Daimler AG’s divorce from the Chrysler Group, cemented in a $7.4 billion (Rs30,340 crore) deal to Cereberus Capital Management, returns the auto maker to an American buyer. It also pretty much ends any hopes the US company had of expanding its global brand.
Analysts say it will be that much more difficult for Chrysler to now get a footprint in the Asian market without the marketing muscle of Daimler. And this is happening even as US rivals Ford Motor Co. and General Motors Corp. are stepping up their efforts in emerging markets such as India to shore up loss-making US operations
To be sure, Chrysler, under Daimler, also had little to show for in terms of its push into hot markets such as India since the 1998 landmark $38 billion deal that was heralded as the future of global auto giants. Only 8% of Chrysler sales come from outside North America and much of this is from South America and Europe.
In February, Chrysler did sign an agreement with Chinese car maker Chery Motor Co. to make small cars. That deal was widely seen as a signal that the American brand would start eyeing emerging markets where small cars typically rule the roads.
After World War II, Mahindra & Mahindra Ltd manufactured the Jeep, under licence from Willy’s, an arm of the American Motor Co., which was subsequently acquired by Chrysler in the late 1980s. Daimler, which built a factory in India before acquiring Chrysler, didn’t bring any Chrysler cars into the country as it felt that the models weren’t suitable for India. A DaimlerChrysler India Pvt. Ltd official declined to comment.
“The prices of Chrysler’s models would have been too high for India,” says Michael Tyndall, analyst with Nomura Securities, who tracks DaimlerChrysler from the UK. “They don’t have a particular model that would fit India.”
But even if Chrysler wanted to enter a rapidly expanding market such as India, it would be “a difficult and slow process”, says Tyndall. “It would require investment and they are not in a position to do that.” On Tuesday, the Chrysler group reported a first quarter loss of $1.98 billion.
Meanwhile, GM and Ford, spurred by growing overseas sales, are hoping to get better road share in India by introducing new models, such as the Chevrolet Aveo and Ford Fiesta, in India after years of struggle with sturdier fuel guzzling cars. India’s market is dominated by smaller lighter cars, such as the Alto and Maruti 800 that offer longer rides per litre of fuel.
The American duo of Ford and GM, facing their worst financial performance led by high health-care and pension bills at home, are pinning their hopes on China and India, the fastest-growing car markets in the world—with demand of more than one million units a year. GM is spending Rs1,400 crore in building a new plant at Talegaon, Maharashtra and has lined up a second car launch after the Spark. Ford, too, is developing a car for India. With others such as Nissan Motor Co. and Volkswagen AG spending Rs30,000 crore to build new factories, India’s car market is set to climb to 2.2 million units a year by 2010.