Chrysler vehicles.

“We have to move now to adjust the way our company looks and acts to reflect a smaller market,” added Tom LaSorda, Chrysler vice chairman and president in a released statement. “That means a cost base that is right-sized and an appropriate level of plant utilization.”

Additional actions include reductions of salaried employment by 1,000 and supplemental (contract) employment by 37%. The company also plans to eliminate hourly and salaried overtime and reduce purchased services.

New Chrysler CEO Bob Nardelli is actively involved in the design of Chrysler vehicles…or at least he’s actively involved in questioning the design of Chrysler vehicles.

“I drive a different car to work everyday,” he said during a recent web cast. He said upon arrival at work in the company’s Auburn Hills, Mich. headquarters, he meets with the company’s chief engineer who addresses Nardelli’s questions about each vehicle. Nardelli concedes his chief engineer is very “patient.”

“I’m not a designer: I’m a consumer,” he said.
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Chrysler’s rank-and-file are voting against the new contract just as often as they’re voting in favor of it through the weekend polling and the new deal may not get approval. This could make things more complicated with Ford negotiations.

If Chrysler employees vote the deal down, it will represent UAW President Ron Gettelfinger’s first significant setback during his tenure atop the UAW. The senior leadership is will lobby employees this week at the Sterling Heights, Mich. and Belvidere, Ill. plants to vote in favor of the deal and secure its overall approval.

Chrysler voting got off to a tough start last week when 80% of hourly employees at the St. Louis North truck plant voted against the contract. The result was a surprise because the plant had received one of the stronger future product guarantees in the new pact. Other plants that have voted against the contract, include: Detroit Axle in Warren, Mich.; St. Louis South in St. Louis and Newark, Del. The Newark plant is scheduled to close.
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Chrysler and Cerberus couldn’t provide the UAW with specific product guarantees because they’ve figured out they have too many vehicles that do too little for sales and the bottom line.

The Auburn Hills, MI-based automaker is expected to cut at least five vehicles from its product lineup, including the much ballyhooed, but cannibalizing Jeep Commander. Did they really need another Grand Cherokee that, if possible, looks cheaper and is less comfortable? Clearly not.

Other models expected to get the boot include the Dodge Magnum wagon and PT Cruiser. Additionally, newly hired executive Jim Press, fresh from Toyota North America, sat in a Sebring and discovered in less than five seconds why Chrysler is having some problems: the interiors look cheap. So the automaker is also undertaking a review of its interiors and will made adjustments according, according to a published report.

Tweaking the interiors is just one of many changes Cerberus is going to be trying to affect over the next two years. Shutting down plants is likely next and in spite of the new contract being more favorable to the UAW than many expected, it does allow for the closure of some plants.

However, Chrysler is not the only one that should be and probably will be reviewing product lineups. Ford is still seeing Wall Street analysts call for the death of the Mercury brand. They cannot see the value in the mid-level product linuep. For example, a fully equipped Ford Fusion is just as appealing as the Mercury Milan. The only difference is the front fascia, rear fasica and the price. Ford CEO Alan Mulally has said in the past that every aspect of the company is being reviewed. If they’re willing to dismantle the Premier Automotive Group (Jaguar, Land Rover, Aston Martin and Volvo), cutting Mercury might not be as far fetched as some think.

It could be argued it was fate that I would lead me to write about the automotive industry: my first word was Volkswagen…at least that’s what my mother claims. Dad claims it was “automobile,” but you see the general direction my life was headed in at an early age.

Like most people who grow up in and around Detroit, my parents worked in the auto industry. My dad retired from Ford after 33 years and my grandfather spent 20 years with the Blue Oval. I’ve written about the auto industry for nearly 15 years. I’ve covered everything from monthly sales figures to auto shows around the world to asking celebrities what kind of cars they like.

I’ve done all that for newspapers, magazines, web site and I’ve even help author a book about the history of General Motors.

I find the business of the auto industry to be fascinating mix of politics, business and art. Few things in this world capture and hold the attention of folks as much as the auto industry and I’m glad to have a window to watch how the industry is changing.

General Motors and Chrysler are done and Ford and the UAW are saying nice things about each other, but the question remains: will these deals ensure the survival of the Big Three?

Consensus is no.
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