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Ten years ago, Chrysler’s pairing with Daimler-Benz AG of Germany was among the largest mergers in industrial history and put the U.S. automaker on the brink of globalization. The future looked bright and the 7,600 Chrysler jobs in Fenton appeared secure.

Now Chrysler LLC is on the brink of another merger. But this time, the future looks uncertain and its local work force continues to shrink.

By the end of this week, the minivan plant in Fenton will be idled and the number of local Chrysler assembly jobs left will drop to 1,100, all in the neighboring pickup plant.

Chrysler’s path since 1998 has taken the automaker to a precarious position. It is arguably the most vulnerable of the three U.S. automakers, and now the focus of a possible merger with General Motors Corp.

After 73 years as an independent company that once staved off bankruptcy using government loan guarantees, Chrysler sold itself to Daimler-Benz in 1998 for more than $37 billion. In that year Chrysler posted $4.9 billion in operating profits, making itself an appealing partner for Daimler-Benz.

The alliance with Mercedes-Benz’s German parent was supposed to be a "merger of equals" to create an international auto superpower. Daimler-Benz would receive a big stake in the U.S. market, and Chrysler would get the international presence it wanted and some access to Mercedes’ luxury platforms it needed.

But the union didn’t turn out as smoothly as planned.

Daimler and Chrysler shared little technology, plenty of rivalry and too few joint decisions, said Joe Phillippi, president of AutoTrends Consulting in Short Hills, N.J. Daimler-Benz called the shots for the overall venture.

"The joke was always, How do you pronounce ‘DaimlerChrysler’?" Phillippi said.

The punch line: "Daimler."

When Chrysler’s profits started falling, the relationship soured even more, Phillippi said.

In 2001, as losses deepened, DaimlerChrysler implemented a turnaround plan to improve Chrysler’s performance, but the restructuring efforts didn’t get traction.

Chrysler eventually took a $1.5 billion operating loss in 2006 and fell to fourth place in the U.S. market behind Toyota. A few months later, DaimlerChrysler met with potential buyers for Chrysler, media reports said.

Enter Cerberus Capital Management LP, a New York private equity firm known for turning around troubled companies. DaimlerChrysler sold off 80 percent of Chrysler to Cerberus in August 2007 for $7.4 billion, and kept a 20 percent stake in Chrysler LLC that it still owns today.

"When Cerberus bought Chrysler from Daimler, Chrysler was sliding down this slippery slope," Phillippi said.

By that point, Chrysler sales were trending down and its product line, dependent on gas-guzzling SUVs and pickups, continued to lose its foothold in the market.

It was about to get worse.

Chrysler’s ties to Daimler were "severed just before the worst market conditions in decades hit," said John Casesa, managing partner of Casesa Shapiro Group LLC in New York and a former Wall Street auto analyst.

FENTON WOES

Demand for large vehicles in particular, including those made at Chrysler’s Fenton plants, was quickly waning.

Minivan sales peaked in 2000, and the sales decline accelerated sharply in mid-2007, Casesa said. Higher gas prices steered buyers away from minivans, new crossover models became substitutes and huge incentives on SUVs lured buyers into that segment and away from others, he said internet payday loan.

Acutely aware of those trends, the automaker announced in early 2007 that it would cut one of two shifts at the Fenton South Assembly plant, where workers make the Grand Caravan, Dodge Caravan cargo van and an export version of the Town & Country minivan.

At the end of 2007, combined sales of the Dodge Grand Caravan and Chrysler Town & Country were down 15 percent from a year before. That came after a 9 percent decline in 2006, according to Automotive News data.

When the shift was eliminated at the start of this year, about 1,080 workers were laid off.

Meanwhile, sales of the Dodge Ram and other pickups weren’t doing well. And when gas prices topped $4 per gallon this summer, consumers shifted even more away from large vehicles and toward smaller cars.

Four months ago, Chrysler announced it would eliminate the remaining minivan shift and idle indefinitely operations by the end of October. Chrysler has no plans to build vehicles at the plant in the future, spokesman Ed Saenz said Friday.

Chrysler also recently reduced the Fenton pickup plant to one shift. In all, the changes laid off 2,400 local workers.

The automaker’s major problems now are twofold, analysts say. Consumers buy fewer cars because of the credit crunch and the economy, and the cars they buy are smaller and cheaper.

"Chrysler wasn’t prepared for this environment," Casesa said.

Chrysler’s sliding sales, and the similar problems Ford and General Motors face this year, stem from decades of bad decisions. The Detroit Three focused too heavily on big vehicles and gave concessions to the United Auto Workers union that saddled automakers with hefty health care and retiree costs.

And for Chrysler’s position specifically, Casesa points the finger at Daimler, not Cerberus.

"To have a strong product line in 2008, you were making those investments in 2003," he said.

But Daimler didn’t make those investments, and now Chrysler and Cerberus are paying the price. January-through-September sales were off 25 percent this year compared to 2007, the most of any automaker.

At the end of October, Chrysler will only have one production shift in the region.

Automakers would run a plant on one shift if they thought demand would soon return. Those days have ended, analysts say.

Casesa said carmakers don’t have the "financial cushion" to pay for unemployment and wait for demand to come back.

A single shift is considered inefficient and doesn’t bode well for Chrysler’s future here.

"One shift is a prelude to idle. Idle is a prelude to closure," said Kristin Dziczek, director of the Center for Automotive Research’s program for automotive labor and education.

According to forecasts used by the research group, the remaining shift at the Fenton pickup plant will be cut in mid-2009.

Even a possible merger between Chrysler and GM is unlikely to save the plant, Dziczek and other observers say.

Gerald Meyers, a former chairman of American Motors Corp., said GM doesn’t need more dealers or plants.

"It’s not a natural fit," he said.

Dziczek was skeptical that Chrysler will remain an independent company. "I don’t see (the automaker) as survivable in this incarnation," she said.

atablac@post-dispatch.com | 314-340-8140

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