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How Chrysler Works

Chrysler Merges with Daimler-Benz
Formerly a Plymouth model, the Chrysler Prowler was removed from production in 2002. The last Prowler ever built was auctioned for $175,000.

The '98 Chrysler Concorde and '99 Chrysler LHS/300M rolled out amidst the understandable ballyhoo surrounding Chrysler Corporation's historic marriage to Germany's Daimler-Benz, announced in November 1998 and finalized during '99. Consolidation was sweeping the industry. Ford had purchased Britain's Jaguar and lately Volvo of Sweden.

General Motors controlled several Japanese makers and the automotive operations of Sweden's Saab. With the big fish getting bigger, Chrysler chairman Bob Eaton began seeking a strategic partner to insure his company's survival. The deal was all but sealed when he chanced to mention the idea to D-B's hard-driving chairman, Jurgen Schrempp.

On paper, the Chrysler/Daimler union seemed a heavenly match. Chrysler was the industry's most-cost-efficient producer, a recognized leader in design and innovation, loaded with talent, and had a strong asset in Jeep.

Daimler boasted a formidable image, worldwide resources, and the engineering prowess of Mercedes-Benz. Both companies were profitable, and getting together promised numerous cost-saving "synergies" as well as lots of nifty new cars and trucks.

But what the parties proclaimed as a "merger of equals" was really a Trojan-horse takeover. Though Eaton and Schrempp were nominal co-chairs of the new DaimlerChrysler, the merger terms clearly favored Daimler. This contributed to a culture clash that delayed combining operations beyond obvious functions like purchasing.

Within a year, some Chrysler hands said the American company was being "Germanized" into a mere division, something Schrempp later conceded was part of his original plan -- which only aggravated ill feelings in Michigan.

Meantime, a number of Chrysler's best executives, designers, and engineers jumped ship, including manufacturing wizard Dennis Pauley, president Tom Stallkamp, design chief Tom Gale and, tellingly, former president Bob Lutz, who had largely masterminded Chrysler's early-'90s turnaround and opposed the merger. Eaton, for his part, said he always believed the merger was of equals, yet he, too, left, stepping down some 18 months before his term expired.

That left Schrempp to tackle a growing pile of vexing problems. First, sales of the cash-cow Jeep Grand Cherokee sport-utility began slipping. Then minivans started lagging, forcing Chrysler to offer more rebates and other costly consumer incentives to clear 2000-model inventories. But that only stole sales that might have gone to the company's redesigned 2001 minivans, which offered more features but cost more to build and thus carried higher prices.

That was not what buyers wanted, especially since the new models didn't look very different from the old ones. Chrysler dangled more lures to spark sales, but competition was stronger than ever, so the new minivans were a fairly tough sell. With all this and more, DC stock tumbled, losing half its value by the end of 2000 versus its merger-time price, and some members of the DC board began demanding that Schrempp be fired.

Schrempp temporarily dodged that bullet and soon dispatched a trusted deputy, Dieter Zetsche, to turn things around as the new CEO of what was now called Chrysler Group. Joining him as COO was another Mercedes veteran, Wolfgang Bernhard.

They moved decisively, shedding more plants and workers while haggling for every last penny with parts suppliers. But they also made friends throughout the Chrysler camp -- Zetsche in particular. Most of all, they put the rush on a stream of new cars and trucks, plus show-stopping concepts that kept Chrysler in the news year after year.

The result was another dramatic Chrysler comeback that culminated in 2005 with a solid $1.7 billion group operating profit, this in a year when General Motors lost more than twice that sum. Trouble was, the Mercedes-Benz division, once a perpetual profit machine, was now losing money too. A weak dollar was partly to blame, but so was a series of image-tarnishing reliability and workmanship troubles that hampered M-B sales in the vital U.S. market.

Adding to the red ink was a costly expansion of the Mercedes model line into mass-market price territory, especially the money-losing European minicar misadventure ironically called Smart. With all this, Schrempp lost critical support on DC's Supervisory Board, and Zetsche was summoned back to Stuttgart in late 2005 to take over as CEO and to head the Mercedes car unit. Bernhard had been in line for the latter post, but was passed over at the last minute and ended up at Volkswagen in Wolfsburg. Replacing Zetsche at DC's Michigan complex was a canny Chrysler hand, Tom LaSorda.

Plymouth had been one of the first victims of the Chrysler-Daimler union, consigned to history after the 2001 model run as a money-saving measure. But the make lived on in spirit for a time, as its Voyager minivans and Prowler neo hot rod were promptly rebadged as Chryslers. Of course, they were still sold by the same dealers, who were fast changing their signs to read Chrysler-Jeep.

Collectors may wish to note that the last Prowler was built on February 15, 2002, bringing total production to 11,676. The following May, that very car was auctioned off for charity at an eye-popping $175,000. Car and Driver reported that was $129,378 over sticker, but did include a small, matching Mopar-cataloged luggage trailer. As one might expect, the buyer was a true Prowler fanatic, already possessing no fewer than 14 other examples -- "one in every color," he said.

For more on the amazing Chrysler, old and new, see:

  • Chrysler New Car Reviews and Prices
  • Chrysler Used Car Reviews and Prices