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 | Source: Automobile History Day By Day, by Douglas A. Wick |
Tuesday, February 12, 2008
The plan for product: Less duplication
Mark Rechtin
Automotive News
SAN FRANCISCO — Chrysler LLC will reshape its product lineup dramatically in the next five years so Chrysler, Dodge and Jeep dealers won't compete against one anotherwith rebadged versions of the same vehicles.
It's all part of a dealership consolidation plan, called Project Genesis, that would result in more stores that sell all three brands.
Chrysler co-President Jim Press said badge-engineered vehicles and single-brand showrooms mean the three brands go up against one another, rather than Ford, Chevrolet and Toyota.
Many products will be deleted, although Press declined to give specifics.
"Do we need 11 SUVs when we sell a million and a half retail?" he asked at the J.D. Power roundtable here. "Maybe we just need three or four."
But Chrysler will add products, too, Press said. For instance, the Chrysler brand might have a minivan for families, while Dodge might get a more rugged vehicle from the same platform geared toward young people.
Badge engineering has wounded the company. The three brands mostly conquest new customers from one another, according to J.D. Power research. Meanwhile, defectors from the individual Chrysler brands frequently go outside the Chrysler fold.
Customer loyalty to the Chrysler brand is only 32 percent — well below the industry average, according to J.D. Power. But those buyers account for nearly half of total sales. That is a recipe for a company in trouble, said Steve Witten, Power's executive director of automotive research.
For every 100 people defecting from Dodge, only 62 new customers are conquested, according to J.D. Power. The research group says that, too, is below the industry average.
Chrysler exec: Journey started on the inside
 | Jim Issner, who guided the Dodge Journey to production, says the new crossover was designed to “fit in customers’ lifestyles between the Caliber and the minivan.” |
Bradford Wernle
Automotive News
Jim Issner guided the Dodge Journey to production, then was promoted to become Chrysler LLC's vice president of advance vehicle engineering. He's a veteran of nearly three decades at Chrysler.
Issner spoke with Staff Reporter Bradford Wernle at the launch of the Journey in Las Vegas.
What was your overall target in designing the Journey?
We wanted a crossover for the Dodge brand, a vehicle that would fit in customers' lifestyles between the Caliber and the minivan, especially with the short-wheelbase minivan not being part of the new minivan program.
When we looked at the position between the Caliber and the minivans, we saw a lot of crossovers in the market.
What do you need to compete in that segment?
Storage and innovative features in the interior are the heart of opportunity in that market, which goes along with good ride and handling, excellent NVH (noise, vibration and harshness).
What features are you proud of on the Journey?
There are a lot of things I'm happy we did. I think we've got an efficient three-row package for seating seven people. We increased the wheelbase 4.9 inches, but the vehicle is only 1.7 inches longer overall than the Dodge Avenger.
Some of the thoughtful features like the storage bins give us an opportunity to have some things our competition doesn't have.
At what point did you decide to delete the 2.7-liter V-6 engine?
It was late in the program. We had a management ride-and-drive at Chelsea (Chrysler's proving ground in Chelsea, Mich.). The 2.7 didn't provide enough benefit over the four-cylinder. Having that extra powertrain seemed to be a confusion point for our customers. The right thing seemed to be to go with the 3.5-liter V-6. The decision to take out the 2.7 was the right thing to do for the product and the customer.
Why did you make the changes so late?
We went after the Journey with the idea we're going to come out of the box right.
You plan to sell the Journey here and overseas. That means you'll be competing with different vehicles, such as the Ford S-Max over there and the Ford Edge here. What kind of challenge is that?
If you create a unique product for the European market like the S-Max and the Edge over here, that requires significant capital investment. Our strategy would suggest we can compete with one vehicle in both markets. I guess the marketplace will tell us whether we've been successful.
But from a technical standpoint, there's nothing that would preclude me from doing that with a single vehicle. It's not so much a technical challenge as a marketing challenge.
Chrysler will pay for new-car fill-up
Bradford Wernle
Automotive News
DETROIT — Chrysler LLC dealers are getting their gasoline money back.
