Why India was a jinx for Chrysler

by 13 Jun 2007


image
Chrysler was among the first lot of names tipped to make an entry into India when the doors were thrown open to multinational investments in the auto sector. At that time, the company was in talks with Mahindra & Mahindra to make the Cherokee in India. It looked as if this was inevitable given that it had a marginal stake in M&M and had had a long association with the company for the Willys brand.

The Indian company was equally keen on a car option from Chrysler and the Neon seemed to fit the bill. Just when it seemed that the two were set to make a formal announcement of their joint venture, M&M had settled for Ford as partner. The Cherokee project was history and Chrysler had to make a beginning all over again.

TALKING TO BAJAJ

Interestingly, this was the time when Bajaj Auto had indicated its interest to get into cars. Chairman, Rahul Bajaj was in talks with the likes of Renault and Mitsubishi and Chrysler soon entered the picture. It was widely perceived that the two were close to signing a deal. Bajaj was categorical, though, that the need of the hour in India was an affordable car and Chrysler began working on an Asia model.

Eventually, the project died a quiet death and Bajaj also decided that it made little sense to get into cars especially when it involved heavy investments with hardly any role for the Indian partner. It is in this context that the question of equity stakes becomes relevant.

The Indian two-wheeler major made no bones about the fact that it would not settle for an equal partnership but hold majority stake in the car joint venture. This apparently did not work with the likes of Ford, if reports are to be believed.

Anyway, moving on with the Chrysler saga, it was clear that the company was fast running out of options in India. It was quick to divest its stake in M&M because there was really no point continuing with this at a time when Ford had entered the picture. Peugeot, which also had marginal equity in the company, followed.

##### MEGA ALLIANCE

Anyway, this was also the time when there was a mega global alliance brewing between Daimler and Chrysler and thus was DaimlerChrysler born. Who would have thought then that this was going to be the most incompatible relationship in the history of the automobile industry?

The German carmaker had entered India through a joint venture with Tata Motors (which eventually became a 100 percent arm of Daimler). It now had the option of bringing in Chrysler products too though its management constantly maintained that no decision had been taken yet on the issue.

Clearly, it was not going to be an easy task. In the first place, this would have involved a lot of time, effort and money in building the Chrysler brand here. Two, it was crystal clear that the top priority on hand was to promote Daimler in India. Hence, while a range of Mercedes models entered the market, there was just no indication of Chrysler following suit. Clearly, there was an issue of identity preservation as far as Daimler was concerned coupled with the fact that the global marriage was rapidly falling apart.

Of course, the bigger issue was that there was really no model from the Chrysler stable that was appropriate for India especially in terms of costing. Now, with Daimler having decided to divest practically the entire Chrysler shareholding (it is irrelevant that it holds a residual 20 percent stake), there is really no way the American company can hope to participate in the India market.

CERBERUS IN CHARGE

Private equity investment company, Cerberus Capital, which is the new owner of Chrysler will have its own share of problems on issues relating to losses and labour. Typically, it would like to make a profitable exit at the earliest and the only way this can be done is to sell it to another entity within the automotive space.

The biggest obstacle is the state of the balance sheet and this is what could deter potential buyers from contemplating such a move. Will somebody like M&M actually be interested in buying out Chrysler? Or will Carlos Ghosn see some value in this company? All this only remains speculative for the moment as Cerberus begins to take charge of daily operations. Daimler, in its turn, is celebrating! This has been a doomed marriage from the word go.

comments powered by Disqus