What next for Daimler and Chrysler?

Reading this article today, the following thoughts occurred to me:

I have no data to post here right away but I am given to the view that in spite of the great affinity and demand for automobiles that characterizes this and the past century, there is an obvious surfeit of automobile manufacturing corporations. I cannot recall precisely the reasons given for the merger of Chrysler and Daimler when it occurred but I am certain that it was a critical event in that industry and one that was largely expected to change the automobiles landscape in both the Us and Europe. Here was the merger of great German engineering with the large market in the US. It quickly became evident that the expected efficiencies not only failed to work, but that Mercedes was in turn affected by quality problems.

In the article above, Andrew English traces the merger and recalls, with the benefit of hindsight, early signs that the merger would most probably fail. I am a skeptic of this kind of hindsight for the reason that while the merger was then considered quite risky, a good number still considered that it would enhance value if it could be made to work. as one can tell, at that time, there was no mention of the health care and pension liabilities that prominently feature as the explanation for the poor performance of the automobile manufacturing firms in the US.

Chrysler has a number of divisions with varying levels of profitability. Impliedly therefore, not all of these divisions are losing money. Competition is now faced from established Japanese manufacturing firms and the overtures from Chinese firms are also indicative of the fact that there are profitable areas. At the same time, these also support my view that given the number of automobiles manufacturers and the price competition, there may be far too many automobile manufacturing firms already. Noting that the Porsche's annual returns of 17% are the industry's highest, the message for Chrysler ought to be clear, take out the unprofitable divisions.

Private equity firms are increasingly taking over many corporations with the intention to restructure them and sell them out with huge returns. Andrew English correctly anticipates what Cerberus Capital might do when it acquires Chrysler. My guess is that it will very separate the profitable divisions from the rest and carve out the firm and thereby prove that the sum of its parts is probably greater than the whole. The advise for Daimler, with the benefit of hindsight is that corporate hubris often precedes the inevitable fall.