A lot of news energy has suddenly been released in the last couple of days regarding the Chrysler Group of DaimlerChrysler. All speculation on who will purchase Chrysler from the Daimler parent company.
It would seem to be a mistake for DCX to spin out Chrysler and undo the acquisition. I worked at Chrysler when the merger was announced, in fact I went up the elevator with two of the executives in the inner circle of that endeavor the day the European Wall Street Journal broke the news (one very interesting elevator ride). One of those two executives would later become CEO of the Chrysler Group, briefly. I was on some of the high level merger integration teams, worked through some of the concepts and processes that would be used to generate the savings to pay for the project. Some original research I did directly helped a later Chrysler CEO understand the company background and future for an improved company.
What DCX shareholders and their board of management forget is the Chrysler Group, while now troubled (again) does really offer more opportunities and strengths. Chrysler thins out the massive Mercedes R&D to shoulder some of the financial burden. A couple of years ago Mercedes was deep in loses and the Chrysler Group generated cash that kept Mercedes going. That give and take is what the original acquisition was meant to do. And the two companies are still integrating, sharing concepts both directions across the Atlantic. But it appears that the decision has been made to spin out Chrysler on its own.
General Motors has been the most frequently cited suitor for the company. Many experts are pointing out that GM doesn’t need Chrysler because they directly match each other in every segment. But I think a lot of reasons make the deal attractive for GM, provided the price is kept reasonable. GM has been down, but I think they have been improving on many fronts and are way ahead of the news reporters on their real comeback. Buying Chrysler would give them a little more swagger and defend their market share numbers against Toyota.
Here are the best reasons that GM should pursue Chrysler:
1- Jeep. Chrysler purchased AMC in 1987 to get one brand, Jeep, which still ranks in the very top of globally recognized brands. DCX may have been squandering the brand a bit in the last few product launches, but the name has meaning for a lot of consumers. And Bob Lutz was involved with some of that purchase the prior round.
2- Minivans. GM and Ford announced they are exiting their own minivan programs. Cross-overs get more press, but minivans offer the room and fuel economy that truck based SUVs certainly lack and generally more cargo space than CUVs. Chrysler’s minivans have generally filled two assembly plants with product while producing innovations that Toyota and Honda end up benchmarking.
3- Powertrains. (a) Transmissions. GM and Chrysler are already partners at New Venture Gear to produce transmissions for each other. So why not bring this all in-house? (b) Hemi. A strongly branded platform in its own right. The only engine that “average consumers” know about, unless you count “V6″ and “V8″ as “brands”… Look what Intel did with their “Intel Inside” stickers for the potential value.
4- Assets. GM can purchase the assets of Chrysler without pulling through the pension liabilities and other headaches that GM already struggles with. GM (actually any buyer) can come in and offer everyone a job at the new company but under radically different terms. They might even be able to choose which plants they really want (Hemi, Jeep, and Minivan) and pass on the others.
5- Costs. There is a lot of opportunity to reduce and eliminate costs between the two former competitors. Redundancies are expansive and can easily be uncovered (contact me if you’d like some help, whether your GM or the corner grocery, we can help).
The risk is that GM gets in a bidding war and pays too much for Chrysler. There is a fine line between determining value and folly. As long as GM keeps their wits in the heat of the inevitable auction they will do fine.
So Detroit will once again be on the nation’s newspapers and for something a little more interesting that the typical read.
Investment disclaimer: While I don’t currently own any shares of DCX or GM, I have owned shares in the past, as well as worked at both companies in various capacities.
Cheers!

Digg.com has a thread running about a comment that Steve Ballmer at Microsoft made that Windows Vista sales are behind the sales curve of prior launches of Windows 95 and Windows XP at the same point of their respective sales histories.  Here are a few thoughts about what Microsoft should be considering:
It’s not Piracy, it’s just that the world has changed…

Large corporations don’t upgrade until they have had their IT departments fully test the new operating system for 12-18 months or longer.  As time goes on they spend more time testing because there is more complexity in the OS and the other programs the company runs and more potential for problems.

Savvy corporations are looking more at client-server applications and cutting hardware (and software) costs - not putting a Thick-client on every desk anymore - especially since most work is being done on or feeding Internet applications.

Consumers take longer to purchase replacement computers (why the hardware manufacturers have languished).  Most don’t have major performance needs (email, web surfing, and documents/spreadsheets don’t require fancy equipment).  So most consumers are getting by with computers still running Windows 98.  Or if they want more security than 98/ME/etc affords since Microsoft discontinued support they look at Linux.  The major performance issue for people comes at the bottle-neck of Internet access - more are moving from dial-up to DSL/Cable but still the speed of an average ten year old computer still far exceeds the access bottleneck.

