Saturday, May 2, 2009

Jeep is a Four Letter Word for Albatross

Jeep is an iconic vehicle. It is an icon. Veterans of World war II and Korea loved it. I had a great physics teacher, Carl Koenig, in high school. Koenig would buy beat up Jeeps for $250, fix them up, and then sell them at a large profit (this was when school teachers were still grossly underpaid).

Ford and GM might outsell Jeep in SUV’s, but no Ford, Chevy, GMC, or Dodge SUV has the cachet of Jeep. The Toyota Land Cruiser or Leyland Land Rover sell well, but they are not Jeeps.

Jeep later parented an illegitimate offspring, the Humvee/Hummer.

Jeep is also an albatross, a bad karma, for any company which acquires it. Fiat’s acquisition of Chrysler (Jeep) is a guaranteed loser. It’s as certain as death and taxes. You can bet on it.

Every prior Jeep relationship has failed. Jeep is a beautiful, seductive, somewhat husky and masculine, serial bride. Hope always springs eternal, and is ever dashed with Jeep.

The first “Jeep” was designed by the small American Bantam company in response to a government invitation for bids shortly before America’s entry into World War II. Like seemingly all defense contracts, the Jeep came in oversized and above budget, whereupon another small auto company, Willys-Overland of Toledo, Ohio made some design modifications.

Willys’ modifications became the standard design of the Jeep. Production during the war was split between Willys and Ford, which had large production facilities.

The sinking Kaiser-Frazer Motors acquired Willys Jeep in 1953, and became Kaiser Jeep. American Motors acquired Kaiser Jeep in 1970. The Jeep product line was actually losing money at the time.

Renault of France started acquiring shares in the floundering AMC in 1979, and soon owned 49% of AMC. The combination was often referred to as “Franco-American Motors.”

Lee Iacocca, the last great leader of Chrysler, saw the potential in Jeep; Chrysler acquired AMC in 1987. Chrysler then had a “six pack” of dealers: Chrysler, Plymouth, Dodge, Dodge Trucks, Jeep, and Eagle, soon to become three, Chrysler, Dodge, and Jeep.

Daimler-Benz acquired Chrysler in 1998, becoming DaimlerChrysler. That relationship was ill-fated from the beginning.

Cerberus, the hedge fund, rode to the rescue in 2007, acquiring 80.1% of Chrysler Jeep from Daimler.

Cerberus hired Robert Nardelli to run Chrysler. Nardelli was a failure at his previous position, CEO of Home Depot, but no one ever doubted his bean-counting ability. He cut costs at Chrysler. partially by cross-badging Dodges as Jeeps, and Jeeps as Dodges. The iconic uniqueness of Jeeps is no more.

Fiat now comes to the rescue of Chrysler, putting up no money in the acquisition. A fundamental rule of law is that you get what you pay for.

First Renault, then Daimler, and now Fiat – three European auto companies got their hands on Jeep. The first two failed, even though Mercedes knew how to build quality vehicles. Both Renault and Fiat previously left the American market because their poorly designed, poor quality vehicles did not appeal to American consumers. Renaults and Fiats never could have competed in the Baja 500.

Fiat, nearly bankrupt a few years ago, wants another try at the American market, or is it the Japanese-American market?

The two remaining questions are:

How many years before the Fiat-Chrysler merger fails?

Who will be the next suitor of Jeep?

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