Can Chrysler cheat death yet one more time ?

[skylight]

Can Chrysler cheat death yet one more time?

Aug. 23, 2007 (Bloomberg)

Saving Chrysler is the mission of Robert Nardelli, the former Home Depot Inc. chief executive officer who two weeks ago was named CEO of the No. 3 U.S. automaker by its controlling shareholder, Cerberus Capital Management LP.

Nardelli, whose credentials as a cost-cutter are unquestioned, must also find ways to boost revenue with hot new cars if the automaker is to stay afloat. A novice in Detroit, he inherits a mish-mash of Chrysler, Dodge and Jeep models containing several new, unfamiliar names, a few bright spots and several whose sales are falling.

The need to retool produce strategy once more is frustrating, since Chrysler over the years has shown it can build its share of imaginative, popular cars. But the automaker also has struggled to adjust to rising gasoline prices and fallen into the trap of trying to ride winners too long without upgrading their designs.

A case in point is the PT Cruiser, which was introduced in 2000 and immediately found enthusiastic customers that liked its throwback styling, reminiscent of a 1930s hot-rod, and its compact sport-utility functionality. Chrysler has sold more than 1.2 million of them.


Attention Getter

Sure, some people despised the look. But it attracted notice and provoked debate. After five or six years, Chrysler should have redesigned the car, somehow keeping its quirky appeal, while improving suspension, handling, power, interior appointments. Instead, changes mostly were minor and cosmetic.

On Aug. 14 Chrysler said it will build the current PT Cruiser "at least" another year. No word on a replacement.

Alan Baum, an automotive consultant with Planning Edge in Birmingham, Michigan, said the automaker might replace the PT Cruiser with a new vehicle sold under the Chrysler brand to be built in Mexico. A second version of the same vehicle tentatively is to be called Dodge Crew.

"The problem with PT Cruiser was its branding, originally meant to be Plymouth," a line the automaker has since discontinued, Baum said. "My sense is there is going to be a lot of pruning of product and a focus on profitability."


Soft Demand

Sales of Chrysler models have fallen 9.5 percent this year through July to 326,359; Dodge sales were off 3.8 percent to 639,965; while Jeep sales rose 12 percent to 284,497.

When Lee Iacocca became CEO in 1979, Chrysler was sliding toward bankruptcy. With help from the U.S. government, he accelerated plans for the industry's first minivan, as well as economy cars built on identical platforms to save money. Labor concessions, cost-cutting, an economic rebound and hot-selling models saved the company.

Chrysler rebounded. A second brush with financial catastrophe in the early 1990s was followed by the automaker's disastrous $36 billion acquisition by Daimler in 1998. Daimler finally gave up trying to make Chrysler consistently profitable earlier this year, ceding ownership to Cerberus for a pittance while retaining a 19.9 percent stake.


Lots of Room

To its credit, Chrysler has managed to keep its leadership in minivans, though the category is shrinking. The fifth generation Chrysler minivan has just gone on sale, with new styling and features such as air bags standard for third-row passengers.

"The new minivans have to be a hit, and we think they'll do very well," said Rebecca Lindland, automotive analyst for Global Insight. In 1999 the U.S. minivan market was 1.32 million units; Chrysler's minivan sales were 503,000 or 38 percent. Last year sales fell to 971,000, while Chrysler's share was 370,000, still 38 percent, according to Global Insight.

Chrysler's single-most profitable vehicle has been the Dodge Ram full-size pickup truck, due to be replaced with a new version a year from now. Ram, which accounts for 17 percent of the automaker's unit sales, has maintained its share well against new competitors like the Toyota Tundra and Nissan Titan. But it and other big pickups are losing their appeal as daily transportation because of higher gas prices.


Deep Discounts

Many of the Chrysler's cars are sold at little or no profit to daily-rental and other fleets. Fleet sales amounted to 35.2 percent of total vehicle sales in the first quarter of the year, up from 29.9 percent for all of 2006.

As a closely held company Chrysler's financial condition is confidential. But its last snapshot in the first quarter of 2007 showed Chrysler with a loss of 1.48 billion euros ($1.99 billion) for the quarter. Cerberus won't give Nardelli endless capital or a lot of time to replace unpopular vehicles with new models.

Since Nardelli has no automotive experience he will have to rely mostly on those at Chrysler to help him make a few very long bets. Several high-profile retirees, such as former Chrysler design chief, Tom Gale, are advising as well.

Chrysler has surprised the world before. But now, more even than when Iacocca was in charge, the company's fate rests in the hands of one executive -- and a newcomer to the industry at that.


Source: Bloomberg.com: Opinion

[Superwoody]

Doesn't sound good for our PT's

[bobs turbo pt]

they will change the pt in the next few years the next big car for them will be the challenger as long a they make it the way they are showing it now