Chrysler Revisits Hard Times

(CBS)  If Chrysler got any good news Friday, it was that its November sales were down only five percent, compared to Ford's seven percent drop and General Motors' eight percent slide.

The bad news, CBS News Business Correspondent Anthony Mason reports, is that sliding sales translated into a half-billion dollar loss for the automaker in the third quarter, and Friday the company took action.

It announced it will idle a dozen plants this month and temporarily lay off 22,000 workers. "It's a saturated market and all of this requires immediate action," explained Chrysler's Jay Cooney.

This week Chrysler idled three plants and 13,600 workers in Detroit, Toledo, Ohio, and Ontario, Canada to cut inventories.

Next week, the Newark, Del., plant and the St. Louis North truck plant in Hazelwood, Mo., will be idled.

The following week, the Pillette Road plant in Windsor, Ontario plant will be shut down.

And the week of Dec. 18, plants in Belvidere, Ill., Detroit, Hazelwood, Mo., Toledo, Ohio and Brampton, Ontario will not operate.

In November, the automaker closed seven plants for a week — a move that surprised chairman Schrempp and eventually led to the ouster of company president James Holden.

Suddenly Chrysler is a company in turmoil. But its trouble may have started two-and-a-half years ago after its celebrated marriage with Mercedes' parent, Daimler Benz.

In 1998, DaimlerChrysler chairman Jurgen Schrempp called the merger a perfect fit and said somebody called it a marriage made in heaven.

But it has been hell ever since. Advertised as a merger of equals, most of Chrysler's American management — once the dream team of Detroit — have resigned, retired, or have been fired.

"Almost all of them are gone and the rumors are whoever isn't will be gone by the end of the year,"noted Keith Crain of Automotive News.

Schrempp confessed last month that his "merger of equals" promise was a ruse to get Chrysler to approve the deal.

"Schrempp's admission that this was never to be a merger of equals badly damaged morale at Chrysler. It makes it very difficult for Chrysler employees to believe what's said in Stuttgart," said auto industry analyst John Casesa of Merrill Lynch.

"It's technically called fraud," according to attorney Terry Christensen. It's a fraudulent misrepresentation."

Christensen represents Chrysler's largest individual stockholder, Kirk Kerkorian, who filed suit this week claiming Daimler's CEO deceived Chrysler shareholders.

"I know that Mr. Kerkorian would not have done the deal if he had not said that," said Christensen.

An angry DaimlerChrysler shareholder group urged Schrempp to quit Friday in the growing fight over who is to blame for the slump at Chrysler.

Critical Shareholders DaimlerChrysler, an umbrella for small shareholders in the German-U.S. company, became the secod group of German shareholders to demand the immediate resignation of Schrempp, saying he cost them $30 billion in lost stock value.

The move rides a wave of U.S. lawsuits that has rocked the Stuttgart-based automaker, including the $8 billion lawsuit Kerkorian filed Monday.

A few days later, another group of German shareholders said it would formally petition DaimlerChrysler to fire Schrempp and dump its loss-making Chrysler division during April's annual shareholder meeting.

Adding to the acrimony was a DaimlerChrysler board member who suggested in an interview published Friday that American executives withheld weak financial figures during 1998 merger talks between Daimler-Benz and Chrysler Corp.

"Apparently, Chrysler did not make available to us all the decisive figures during the merger's preparation stage," supervisory board member Manfred Goebels said in an interview with the business weekly Wirtschaftswoche. "Perhaps our production experts were confronted with too few transparent facts during their analysis of the Chrysler plants."

But Goebels stopped short of saying merger mastermind Schrempp was duped. Schrempp is in solid control, Goebels said, adding that the fundamentals of teaming up with Chrysler were still sound.

Despite ongoing production problems, analysts say there is little evidence that Chrysler hid poor figures, adding that the financial troubles at Chrysler, which rocked the partnership when it posted a $512 million loss in the third quarter, resulted later from fierce competition and tight profit margins.

"I don't see any signs of that," said Juergen Pieper, an auto analyst with Metzler Bank in Frankfurt. "Chrysler had done almost everything right for a couple of years, and they were simply too slow in reacting to the competition that moved into their markets."

Meanwhile, as tougher competition has cut Chrysler's minivan, sport utility and pickup truck profits, the merged company has yet to come together.

"There isn't a single product out of this new company DaimlerChrysler that didn't exist before the merger," said Casesa.

So, Casesa observed, "there has been no real marriage; there has just been…a lot of hand holding."

A new German head was installed at Chrysler this month. The joke going around Detroit is that DaimlerChrysler has a new name: just Daimler; the Chrysler is silent.