Starting March 1, Chrysler will restore to dealers money to give customers a full tank of fuel for new vehicles.
Chrysler executives received loud ovations when they announced the change at dealer meetings across the country. The cost to fill the 21.1-gallon tank of the Jeep Grand Cherokee, for instance, is about $63.
Under DaimlerChrysler ownership, the company took away the fill-up money in 2000 after rancorous meetings with dealers. The reinstated fill-up is part of a series of retail initiatives the company is rolling out this month as part of Chrysler's "New Day Celebration."
In a national road show Feb. 4-8, Chrysler LLC's top sales executives — including co-President Jim Press, Executive Vice President Steven Landry and Chief Marketing Officer Deborah Meyer — revealed major changes to dealers. Chrysler also told dealers it will speed parts delivery to them by giving a key component of the business to UPS.
Under Press, formerly Toyota's top North American executive, Chrysler has been listening to criticism from dealers, many of whom were unhappy during the DaimlerChrysler era.
For instance, Chrysler has reduced inventory by more than 100,000 vehicles because dealers said the factory was cramming unwanted cars down their throats.
| Support group To build support from dealers, Chrysler will -- Pay for a new vehicle's first tank of gasoline -- Speed parts to dealers via UPS -- Cut inventory by more than 100,000 units to reduce pressure on dealers to take unwanted vehicles -- Offer discounts on certain well-equipped vehicles |
Chrysler also says it will give customers more equipment for their money on 12 vehicles.
For example, Chrysler now is offering the Aspen Limited SUV equipped with a MyGig in-dash stereo hard drive and rear parking camera along with heated two-tone front seats and 18-inch chrome wheels at a discount. Customers pay $1,855 for a package worth $3,355, according to Chrysler.
During the second quarter, Chrysler will start using UPS to ship parts that dealers can't get from local parts depots.
Dealers complain now that if parts aren't available at the local depot, orders are referred elsewhere, usually to the national depot. Then the order is shipped to the local depot before going to the dealership.
Under the new system, those parts will be shipped by UPS directly from the national depot to the dealership. Dealers will be able to track the shipments using UPS' tracking technology.
Klegon: Chrysler's new platform is flexible
 | Chrysler product chief Frank Klegon: Team is looking at “where we ought to go with the next midsegment cars |
Rick Kranz
Automotive News
CHICAGO — Chrysler will spin a variety of vehicle types off its new mid-sized global vehicle platform, including sedans, hatchbacks, crossovers and small pickups.
"It has to be a pretty flexible platform," said Frank Klegon, Chrysler's head of product development, in an interview at the Chicago Auto Show.
The platform will replace Chrysler's D-segment platform, used for the Chrysler Sebring and Dodge Avenger cars and Dodge Journey crossover.
"We set up a small group. We're calling it Project D, to take a look at the next generation" mid-sized platform, said Klegon. They are "taking a look at worldwide demand — it is one of the largest segments worldwide. That segment breeds a lot of offspring."
Chrysler created the mid-sized team in December as part of a realignment of its product organization. Michael Donoughe, an engineer with experience in both front- and rear-drive platforms, heads the team.
Project D is made up of engineers, product planners and program managers, as well as purchasing and international business managers. Klegon expects the group to make recommendations by June.
Klegon said the team's job is to come up with a strategy — not plan and execute a new platform.
"They have to look at where we ought to go with the next midsegment cars," he said. "That goes from taking an existing platform and building upon it, to designing a new platform. It could be front-wheel drive; it could be rear-wheel drive; it could be the ability to switch."
The group will consider where in the world the vehicles should be built and will recommend whether Chrysler should partner with another automaker.
"All those things are on the table with no preconceived answer to the question," said Klegon. He said the first vehicles will arrive in five to six years.
The pickup based on the platform would be a lifestyle truck, he said. The Honda Ridgeline falls into that category. Automakers are scrutinizing this strategy because the small- and mid-sized truck market is declining, he said. They also are looking at light-weight pickups that offer better fuel economy.
