Posted on 06/12/2008 3:27:26 PM PDT by MinorityRepublican
DETROIT (Feb. 8) - Automaker Chrysler LLC aims to cut its product lineup by around a half and dramatically shrink its dealership network so it can sell its three brands under one roof, the Wall Street Journal reported on Friday, citing people familiar with the plan.
The proposal to cut the struggling U.S. automaker's product line of around 30 different trucks, cars and sports utility vehicles across the Chrysler, Dodge and Jeep brands to 15 or more within a few years is part of a drive to cut costs and create a leaner, more profitable company, the paper said.
Analysts welcomed such a move, saying a smaller, more focused Chrysler would have a better chance to thrive.
"This is just what the doctor ordered," said John Casesa, a former Wall Street analyst who now heads an advisory firm in New York specializing in the auto industry. "This strategy is decades overdue.
"It's an absolute imperative to have a viable business in North America," he added. "This company needs to eliminate waste that goes with having duplicate products in each (brand) channel and smaller stores with low profitability."
Shrinking the number of dealers will be difficult, however, because of laws in all the states protecting those businesses, analysts said. If Chrysler, with about 3,600 dealers, wants to move quickly, it likely will have to offer financial incentives.
Over the years, the automaker and its U.S. rivals, General Motors Corp and Ford Motor Co, have tried to shrink their dealer numbers, often facing great resistance. However, analysts said some dealers may be more receptive now, given the weak U.S. economy, if the offers are generous.
A smaller dealer base will translate into more attention for Chrysler's cars and stronger advertising, Casesa said. "A weak dealer network is a silent killer; like blood pressure," he said.
Chrysler said in a statement that Vice Chairman Jim Press had just completed an eight-day tour of about 3,000 Chrysler dealers during which the company had unveiled a new corporate initiative called "Project Genesis." The tour came ahead of the annual National Automobile Dealers Association meeting, taking place in San Francisco.
The head of the largest U.S. dealer called the plan "brilliant," saying his large stores were well placed in such a new environment.
"It will be extremely controversial," AutoNation Inc Chief Executive Mike Jackson told CNBC Television on Friday. "What's brilliant and powerful is that they've combined their product strategy with their retail strategy.
"You can't survive unless you get the entire product offering. You'll either be out of business or in a high throughput model," he added. "This is where they had to go."
The Chrysler project is designed to "align the dealer network with the product portfolio," the company said, without commenting directly on the newspaper report.
"At this point, we have not made any final decisions regarding our dealer optimization or future product plans, nor has the company set any firm timelines," Press said in the statement. "Our dealers are and will continue to be an integral part of this process moving forward."
Chrysler is owned by private equity company Cerberus Capital Management, which bought an 80 percent stake in the company from Daimler AG last August. Since appointing former Home Depot Inc CEO Robert Nardelli to run the company, Cerberus has been expected to shake up established practices in Detroit.
Indeed, in an unexpected move last week, Chrysler abruptly canceled contracts with financially struggling supplier Plastech Engineered Products Inc and moved to seize equipment at the supplier's plants that the automaker said it owns.
That dispute led Plastech to file for bankruptcy and stop production of parts for Chrysler, forcing the automaker this week to shut production at four assembly plants for a day before an interim deal was reached.
Last month, Chrysler officials told Reuters that the company was rolling out an initiative called "New Day" that included a $150 million package of vehicle upgrades. Chrysler also said at the time it was committed to removing weak links from its product lineup.
"In the end, we will have a more viable dealer body focused on the customer," Press said on Friday.
Also on Friday, Jerry York, an advisor to billionaire investor Kirk Kerkorian, said at a panel in Chicago that the U.S. automaker cannot succeed by itself. York is a former Chrysler chief financial officer and Kerkorian has tried to buy Chrysler in the past.
"Chrysler as a stand-alone company is not viable," York said at an event being held in conjunction with the Chicago Auto Show. He added that Cerberus was likely weighing all options due to the intense pressure Chrysler is under.
Last November, York said at the Reuters Autos Summit he ultimately expected Chrysler to be combined with an overseas automaker once Cerberus fixed it up. Some analysts have suggested Carlos Ghosn , chief executive of Japan's Nissan Motor Co Ltd, might be a willing partner.
i’ll bet cereberus is wondering why they bought chrysler,
especially after mercedes couldn’t turn a profit.
sorry!
1 2 many e’s there.
They have JEEP and minivans as well as dodge ram, they should remain profitable easily if they stick to basics.
I’ve seen reports before that said Chrysler wanted to close down dealerships so that the remaining dealers were larger and potentially more profitable. Car dealers are often prominent local businesses, and many may find themselves out of business.
Build the worst product(s) and you will sell fewer of them.
Honda has the best sales month in their history in May. This at a time when overall car (as an industry) sales are down.
Build the best product(s) and you will sell more of them.
This is old news.
Ah, the ‘old days’; when a novice could actually distinguish manufacturers models just by looking at them, not by having to get close enough to see the emblem.
Bump for later on a different computer...
They have finished setting up the three brand stores in the Milwaukee Wisconsin area. A number of former Chrysler/Jeep and Jeep only stores were closed.
“Gone are the days.”
