Will General Motors Pick Up Chrysler On The Cheap?

My forecast that the cost-cutting strategy of the private equity Cerberus guys who bought Chrysler from Daimler Benz would fail is, unfortunately, turning out to be true. By hiring ex-Home Depot CEO Robert Nardelli, who’s speciality is efficiency, they embarked on a traditional business strategy of squeezing more out of existing operations at a time when soaring oil prices were undermining the sales of their gas-guzzling product. What was needed was an innovation strategy of growth that quickly generated electric, hybrid, flex-fuel and other models that better fit into a fast-changing market place.

Supplying these cars from China or anywhere around the world quickly and then investing in new models to capture market share might have saved Chrysler. But squeezing pennies out of a shrinking operations base cannot.

My guess is that GM will pick up Jeep and a couple of Chrysler lines—and that will be the end of that. Business model innovation is often the most powerful kind of innovation. It requires imagination and guts. Implementing old, tried and true, strategies in a time of dramatic change rarely work.