Corporate Governance & Business Ethics Case Study

Is Chrysler's Existence at Stake?

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Abstract:
Widely known for its speed, creativity and innovation, Chrysler, the third-largest US automaker faced a lot of challenges in the competitive environment. The oil crisis, enforcement of new safety regulations and ineffective overseas expansion during the 1970s, crippled Chrysler and forced them to seek the government's help to survive. Though the US automaker saw a period of growth in the following decade, it was hit by Japanese automakers' introduction of low cost and fuel-efficient vehicles. In an attempt to become the world's fifth-largest automaker, it merged with Daimler-Benz, in 1998, to form DaimlerChrysler. Even under the new ownership, Chrysler made losses and was completely unprepared for environmental issues and rising oil prices. Its overdependence on its dominant products like trucks and sport utility vehicles did not help either. In 2007, it was sold to Cerberus Capital Management, a private equity firm, to form Chrysler Limited Liability Company. But the ownership of Cerberus has also proved unfruitful. Subsequently, due to the slow down of the US economy and the credit crunch, Chrysler's existence seems to be a question mark. The case examines the challenges faced by Chrysler for survival and the various possible alternatives available if Cerberus stops funding its initiatives.

Pedagogical Objectives:

The case attempts to achieve the following pedagogical objectives:

• To understand the dynamics of the global auto industry.
• To analyse Chrysler's rise and fall since its inception.
• To examine Chrysler under Cerberus and the uncertainty of its existence due to soaring oil prices and economic downturn.
• To analyse the alternatives for Chrysler if Cerberus shies away from its ownership.

Keywords : Chrysler, General Motors, Ford Motor Company, Automobile, Trucks, jeep and sport utility vehicles (SUVs), Big three, US automobile industry, Lacocca, Chrysler Europe, Fuel price, Cordoba, Daimler-Benz, DaimlerChrysler, Cerberus Capital Management