The Pacifica
Posted on 06/13/2003 10:40:23 PM PDT by bruinbirdman
Chrysler is either soaring or floundering. Now it's floundering. I can't remember a decade in the last half-century when Chrysler wasn't in a crisis.
The problems this time are so serious that they could change the face of Chrysler, the American arm of DaimlerChrysler (nyse: DCX - news - people ). Let's look at the negatives first.
Management predicts a $1.2 billion loss for the second quarter. Who knows what will happen in the remainder of the year? The Germans weren't prepared for the type of competition in the U.S. today, the amounts of money they could lose or the enormous success of the Japanese in this market. They don't see that in Europe.
The new Chrysler Pacifica, a crossover and the first product of the new German management, is off to a slow start. The sales goal is 100,000 a year, or 8,400 a month. Last month sales were 2,471. What's wrong? The price is high--$35,000 to $40,000--for a Chrysler, and breaking into this competitive market is rough. And maybe the engine needs more punch.
The Pacifica
Chrysler, Dodge and Jeep vehicle sales are down 6% so far this year. The sales manager, an American, has just been replaced with another Daimler man.
The coming LX Chrysler sedans and "tourer" wagon look high priced, especially when equipped with the well-publicized "hemi" V-8 engine. They smell like $35,000-to-$40,000 vehicles to me. Chrysler is trying to move its big cars upscale, but it risks losing old customers while hunting for new ones.
Chrysler needs at least 200,000 LX sales a year to keep the plant running near capacity. (In 2002 it sold 175,000 LH big cars from that factory.) What if they sell only 120,000 new cars? Jurgen Schrempp, the DaimlerChrysler chief executive, has a short fuse. I can imagine him shutting the plant if the cars don't meet their goals.
The next generation of Chrysler's smaller cars is to go on a Mitsubishi platform. Mitsubishi is not successful here; its U.S. sales are down 23% so far this year. And this is the foundation upon which they are going to base upcoming Chrysler cars?
Chrysler's only successful vehicles--the Ram pickup, the Jeep Liberty, the PT Cruiser--are the products of the old American management, not the Germans. If the coming LX cars and the coming Mitsubishi-based small cars fail, Chrysler could well abandon cars and attempt to exist with trucks, Jeeps and minivans. I don't think it would work because dealers need the cars.
The Germans are slow in understanding the U.S. mass market and releasing new products. Chrysler's minivan, its most successful vehicle, is facing new competition from Toyota (nyse: TM - news - people ) and Nissan (nasdaq: NSANY - news - people ). And the Jeep Grand Cherokee, another key product, is slipping as more sport utilities enter the market.
One other problem: that lawsuit by Kirk Kerkorian, who charges Daimler won Chrysler in 1998 with lies and deception to Chrysler's directors, stockholders and the public about a "merger of equals." Kerkorian could win or settle out of court for a bundle. I'm not saying he will win, but he's got a case.
The positives:
That Pacifica is too new to judge. It could catch on and sell 100,000 a year. Chrysler plans to rebalance its production plans and build more models with less-expensive option packages.
Those LX vehicles are big bruisers and come with rear wheel drive--not the more common front-wheel drive. And the other new and coming stuff from Chrysler--the Crossfire, a $35,000 two-seat sports coupe and the Pacifica--are all standouts. Chrysler often does well when it's daring. Love them or hate them, Chrysler's new entries don't look like everything else on the road. That counts with car buyers.
The Crossfire
It is the trucks that are crucial to Chrysler; cars account for only 30% of total sales. A new Dodge Durango sport utility is coming this fall, which could revitalize its sales. The PT Cruiser line will be expanded with a convertible. The racy "California Cruizer" show car should be built--only stupidity would keep them from building it. A PT panel truck also has potential if they decide to build it.
Despite the competition, Chrysler is the world leader in minivans, with the lowest cost, too.
In the coming years Jeep will broaden its range. Jeep is working on low-priced (under $20,000) vehicles, and there's word that it's also working on a bigger version of the Grand Cherokee, with three rows of seats. Those could be winners.
As to that $1.2 billion loss, a couple of winning vehicles could quickly turn around the company's fortunes. This formula has worked many times in the past.
What will happen?
Two possibilities: Those new vehicles will succeed, the profits will roll in and DaimlerChrysler realizes its goal of becoming a global carmaker.
Or, the German board of supervisors gets tired of Jurgen Schrempp's global aspirations and Chrysler. The board knows BMW turned itself into gold by selling most of the Rover passenger-car business back to the British (in effect they paid the Brits to take it) and selling Rover's SUV operations to Ford (nyse: F - news - people ). So why not sell Chrysler back to Americans?
Personally, I call that a win-win scenario. Chrysler succeeds or the Daimler people go home and we Americans get it back.
And Lee Iacocca is still around, waiting!
yitbos
Yhey should stick to what they do best, making cars. I'd never buy a crossover.
Me, my Ford, my 32 year old Dodge & the 75% or so of the driving public who drive American cars bow down to the you and the other 0.000001% of the public smart enough to drive SOBs... you're so superior! (but my cost-per-mile is about 15% of yours!)
Regards,
Yeah, Take the a606 transmission...PLEASE!...It really sucks...$2400, still in 2nd gear.... :(
Yeah, Take the a606 transmission...PLEASE!...It really sucks...$2400, still in 2nd gear.... :(
Saabs are made by General Motors. You've been had.
Reminds me of Kienholz' "Back Seat Dodge '38". What was this piece of art so well known for? Hint: Bill Clinton's pickup.
yitbos
Gracias, amigo! I knew you would see it my way! ;-) I learned how to drive in a Ford last year - no thanks, sorry, shoddy through and through, ugly also. I'll never by an American made car, sorry. It's like night and day.
To be fair, I' ll never drive a German car either - well built but I just think those guys royally stink, and I would never send $50k or more that way.
Oh, I know that GM owns Saab - they collect on my loan every month! But its designed and run out of Sweden, where it belongs, though the 2003 models look more like wannabe BMWs to me. Maybe they will find they way back, someday!
I will always love my Saab! Did I mention it's well built, stylish but not slick, indivdialistic, and luxurious without being excessive? Did I mention chicks like it too?? Also, I don't think our respective mileage is close to the 15% differential that you suggest. Oh well, see you on the highways - I'm the guy cruising nicely (at the speed limit of course) with a comfy, smooth ride, passing by all the junky American cars.
Being a conservative is one thing, but supporting our automobile industry is another. The most 'american' thing you can do is buy foreign, to help get their acts together. It's worked in the past - the Saturn is a fine car, for example. Ultimately, too, the Saab $ goes to GM, so I get to do both of both worlds - buying a well made stylish foreign car, and the $ trickles back to the good old USA.
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