Chrysler has been drowning. It's not a big secret.
In 1999 - the first full year they were part of DaimlerChrysler - 2.6 million Chryslers, Dodges, Jeeps, and Plymouths were sold in America. For 2009, they may sell 900,000. If they're lucky. In the last 3 years alone, sales have dropped a staggering 58%.
As has been discussed before, this cliff dive is due to a variety of factors. The biggest among them is that, with few exceptions, their current product line is woefully behind the competition in nearly every measurable way. Quality isn't there. Reliability has been at the bottom of the barrel. Design execution has been subpar. Fuel economy is no great shakes. And for the 4 months between their emergence from a quick-rinse bankruptcy, and last month's release of their "5-year plan", they hadn't spent money to advertise their rag-tag group of misfits.
All the while, reports of angry, jettisoned dealers and Obama officials admitting shock at how far-gone Chrysler was when they stepped in has filled the void in airtime and column inches that their advertising would have otherwise occupied.
The rank ineptitude of the Daimler management at Chrysler was hugely responsible for the bad product decisions that pushed Chrysler to the brink. And when Cerberus took the company over in 2007, they brought in their own group of incompetent managers that only cut employees, plants, future vehicle development, and other costs to the bone.
So, since the year began, the bankruptcy court has decoupled Chrysler from Cerberus. The Feds have thrown them a multi-billion dollar life preserver. And Fiat has pulled America's third-biggest car company, floating listless in a heavy sea of fierce competition, aboard its own recently-mended ship.
CEO Sergio Marchionne's plans are certainly ambitious. He has acted fast, ending engineering alliances with Renault-Nissan, Mitsubishi, and Hyundai, and starting Chrysler on a path of better integration with Fiat AG.
But will the company once known as "Fix It Again, Tony" be any better for Chrysler than Daimler was? In a word: Yes.
Fiat has long been famous for its line of excellent small cars. From the days of the Topolino, the iconic rear-engined original 500, long-lived 126, internationally-successful 127, race-successful 850, critically-acclaimed 128, legendary, lovably utilitarian first-generation Panda, aerodynamic Uno, and utterly prolific original Punto, Fiat has come through - without question - as the car company with the greatest small car expertise of any automaker in the world.
They have cleaned house with the European Car of the Year panel 9 times since the award's 1964 inception - much more than any other automaker in Europe. And that isn't including the company's Alfa Romeo and Lancia brands, which bring the total to a staggering 12 wins - twice the number of the second winningest company, Renault. The current Panda and "Nuova" 500 number among those 12 wins. And with the subcompact Grande Punto, these small smash hits have catapulted them from death's door in 2004, back to greatness in the European scene.
But, with the exception of Maserati and Ferrari's tiny dealer network, equipped to sell less than 5,000 cars per year, they have no presence in the North American market. They haven't since they pulled out in 1983 due to lagging sales. Their terrible reputation for rust, indifferent build quality, and tear-jerking unreliability earned the company the "Fix It Again, Tony" reputation in the first place.
Fiat, however, has since worked hard to address all three issues, and has improved drastically in European quality ratings. Bolstered by this, they've been eyeing re-entry into this market. Until the deal with Chrysler, however, they were faced with the daunting task of setting up their own dealer and distribution networks in America. They'd have to commit millions of dollars to build plants on American soil so they could escape exchange rate fluctuations. And they'd have to overcome a lack of American familiarity with their brands, at best, and a dubious reputation with those who remembered, at worst.
Chrysler's realities just so happen to clear all of the barriers to Fiat's presence in our market. Ready-made dealer and distribution network screaming bloody murder for new, small product? Check. Unused or under-used manufacturing plants? Big fat check. Branding options that are more familiar to American customers than Fiat, Lancia, and Alfa Romeo are? Check.