I supposed so Joe. Nevertheless, I would not mind coming across a cherry Chrysler 300 in mint condition sitting in some old farmers barn. Every gear-head’s dream for sure...
Hmm... I'm just recollecting how Jeep used to share sales lot space with AMC vehicles.
Good luck to 'em with this re-org... they definitely need to shed the smaller Dodge SUVs that compete with the Jeep models. Heck, the Durango might be gone soon, too. I just hope the Challenger's life isn't snuffed out prematurely in this mess. I'm not even a Mopar guy, but I like that beast.
Also, a re-think of the Dodge Caliber might be in order. I had one of those a few months ago as a rental. My God, what a hunk of junk. My sister's old Neon was nicer.
“Ah, the ‘old days’; when a novice could actually distinguish manufacturers models just by looking at them, not by having to get close enough to see the emblem.”
My father used to be able to tell them apart by the tail light configuration at night.
So true! When a Mercury didn't look like a FORD and a LINCOLN was not a FORD in FANCIER trim.
In a farmer's barn, I'd like to see either a 69 Roadrunner (in Crazy Plum Purple), a '70 Cuda, or an AMC MARLIN. Also I'd love to see a Mercury Turnpike Cruiser, an Edsel station wagon or a 65 Mustang. (Maybe all of them in the same barn)
but until gasoline comes down,
... uh ... i don’t think they’re going to sell many rams.
Soon, a family has to buy a station wagon (better mpg than SUVs and Vans) if they want to take their kids to places.
The idea of selling all three brands under one roof was one of the reasons for axing Plymouth several years ago.
I haven’t seen a dealership that was only “Dodge” or only “Jeep” or only “Chrysler” in a very long time. They may exist still in some areas, but not any that I have seen in many years.
Actually, according to the numbers, Chrysler was the last of the “Big 3” to turn a profit in the downturn.
I’ll miss the Plymouth logo, but Chrysler’s moves make sense in order to ensure long-term survival in time of rising gas prices and better quality from foreign cars.
I’ll miss the Plymouth logo, but Chrysler’s moves make sense in order to ensure long-term survival in time of rising gas prices and better quality from foreign cars.
We have all three within a mile of each other on the same street.
I have always thought that the Big 3 were stupid to offer basically the same vehicle under three different logos - with the only real difference being trim level.
Why can the manufacturers not get it through their thick skulls that selling the same car under three different badges isn’t increasing sales - they just eat each-other up.
HOW ABOUT:
For Chrysler:
The Chrysler name used for the more “up-market” vehicles - primarily sedans and large coups.
Dodge would be the workhorse brand name - with trucks, vans, and cars in various trim levels. Dodge power could be showcased there as well.
And Jeep being the SUV/sport/off-road division.
It is idiocy for the same corporation to produce the new Jeep Liberty and the Dodge Nitro. For one slight difference in the rear suspension and some trim, they are identical (and are even made on the same line, I believe - but could be wrong).
For GM:
Cadillac could be the up-scale branding of cars
GMC - Trucks and vans - the workhorse brand of GM
Chevrolet - focus on cars - the Impala or Malibu, the econo-cars, and such
Pontiac - the performance division - cars and specialty vehicles that fit into that category.
Saturn - close it down. While it is doing fairly well, GM basically made it another clone of the other brands, thus taking away the unique products they once represented.
Hummer - combine with GMC - The product line would be “industrial for the consumer” -
FORD:
Lincoln - the up-scale brand of cars
Ford - the workhorse brand - Trucks, vans, commercial applications,SUVs, etc.
Mercury - Consumer autos.
Each line should be distinct enough that they do not scavenge sales from each other. Offer enough trim levels in each vehicle and a person wouldn’t need to “step-up” into another brand to get the same basic vehicle with more “stuff”.
Looks like the car that the parents of a friend had when we were in elementary school back in the early 60’s. Theirs had a push button automatic transmission, which was the coolest thing I’d ever seen!
Which models are they talking about chopping? We have a Town and Country Mini-Van and I love it, but am thinking of moving to a midsized SUV next. We’ll be empty nesters come the fall, and I don’t need large people movers anymore, but I still like being up higher off the street when I’m driving, and want some space for hauling stuff.
“I supposed so Joe. Nevertheless, I would not mind coming across a cherry Chrysler 300 in mint condition sitting in some old farmers barn. Every gear-head’s dream for sure...”
“In a farmer’s barn, I’d like to see either a 69 Roadrunner (in Crazy Plum Purple), a ‘70 Cuda, or an AMC MARLIN. Also I’d love to see a Mercury Turnpike Cruiser, an Edsel station wagon or a 65 Mustang. (Maybe all of them in the same barn)”
Agree with your choices with the exception of the AMC Marlin. That was one butt ugly car. However, I did like the Javlin and even briefly thought about buying one but came to my senses and bought an SS Chevelle with a 396 instead. Now that car could haul...
It’s wonderful that there is so much history associated with each of the labels. But what we’ve seen from the successful foreign brands is that it is possible (and cheaper) to sell one model of car under one brand name and make tons of money. Have the identical minivan sold under the Chrysler Town and Country and Dodge Caravan names simultaneously may have made sense at one time. It doesn’t today. I’m tempted to think that this type of meaningless product differentiation made no difference to total sales, and only floated because for a good long while, Detroit was the only game in town.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.