- Associated Press
- The 2008 Dodge Challenger is seen at the Chrysler Proving Grounds in Chelsea, Mich., where it was being road tested prior to the start of production for the new model year.
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Several new vehicles coming out in fall
CHELSEA, Mich. — With its purchase of Chrysler looming, Cerberus Capital Management LP could be buying control of the struggling automaker at a good time.
And the best reason for the $7 billion acquisition for a controlling stake in the DaimlerChrysler AG unit might wind up being the products — not the bargain price — according to one analyst.
A new version of Chrysler’s stalwart minivan is scheduled to come out this fall, and Jeep sales continue to rise.
But the minivan is the can’t-miss product that should have Cerberus smelling like a rose in a year, said Erich Merkle, vice president of forecasting for auto consulting company IRN Inc. in Grand Rapids.
“If I’m Cerberus, I’m buying Chrysler for dirt . . . right on the cusp of one of the biggest product launches in the decade,” said Merkle, referring to the redesigned 2008 Chrysler Town & Country and Dodge Grand Caravan. He was attending an event Thursday to showcase Chrysler’s 2008 models at the automaker’s Chelsea Proving Grounds. “That’s the next hit.”
Even with their dual-screen DVD players and Swivel ’n Go seating and storage system, the minivans were easy to overlook amid many sexier 2008 models on display, including the Dodge Magnum, Viper SRT10 and even the Jeep Liberty, with its bolder, boxier frame and exclusive full-length open canvas roof.
But Merkle said the minivans, which represent about 20 percent of Chrysler’s sales, are its “ace in the hole.”
“There may be products where [Chrysler] doesn’t hit the mark. But their core competency is the minivan — that’s one thing they don’t screw up.
“GM and Ford moved away from it — not because the segment is poor but because . . . Honda and Toyota beat ’em,” referring to the Japanese automakers’ Odyssey and Sienna, respectively.
On top of that, Merkle said, Chrysler is gearing up for the next-generation 2009 Dodge Ram. The pickup is the automaker’s second-best-selling product.
“You’ve got a one-two punch coming up for Chrysler.”
Some promising products are also timely for Chrysler, which made $1.8 billion in 2005 but lost $618 million in 2006 and $1.98 billion before interest and taxes in the first quarter of this year.
DaimlerChrysler agreed last month to transfer an 80.1 percent stake in Chrysler to Cerberus, a New York-based private equity firm. Daimler bought Chrysler in 1998 for $36 billion.
As part of the $7.4 billion takeover cost, Cerberus would invest $6.05 billion in Chrysler, and its financing arm would pay DaimlerChrysler $1.35 billion. The two companies expect to close the transaction in the third quarter.
Chrysler brand sales are down 9.8 percent for the first five months of the year, and Dodge is off 1.9 percent for the same period, according to Autodata Corp. Jeep sales are up 12.2 percent.
One of last year’s big hopes, the redesigned Chrysler Sebring, failed to woo buyers of the Toyota Camry, Honda Accord and other midsize competitors. Still, Chrysler’s success with the 300 and 300C sedans and Dodge Magnum crossover helped it make money in 2005.
“They run in streaks,” Merkle said.
Frank Klegon, executive vice president for product development, said the company’s future pipeline is strong, with 20 new products and 13 revamped vehicles coming out between 2007 and 2009.
“No one succeeds in our business without innovation, and distinctive products that respond to the customer are a must,” he said.
Aaron Bragman, an analyst with Global Insight in Troy who also attended Thursday’s event, said the jury’s still out on whether Cerberus will find it so rosy.
“New products have to be extremely successful,” he said, adding the new minivans offer refinements but not exactly a revolution.
“The competition is extremely good. . . . It’s such a tough segment that its two domestic competitors have gotten out of it.”
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