Friday, November 2, 2007

Chrysler may need to drop more models selling slowly

November 2, 2007

Chrysler LLC's decision to cut four slow-selling models is the beginning of what is needed to reshape the company's lineup, analysts said Thursday.

The Chrysler Pacifica, PT Cruiser convertible, Crossfire and Dodge Magnum were obvious candidates to let loose, said Joe Phillippi, a principal with Short Hills, N.J.-based AutoTrends Consulting.Sales of the Pacifica and Magnum were down almost 30% through October, compared with the same period a year ago. The Crossfire and PT Cruiser ragtop were niche players.

"This was the low-hanging fruit you could deal with right away," Phillippi said. "There's clearly more to come."

Analysts say Chrysler has several major problem areas:

• The lineup has too many large, gas-guzzling SUVs and lacks a large, car-based utility vehicle, or crossover, that delivers better fuel economy while providing the same room.

• New or redesigned cars such as the Dodge Caliber and Chrysler Sebring fell short in attempts to catch up with competitors.

• The Jeep brand, an off-road icon, has gone astray with a ballooning lineup of vehicles that compete with each other.

Todd Turner, president of Thousand Oaks, Calif., consultant Car Concepts Inc., said he can think of at least three more vehicles Chrysler should drop: the Jeep Compass, Chrysler Aspen and Jeep Commander.

The Compass fills a spot also occupied by the Patriot, another compact utility vehicle. Jeep needs a small, fuel-efficient vehicle to hedge against rising gas prices, but it doesn't need two of them, Turner said.

Chrysler is not a strong enough brand to pull off a luxury SUV, such as the Aspen, he said. And the Commander crowds a market already covered by the Grand Cherokee, Turner said.

If Jeep wants to add a large SUV, it needs more separation, he said. The Commander is only 1.9 inches longer than the Grand Cherokee.

"The Commander just has to be stopped," Turner said. "It's so close to the Grand Cherokee that it makes no sense."

Pulling the plug on models, though, is not an easy decision, said Phillippi of AutoTrends.

Even if sales are modest, some vehicles help cover costs for new factory equipment, Phillippi said. The Compass, for example, is made at the same plant as the Patriot and Caliber.

Chrysler also cannot abandon a high-volume segment, such as midsize cars, just because the current model does not stack up, Phillippi said. "That's the greatest way in the world to bankrupt half your dealers."

Chrysler President and Vice Chairman Jim Press should help reshape the lineup quickly, Turner said. Under DaimlerChrysler AG, Chrysler Group was known for coming up with new models and then pushing them on dealers, he said. Press will take a different approach, Turner said. "It will be marketing-driven decisions," he said.

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