Monday, April 28, 2008

Chrysler: Back to the midsize

100 engineers enlisted to create future models

Eric Morath / The Detroit News

In the highly competitive midsize car market, Chrysler LLC's offerings get lost in a sea of Toyota Camrys and Honda Accords.

Those Asian models outsell the automaker's Dodge Avenger and the Chrysler Sebring by as much as four-to-one.

But the midsize car market is a segment in which the struggling Auburn Hills automaker thinks it can do better and has dedicated a team of about 100 engineers to reshape its models.

A competitive entry in the so-called D segment would be very profitable for Chrysler and could sell well globally, said Mark Chernoby, the automaker's top engineer for the platform and leader of the effort, dubbed Project D.

"Run the numbers on the sales, run the numbers on what various manufacturers make in terms of profits," and look at how those platforms can be used across a broad range of vehicles, he said. "It's pretty easy to see that the potential is there."

The midsize segment is the most popular car class in the United States, and worldwide sales are expected to reach 8.96 million this year, according to Global Insight Inc. analysts.

Chrysler's efforts to rebound in the midsize segment are a good move, said Todd Turner, president of California-based consulting firm Car Concepts. Inc. Done well, an improved midsize car could help Chrysler recapture its lost U.S. market share and increase sales overseas, he said.

Chernoby, who took over the high-profile project three weeks ago after the resignation of lead engineer Mike Donoughe, declined to say what the automaker has planned or how soon any new vehicles would make it to the market.

He made it clear that new midsize vehicles are a top priority for Chrysler's management, even though both the Avenger and redesigned Sebring debuted just last year. Chrysler sold 160,600 midsize sedans in the United States in 2007.

To serve customers worldwide, the next universal midsize platform could take many forms, such as a sedan and a crossover, Chernoby said.

Midsize is popular segment

Succeeding in the midsize market is easier said than done, analysts said. Chrysler crosstown rivals, General Motors Corp. and Ford Motor Co., have had mixed results in a massive market dominated by Asian automakers, whose models have some of the most loyal customers in the industry.

"The problem is everyone is getting really, really good in that segment," Turner said. "Chrysler's current entries are probably the weakest in the marketplace, not just in terms of sales, but in customer satisfaction."

Chrysler, he said, is smart to re-engineer its midsize cars, even as it partners with Nissan Motor Co. and China's Chery Automobile Co. to help add smaller cars to its lineup.

"I commend them for bringing a dedicated product to the segment," he said. "This is the type of product that could sell 350,000 units."

While smaller, more fuel-efficient cars are growing in popularity, increasing wealth in emerging markets like China are also pushing midsize sales.

This year, one in every eight cars sold worldwide will be a midsize vehicle.

Combine that with Americans' preference for midsize models and Chrysler's strategy makes sense, said Aaron Bragman, automotive research analyst at Global Insight.

"If they're going to focus and put resources into one area, they may as well go for the largest market," he said. "They won't get the same volume in North America" from smaller cars.

While Chrysler is aiming for global sales, any successful midsize car must also be a hit in North America, which accounted for 91 percent of Chrysler's 2007 sales.

Ford Taurus dominated

The top three entries in the midsize segment are from Asian automakers.A decade or so ago, Ford owned the segment with the Ford Taurus, the nation's best-selling car from 1992 to 1996. The Dearborn automaker's newer models have failed to replicate that success.

Bragman said Ford tends to split its midsize sales between the larger, reintroduced Taurus and the smaller Ford Fusion, missing the sweet spot of the market.

GM has a hit with the redesigned Chevrolet Malibu; its sales are up more than 32 percent in 2008, compared with the same three-month period for last year's outgoing model, according to U.S. vehicle sales data tracked by Autodata Corp.

But the Saturn Aura -- which also was well received by critics -- hasn't captured nearly the same sales volume.

"The Aura is a stylish, reliable and well-reviewed car and GM is struggling to sell any number of them," Bragman said. "That shows how difficult it is to change consumers' perspectives in this segment."

For Chrysler to improve its standing in the segment, critics say the automaker needs to launch new midsize products soon.

Without giving a time frame, Chernoby said the automaker is moving prudently.

"We will manage the time line accordingly to always make sure we have a product that will satisfy the market place," he said. "You can take that to the bank."

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