There are more than one pc in many families - so some upgrades begin to be considered like a corporation - file compatibilities, system stability, home network issues, and so on.

There is still support for XP by Microsoft and no killer-app for upgrading to Vista.  Windows XP was a good stability upgrade for most people so they are not getting too angry at their existing OS to be looking for something better.

A major competitive threat used by Microsoft in the past was the cost advantage they could apply vs new entrants - they could offer products for nearly free until people were hooked and then charge later after competition is removed (early MS Office tactics, real and imagined).  Or offer as a bundle with new equipment purchases (that appear to be free to the buyer).  Now Linux and other open source projects are out there that are more free than Windows.  And Linux is improving, rapidly.

Gamers, that drive a lot of hardware upgrades, have other competing options to consider spending on - XBOX’s, PS, Wii, etc.  They then have less disposable income for the high-end computer purchase.  Then some game consoles can access the Internet, so some don’t bother buying a family computer.  Microsoft is contributing to cannibalizing their own OS sales with their consoles and game offerings.

Linux is improving and more consumers are learning about it and experimenting.  They find it works on their machine and keep going.  Programmers write a lot of expensive code for Linux because they are fighting for freedoms against the huge corporation.  Rebels will work exceptionally hard for a cause they believe in.  Comments about Pirates and so on just renew their resolve.

So Microsoft’s world has changed from the launch of Windows 95 and Windows XP.  Their launch curves will be slower and longer.  Eventually Vista will be installed in a large base in corporations as they upgrade equipment and home users will upgrade slowly to do work at home.

But don’t blame the Pirates, blame market competition.

Cheers!

Dell computer corporation recently launched a site called “Idea Storm” to get feedback from customers on improvements they can make to products and company interactions.

So far most of the issues can be summarized as customers just want ways to simplify their purchase and use experiences, reduce costs, and get more performance out of the hardware they are purchasing.

Dell has advertised how they use Lean Manufacturing concepts in their factories. Pictures and videos I have seen from their factories indicate they understand the concepts (some more opportunities though, my team and I would be very willing to assist, see the contacts page to get in touch). So Dell just needs to translate these concepts from the factory floor to the office and customer facing interfaces.

Dell is also in the midsts of figuring out how to improve profitability and sales penetration. An early method they should begin with is the old 80/20 rule and simplifying their product line. There are a huge number of product platforms and options available – all in the spirit of offering the customer a “customized experience”. Many consumers view computers as a commodity, an appliance, to use to get things done. I grew up in the automotive industry and while there are the passionate owners, there are many who just look at a car as transportation, and they make buying decisions from that perspective. The 80/20 principle will point out which 20% of the products generate 80% of the sales and profits. Everything else is extra overhead and complexity for a company that drags them down – it’s a real phenomenon, there have been several studies of increasing platform and product complexity rapidly drags down profits. Oh, marketing departments will tell you the company has to compete in every market and price point and “we need all of this” - sometimes just to keep the marketing group busy as there would be too much redundancy if they only had a couple of products instead of hundreds to market – where’s the career in that?

Why confuse buyers with duplicates of similar products (the separate corporate and consumer brands)? With the rapid pace of technology shift it would be better to select one platform and provide that to both categories. Think the consumers would like to get the pricing the corporate version offers (typically less trim and chrome and shiny sparkles and covers used to “dress up” the consumer version)? Think the corporations would like to get lower prices because much of the hardware fixed/overhead costs have been spread into the consumer market?

As I’ve explained in my prior posts here, I do some computer refurbishing for a hobby, so I’ve seen the good, bad, and ugly hardware designs from all the manufacturers – and because of my background I know what problems those designs cause in the manufacturing realm. Make hardware repair easy, make getting service documentation from the web site easy.

Then work on the software end – many consumers correctly dislike the advertising and “free” software pre-installed on their hard drive. Just like grocery stores, many computer manufacturers take the equivalent of “slotting fees” to place product on their “shelf”. Dell has been investigated or are at least suspect about Intel, Microsoft, AOL, and etc possible “fees” that “reduce the price to the consumer”. But they do not reduce anything, departments have to manage all the various projects to collect and maintain them, consumers get slower performance, and the call centers have to add more support people (often in other countries “to reduce costs”). Seems a bit expensive, doesn’t it?..

Go back to the Lean tenants and remove waste from your system. It doesn’t matter if you make cars, computers, or crayons - you need to simplify all of your processes and products and remove costs in doing business. Sometimes it is useful to “Lean” on outside expertise to offer an objective perspective on the exact methods and tools for getting there, which is where we can assist you – and you don’t have to create “Waste” by keeping an in-house staff for this either – just give us a call.

Cheers!