Wednesday, April 16, 2008

Revised Chrysler lineup takes form

Team working on key midsize car


Perhaps the most important part of the newly private Chrysler LLC's future -- its vehicle lineup -- is beginning to take shape.

An important piece was announced Monday, in the form of a deal with Nissan Motor Co. for the Japanese company to make small cars for Chrysler to sell in North America beginning in 2010.

The deal promises to address one of Chrysler's most significant shortcomings: a weak lineup. But more than just needing a small car, Chrysler executives realize they need to address problems with their midsize cars as well; to equip the automaker for overseas growth, and to balance a truck-heavy lineup when gasoline is pushing $4 a gallon in the United States.

In an interview with the Free Press, Frank Klegon, Chrysler's executive vice president for product development, said the automaker has dispatched a special team to work on a new midsize vehicle -- known in the industry as the D-segment -- that is to be able to compete in the United States and elsewhere.

The automaker's current offering, the Chrysler Sebring, was redesigned and launched in 2006 to poor reviews and sluggish sales.

"From a volume perspective and an importance perspective, it's very, very important. It's a big segment worldwide. We've got to grow our presence in these other markets. And D's and its derivatives of D's, whether they're sedans, or hatchbacks or CUVs or other things ... is huge," Klegon said.

They've dubbed the effort Project D.

Team takes global view

In the meantime, Klegon said the automaker is working on a revamped Sebring that is to debut before the vehicle's 5-year life cycle ends.

"We're going to do something to the current car in between. You're going to see a significant improvement even in the mid-cycle of that car," Klegon said. "We're going to do some things ... some cosmetic, but" also "more functional things that we want to do to improve the dynamics of the vehicle."

Klegon insisted that Project D was not hampered by the abrupt departure of Michael Donoughe, the Chrysler vice president appointed soon after the company was acquired by Cerberus Capital Management last August to lead Project D.

Donoughe quit in March after reports that he left as a result of a dispute with senior managers, a claim the company denied.

"It didn't affect it at all," Klegon said of the departure.

Mark Chernoby was appointed to replace Donoughe in leading the charge to develop a new midsize car. The team is looking across the global marketplace -- including in China, India and Russia -- for how the vehicle can better compete, Klegon said.

"One of the key things we wanted to do with Project D is to give that team, a small group of individuals, the time and the tools to look at the front end of the product development and the front end of product design," he said.

"This is a global platform that needs to serve a global market and maybe be manufactured in different places as well," Klegon added.

Small-car deals in the works

Adding small and midsize cars is important for Chrysler if it truly wants to compete internationally, experts say.

"They're not going to sell Caravans and Ram pickups and Durangos globally, at least not very many of them," said Erich Merkle, director of forecasting for IRN Inc. "They're just too big. ...

"Smaller vehicles certainly work out better for the international markets just because there is more congestion and they need the fuel efficiency. We gripe about the price we pay at the pumps, but it is nothing compared to what the international markets pay."

Part of Chrysler's strategy as a private company under Cerberus has been to partner with other automakers in an effort to save money.

In addition to the small-car deal with Nissan announced Monday, Chrysler plans to assemble a pickup for Nissan to be sold in the United States. Chrysler has a similar manufacturing deal with Volkswagen to make minivans for the German company.

Also, the German business newspaper Handelsblatt reported Tuesday that Chrysler and Fiat Group are in talks for the U.S. company to make vehicles for Fiat subsidiary Alfa Romeo in its U.S. plants.

Chrysler also is working with Chery Automobile Co. on a deal that would have the Chinese company build small cars for Chrysler to sell under its own brand in markets around the world.

Daimler AG continues to keep a 19.9% stake in Chrysler and will share technology with the Auburn Hills automaker.

At this time, Klegon said, Chrysler has not partnered with another automaker for the creation of a midsize car. "They could, but there is nothing in play to do that," he said.

He seemed to indicate that part of Chrysler's discussions with Chery involve the possibility of a midsize car. "Whether this is the right product for that, don't know yet," he said.

Another industry insider said Chrysler and Nissan could have the option of making a Chrysler vehicle based on Nissan's popular Altima sedan.

Future of SUVs unclear

Chrysler's lineup was thrown into confusion in February when Jim Press, a Chrysler president and vice chairman, told dealers that the future product lineup was going to be dramatically cut to fall more in line with what Chrysler is becoming: a small-car company.

For example, Press has said Chrysler has too many SUVs among its Chrysler, Dodge and Jeep brands, and told Bloomberg News that the automaker needs to halve its 11-SUV lineup.

Klegon said executives are talking about their future SUV program, in particular the Jeep Commander, which is built at Jefferson North Assembly Plant in Detroit.

"What I don't know is whether we'll have another vehicle called the Commander in the next generation," Klegon said.

Chrysler will look at the market and ask, "Is there a need for a Jeep vehicle that is three rows? If the customer says 'yes,' we'll make one. What I don't know is whether we just call it a Jeep Grand Cherokee or whether we have two body styles and all of the marketing and the things that goes with that, or do you have a Jeep Grand Cherokee that's offered in a couple different ways? I don't know."

Klegon said those are issues the company is discussing.

"We're looking at what's the next generation of sport-utility vehicles got to be," he said

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