Monday, June 18, 2007

Memo to New Owners: Bring Back Chrysler's Product Mojo

Date posted: 06-17-2007

EDMUNDS INLINE - - When Chrysler's new owner, Cerberus Capital Management, takes over the auto company sometime next month, it should put the revival of the automaker's product mojo at the top of its to-do list.

Since its near-death experience and subsequent resurrection at the hands of Lee Iacocca in 1979, Chrysler has become famous for innovative products.

It started with the minivan in 1984. Then Chrysler helped resuscitate the U.S. convertible market; first with the K-car and later with the 1996 introduction of the Chrysler Sebring, which has since become America's best-selling convertible. It popularized retro styling with the PT Cruiser and Plymouth Prowler. It jazzed up the small-car market with the spirited Neon. It brought back bold American performance with the Dodge Viper. And it developed roomy but cool-looking family sedans, from the cab-forward LH models to the Chrysler 300.

Now Chrysler needs something just as big as these past successes.

Looking for the Big Hit
By the end of 2007, Chrysler will have launched 18 new or redesigned vehicles in the past two years, but it hasn't had a hit in awhile.

The introduction of the Chrysler Aspen couldn't have been more poorly timed, as this large SUV came on the market just as gas prices soared, so hefty incentives have been required to move this heavy metal almost from Day One. Meanwhile, reviews have been mixed for the Dodge Caliber as well as the Caliber-derived midsize cars, the Dodge Avenger and Chrysler Sebring.

The once-dazzling Chrysler 300 has lost its luster, and sales have been falling by double digits even as sales incentives have been rising by triple digits (as confirmed by's calculations of Total Cost of Incentives).

Chrysler needs a couple of home runs to demonstrate to the world that it still has styling chutzpah. The influx of $7 billion in investment capital from Cerberus should help.

Indeed, Chrysler CEO Tom LaSorda said after the announcement of the Cerberus purchase that the deal would allow Chrysler, "to renew its focus on what has always made us special — our passion, creativity and commitment to delivering exciting Chrysler, Jeep and Dodge vehicles."

Playing Small Ball Isn't Working
Chrysler is striking out in small cars, crossovers and hybrids.

Small-car sales have been hot, hot, hot in recent months, and they are expected to get even hotter throughout the summer. Based on's analysis of consumer intent, small cars are showing the largest increase in interest by car shoppers of any vehicle segment. Rising consumer purchase intent translates to less discounting.

But Chrysler only has the Caliber, which is bigger than small, a crossover more than a small car, and carries a price tag that starts at about $14,000. Chrysler has absolutely nothing — and won't for a couple of years — to compete against the tiny gas-sippers from Honda, Nissan and Toyota.

Similarly,'s consumer purchase intent shows hybrids are hot. Chrysler won't have one until early next year and then it will be a large SUV.

About 70 percent of Chrysler sales have been in trucks and SUVs, the highest percentage in the industry. Unfortunately this is the era of high gas prices. With new minivans and a new Ram pickup on the way, Chrysler will remain heavy on the truck side even as it introduces new cars and small SUV-type vehicles.'s study of consumer intent for the next few months shows waning interest in large and midsize SUVs and large trucks, suggesting a continued struggle for Chrysler.

So What's the Game Plan?
Chrysler's turnaround plan, as announced February 14 (the same day Daimler put Chrysler on the auction block) and subsequently blessed by new owner Cerberus, calls for the introduction of more than 20 new vehicles and 13 refreshed models by 2009, with less reliance on trucks and SUVs. At the same time, Chrysler will reduce platforms to seven from 12; its model nameplates will also drop to 25 from the current 32. (The PT Cruiser is rumored to be on the short list of losers.)

For the 2008 model year, Chrysler will introduce its completely revamped minivans, the Chrysler Town & Country and the Dodge Grand Caravan, although the entry-level, short-wheelbase Dodge Caravan disappears.

The long-awaited Caliber SRT-4, the performance version of the crossover, arrives this fall. By year's end, the Chrysler 300 will be freshened, complete with a new 4.0-liter V6. The 300-based Dodge Challenger coupe also is scheduled to debut by the end of 2008 as a 2009 model. The 300-based Dodge Charger and Dodge Magnum also get a light makeover for 2008 including the new 4.0-liter V6. And the Dodge Viper and Jeep Liberty will have some updates as well.

In early 2008, Chrysler goes to market with its first hybrids. The Chrysler Aspen and Dodge Durango will be equipped with the two-mode hybrid system developed by BMW, DaimlerChrysler and General Motors. The hybrid system is likely to be applied to Hemi-equipped models. Also in 2008, the Dodge Dakota pickup receives a freshening and the larger Dodge Ram gets a total makeover. There are some new truck engines as well, including a twin-spark 4.7-liter V8 for the Jeep Grand Cherokee and Commander.

Potential surprises could be the Chinese-built Chery small car, likely to be patterned after the Dodge Hornet concept, which could spawn the Dodge Demon sports car. There's also a small crossover in the works as a replacement for the PT Cruiser that will compete with the Honda CR-V. And there's talk that the Chrysler Imperial, a real flagship based on the concept presented at the 2006 Detroit Auto Show, could arrive in 2010.

But we're not seeing any home runs.

Recruiting Major-League Talent
There are a few indications that Cerberus already understands that product design must be at the top of its to-do list.

Long before its purchase of Chrysler, Cerberus signed Wolfgang Bernhard, the young, aggressive chief operating officer who came from Mercedes and then moved on to Volkswagen. During his stay in America, Bernhard not only had a hand in turning around Chrysler's operations but also in shaping its future product plan.

The betting is that Bernhard eventually will replace current Chrysler CEO Tom LaSorda, a nice guy and competent operations man who is nevertheless said to be not much of a product visionary. LaSorda insists that Bernhard — reportedly already shopping for a house in Detroit — does not yet have a post with Chrysler, although he's consulting on some matters.

More recently, it has been revealed that former Chrysler Design Chief Tom Gale has signed on as an advisor to Cerberus. Gale spent more than 30 years at Chrysler, and his son is a designer there. It was Gale's designs that led the revival of Chrysler during the late 1980s in the era of Bob Eaton and Bob Lutz, and he transformed auto-show concept cars from simple fantasy into instruments for marketing and product development.

And word is that Chrysler is trying to recruit some hot designers from its competitors.

While the future portfolio as we know suggests no home runs, the signs are positive that Cerberus is serious about product and design.

Chrysler Division
Model Changes Timing
Town & Country Redesign Fall 2007
300 Refresh, new 4.0-liter engine Fall 2007
Aspen Two-mode hybrid Spring 2008
Imperial Large luxury sedan above 300C 2010
JZ49 Small crossover PT Cruiser replacement Fall 2008

Dodge Division
Model Changes Timing
Grand Caravan Redesign Fall 2007
Caliber SRT-4 Performance version of crossover Fall 2007
Challenger 300-based performance coupe Spring 2008
Charger Refresh, new 4.0-liter engine Fall 2007
Magnum Refresh Fall 2007
Viper Refresh Fall 2007
Dakota Refresh Fall 2007
Durango Two-mode hybrid Spring 2008
JC49 Small crossover Honda CR-V fighter Summer 2008
Ram Redesign Fall 2008

Jeep Division
Model Changes Timing
Commander New 4.7-liter twin-spark V8 2008
Grand Cherokee New 4.7-liter twin-spark V8 2008
Liberty Redesign Fall 2007

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