November 5, 2007 - 12:01 am ET
Don't blame Chrysler's production cuts on $96-a-barrel oil. Granted, it's tempting — but wrong.
Instead, blame the product gurus who produced unsellable vehicles even when they were positioned in a hot market segment. Chrysler's product development is broken, and it desperately needs to be fixed.
Want proof? Last week, Chrysler announced plans to eliminate a third shift at its Belvidere, Ill., assembly plant. That plant produces the Dodge Caliber, Jeep Patriot and Jeep Compass — vehicles that ought to appeal to households on a budget.
Likewise, the company is cutting production at its Toledo North assembly plant in Ohio, which produces the Dodge Nitro and Jeep Liberty.
Think about it: Chrysler correctly figured out that oil prices would rise and that the market would shift to compact cars and small SUVs. And what happened? Unsold inventories of the Caliber, Compass, Liberty and Nitro have piled up on dealership lots.
As of Nov. 1, Chrysler reported, it had a 150-day supply of the Compass and a 93-day supply of the Caliber. A 60-day supply is considered optimal.
What went wrong? Last April, Consumer Reports published its annual evaluation of new cars and trucks. Its list of the most disappointing vehicles included the Nitro, the Chrysler Sebring, the Caliber and the Compass.
Among other things, the magazine blasted their cheap interiors, noisy powertrains, poor quality, poor visibility and lack of refinement. Is it any wonder Chrysler has dumped vehicles into daily rental fleets?
And here's the really bad news: Lousy sales would be understandable for a model that has been on the market for seven or eight years. But those vehicles are relatively new.
OK, that's the bad news. The good news is that the company finally has taken drastic action. Bob Nardelli is living up to his reputation as a cost cutter who moves fast.
But how will he overhaul product development? By his own admission, Nardelli isn't a car guy. And Jim Press, who has great product instincts, knows more about selling cars than designing them.
Chrysler needs a product guru like Wolfgang Bernhard. Uh, wait a minute — it already tried that guy. In fact, one can safely attribute many of Chrysler's disastrous product decisions to Bernhard.
Productwise, Chrysler needs a complete makeover. And Chrysler's new bosses need someone to push those changes. I wonder if they could rehire Tom Gale.