A bit of history: Chrysler, bought American Motors Corporation in 1987, and, a few years later in the mid-nineties, had integrated AMC's cost-effective "platform team" manufacturing model. The company had a terrific engineering department, and was very lean. While the company was not the "lowest-cost producer", it had made huge strides in that direction. In short, it was a lean, profitable operation. Chrysler had socked away something like $14 billion in cash by 1997.
Indeed, Chrysler was the most profitable automaker in the world in the mid-'90s.
Then Daimler rolled in, and everything changed.
The pile of cash disappeared into Daimler's gaping maw.
Before Daimler, Chrysler was very cautious about its updates of successful products. The company planned carefully to update styling, technology, and features -- while doing its damndest to ensure changes would not turn off repeat buyers.
Daimler, on the other hand, was haphazard and sloppy. Who was demanding the Pacifica, or the Crossfire? And the Neon? Product planning at Chrysler had originally scheduled a complete redesign for 2000 -- DCX canceled it. Predictably, sales kept falling as the line aged; and eventually the car was discontinued without any replacement model in the pipeline.
2000 represented the beginnings of product planning / long-term management choices from Stuttgart. Mistakes made two years earlier now began showing up. Chrysler posted its first loss since the 1998 merger; and losses would continue to 2004. Wolfgang Bernhard and Dieter Zetsche were sent over to manage Chrysler Group. One of their first decisions was to cut costs on materials used in interiors, to profitable levels. Then they expanded the SUV line at a time the niche was becoming saturated. As I recall it was around that time that trouble-prone DCX transmissions and suspension components started showing up in Chrysler products. Selling defective parts was helpful to Mercedes, not so helpful to Chrysler.
In 2004, the long-in-the-tooth Neon was finally canceled (its 2004 [final-year] sales were 118,476. Taking its place on the production line is the Dodge Caliber / Jeep Compass sport wagon. Essentially DCX sent a fuel-thrifty model into the dustbin and replaced it with a passionless psuedo-hatchback thing that gets worse mileage at the very time the market was turning again towards thrifty.
Also in 2004, Plymouth disappears from the automotive pantheon -- perhaps deservedly. But... Maybe a better move would have been for the return of the brand to its marketing purpose half a century ago: to sell cheap cars to thrifty people.
By 2006, Chrysler marketing was inexplicably positioned to pursue the traditional Dodge buyer. Jeep's image is becoming more confused with the Compass and other new models. The Avenger, Aspen, Sebring, and Commander are all introduced at a time when Chrysler has **neither** a subcompact nor any real C-segment vehicle (the Caliber ).
In short, DCX set up Chrysler for pure disaster. DCX harvested the profits Chrysler brought in during 1998, 1999, 2000, 2004, and 2005; as well as the billions in Chrysler's bank account in 1998.
It may be that Daimler really did intend for the Chrysler purchase to be its entrance to the American mass (ie non-premium) market; but they failed to cater to that market. There were no investments in new & competitive compact sedans or subcompacts. They continually cut costs at Chrysler in penny-wise but pound-foolish ways to boost the bottom line, turned it into "all trucks, all the time", and used it as a way to recoup their investments in different technology (such as the transmissions and suspensions in the LX platforms).
Daimler certainly isn't a victim. The marriage was an abusive one that left Chrysler bruised and lighter by several billion dollars. Daimler management got lucky with their purchase of Chrysler. Cash from their American piggy bank covered DCX's never-ending losses on the Smart and Maybach lines. They took away lessons in how the American managers before 1998 got cars from a computer screen to a production line in an industry-leading eighteen months.
There are a lot of people demanding the heads of the auto execs of the Big Three. What no one acknowledges is that the execs who killed Chrysler are named Juergen Schrempp, Dieter Zetsche und Wolfgang Bernhard. They escaped with their skins; I guess just because they live in Stuttgart, instead of Auburn Hills.