So Fiat has decided to fill Chrysler's many product gaps with either their own vehicles or future models co-engineered between Fiat and Chrysler. This will reduce the investment each company needs to make to develop these models, saving them both sorely-needed money, while they can be sold in the US under the established Chrysler, Dodge, and Jeep brands. The current 500 will be the only exception, as the company feels that its character is such that it wouldn't be appropriate to badge as a Chrysler. Much like BMW doesn't put its propeller roundel on the hood of the Mini.
This works for Chrysler, too, because they've been historically awful at building smaller cars. And they currently don't offer anything smaller than the hoary Chrysler PT Cruiser, comically unrefined Dodge Caliber, and horrendously ugly, brand-damaging Jeep Compass. Chrysler's small-car engine line hasn't exactly been the stuff of legend, either. Fiat's has. So, Chrysler gets Fiat's good smaller cars to sell and Fiat gets a partner in Chrysler to help finance their development and a dealer network to sell and service them in.
But if you're thinking this is mostly good news for Fiat, and that Chrysler brings nothing to the table, leaving it to simply be picked over for its assets just like Daimler did this past decade, you'd be wrong.
Chrysler brings Fiat plenty of expertise in building larger cars. Chrysler's 300 and Charger, though aging, are still quite good cars. They were massive hits in 2005 and '06, respectively, when they debuted on the American market. Their predecessors were excellent. Their predecessors' predecessors helped save the company from its huge early-'90s slump. And the current models' replacements promise to be stellar. Look for them to debut in just a few weeks at the North American International Auto Show in Detroit.
Conversely, Fiat AG has swung and missed at making successful larger cars for decades now. Lancia's flagship models have, since the '70s, ranged from beautiful disasters (Gamma), to derivative boxes (Thema), to the forgettably invisible (Kappa), to bizarre throwbacks (Thesis). As a result, each successive generation has sold worse than the last.
The Alfa Romeo 166 was amazingly beautiful, but a depreciation disaster everywhere it was offered. And wouldn't sell, either. The car was discontinued in Europe without a replacement two years ago. It's not that they haven't engineered a replacement. The 169 was supposed to come out in 2008. But it's been delayed multiple times as the company does not want to allocate the prodigious amount of money it would take to build the 169 on its own unique platform at the sales figures (or lack thereof) they think are attainable. They've been looking for a partner from whom they can use their platform and just can't find one. Until now.
And the Fiat Croma, an odd wagon-type car, misses the heart of the midsize European car market by 1.61 kilometers. And its sales figures show that definitively.
Chrysler can also help Fiat with minivan expertise in Europe. The company's Fiat Ulysse and Lancia Phedra were under-performers in their segments from the get-go in 2002. And in the past 8 years, they've only yellowed with age.
In short, the new marriage will yield Chrysler-based offspring and engines for Fiat, Lancia, and Alfa Romeo at the large end of scale, where Chrysler knows what it's doing. Fiat has Chrysler's back with great small cars and engines, where their expertise is. They've even begun to commonize their components suppliers so they can get better pricing, due to the added volume each companion brings. And their CEO, Sergio Marchionne, has been smart enough to see the vast potential in the way the two companies fit together. He's proved that he possesses the wits and the wherewithal to right Chrysler's ship. He did so in record time with a Fiat AG that was dying as little as 5 years ago.
The only problem is that Chrysler has to stick with its current line of turkeys for the next couple of years. The aforementioned Fiat-based small Chryslers won't be done with the development process and the plants won't be prepared to make them until 2012 at the very earliest. So the question looming large is whether or not Chrysler can make do, if it can indeed foist enough of their current schlock, to survive the next 18-24 months.
In the meantime, the plan is to do some surgery on their smaller and mid-sized cars. Chrysler needs this badly. And the excellent little 500 will be coming in just a year. They've also got the hot-looking 2011 Jeep Grand Cherokee, Chrysler 300, and Dodge Charger to keep bigger vehicle buyers and the press at least somewhat interested in the meantime. So, again, work is being done.
Will these well-laid plans be enough keep Chrysler from slipping forever beneath the choppy waves? The new blood at Chrysler are hoping like hell it will. And hundreds of thousands of jobs in the US and Canada depend on it.
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