"Everybody is hunting down this formula," Klegon said. "What is that substitute? Is it a smaller body-on-frame? Is it unibody? Can it be front drive? Can it just carry 1,000 pounds? We don't know yet." c
Chrysler plan: Advice — but no help on price
1,700 metro stores are targets of new consolidation push
Bradford Wernle
Automotive News
Chrysler LLC's aggressive new strategy for shrinking its retail network won't give dealers the thing they would most like to see: money to lubricate consolidation deals that have been stalled.
"We have to be clear that we don't have a big checkbook," said Chrysler co-President Jim Press.
In many metro areas, Chrysler's network has grown into a crazy-quilt of single-brand stores packed too close together. The company's new owners are eager to do something about that.
Under Project Genesis, the new consolidation strategy, Chrysler wants a smaller and more profitable dealer network. Part of the plan is to reshape the product lineup dramatically to end duplication among the three Chrysler brands. That would allow more retailers to sell all three brands under one roof.
Chrysler has 3,600 dealers, and the plan targets about 1,700 stores in metro markets, says Michael Yatsko, director of dealer operations for Chrysler.
Teams of advisers have begun fanning out to help dealers arrange to buy or sell stores.
Dealers will be offered help with all aspects of business planning, including tax consequences, real estate, finance and estate planning. Some advisers will come from Chrysler's majority owner, Cerberus Capital Management.
In an interview last week, Press said Chrysler hasn't ruled out offering money. But he said: "We're not in the financial position to make this a big bunch of checks and paydays. We need to do it with a process of working together looking at alternatives."
Press said he expects the revamping of the dealership network and product lineup to be completed in four or five years.
Where's the money?
For some dealers, the lack of money could be a big problem, said Sheldon Sandler, founder of Bel Air Partners, a Princeton, N.J., firm that brokers dealership transactions and offers dealers financial guidance.
"I think that they're looking at a very, very difficult proposition, one they don't fully appreciate," Sandler said. "Another way of saying it is: Show me the money."
Sandler said the biggest obstacle to getting buyers and sellers to agree on a transaction price is real estate.
"Dealers quite often have an inflated idea of what their property is worth," he said. "Once you eliminate that operating entity, it becomes a piece of property without that operating asset on it. That really complicates the deal."
Without making a pot of money available, Chrysler will have trouble getting dealers to consolidate, says an executive at a large public dealership group with Chrysler stores.
"These things would have happened by now if they had put money in it," said the executive, who asked not to be identified. "The problem is you have sellers who don't want to sell and buyers who don't want to pay.
"There are not a lot of buyers of Chrysler deals out there because nobody's sure how long Cerberus is going to stay."
Blue-chip teams
Chrysler says the new framework will speed the process along. To make deals happen, the company is forming "business solutions teams" to go into each metro area to help dealers overcome obstacles.
"We've done a couple of market meetings already," said Steven Landry, executive vice president of North American sales. "Each of the business centers will hold metro market meetings" and review the volumes in those markets.
Room to breathe
Landry said Chrysler then will hold "individual meetings with dealers and review whether they want to be a willing buyer or willing seller."
Chrysler wants dealers to have more room so they're not poaching sales from one another. Chrysler built its network in the 1970s and 1980s, when the Big 3 ruled. The network in metro areas grew into a patchwork of single-brand stores or odd combinations.
In meetings with dealers last week, Press and Landry used the Boston metro area as an example — and the cuts envisioned apparently are deep.
Boston now has about 22 dealers with Chrysler franchises; the company would like to see that number cut to eight, each selling all three brands.
"Competition has put us in the position where dealerships are seven, eight miles apart," Landry said. "We want them to be 25 miles apart." Landry and Press said the mileage figures would differ from one market to the next.
Among the ideas Chrysler is exploring are satellite dealerships and service-only outlets, Press said.
He said Chrysler's rural dealers will remain largely untouched. Press said about 81 percent of those already have three brands under one roof.
Since Chrysler launched its Project Alpha consolidation in 2004, Chrysler completed about 250 Alpha combinations and has trimmed its dealer body from about 4,000 to 3,600.
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| Source: Automobile History Day By Day, by Douglas A. Wick |
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