From the Wall Street Journal:
Four months after exiting a U.S.-funded bankruptcy reorganization,
Chrysler Group LLC is about to unveil a product roadmap that relies heavily on vehicles from Italian partner Fiat SpA while abandoning many of the U.S. car maker's own models.
The plan, due to be revealed Nov. 4, involves the reintroduction of Fiat's premium, sporty Alfa Romeo brand to the U.S. starting in 2012, according to people briefed on the plans. Chrysler also will introduce the 500, Fiat's tiny car that is popular in Europe, to Americans, though it won't attach the Fiat name to it.
The company meantime is preparing to phase out many of the company's current models, particularly Dodge cars.
Fiat and Chrysler are working to create several new vehicles with Fiat technology for the U.S. market, including a midsize Chrysler-brand sedan slated to be released in 2012, according to these people.
The sweeping changes, due to play out over the next two to three years, represents a big gamble for Chief Executive Sergio Marchionne, who has staked his reputation on the turnaround. Mr. Marchionne, who successfully revamped Fiat, appears to be creating a vehicle lineup that stays true to Chrysler's blue-collar muscle car and pickup truck roots while adding European-styled vehicles to attract a new, more white-collar customer.
But in the short term, Mr. Marchionne's challenge is to keep the company afloat until 2012 when the bulk of the new offerings will come to the U.S. Currently, Chrysler is faced with shrinking market share and few new models coming to market. While it doesn't disclose its finances, Fiat has said repeatedly it won't inject any money into the Chrysler despite receiving a 20% ownership stake in the company's reorganization. Instead, it is contributing technology and management expertise.
"The biggest issue this company has is getting through the next few years," said Rebecca Lindland, an automotive analyst at IHS Global Insight. "They are going to have a hard time maintaining market share let alone increasing it."
Chrysler spokesman Gualberto Ranieri declined to comment on the product plan. Next Wednesday "is the day Chrysler group is going to present its five-year-long business plan," Mr. Ranieri said. Mr. Marchionne and senior executives will give a six-hour presentation to the financial community and media.
For most of the next two years, Chrysler will have to rely on much of its current product line until the new Fiat-derived vehicles arrive. The company is banking on two revamped vehicles due out next year, the Jeep Grand Cherokee and Chrysler 300, as well as juicing its marketing spending on its Jeep brand.
But analysts worry that Chrysler's market-share erosion will continue as consumers appear to favor smaller passenger cars -- not the trucks and sport-utility vehicles that make up the bulk of Chrysler's lineup. Chrysler's share of the U.S. market fell to 8.35% in September from 11.1% a year ago.
The decision to increase the number of brands at Chrysler runs counter to the current industry trend of brand consolidation. General Motors Co. cut back to four brands from eight under its own bankruptcy to reduce development and marketing costs associated with having so many names. Ford Motor Co. jettisoned its Jaguar and Land Rover and plans to sell Volvo.
Yet both Ford and GM have many more new products coming to market in the near future than Chrysler does, which could further hurt that company's sales, analysts say.
"What everyone is counting on is enough of an uptick in sales that will heal everybody fairly quickly," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. After cutting costs sharply in bankruptcy this summer, Chrysler "may not have a lot of smash hits but I think there is a core market there that can be profitable for them."
Chrysler received $9 billion from the U.S. government as part of its bankruptcy. The company's cash position has improved since that time, according to a person familiar with the company, as production of vehicles restarted in full.
Under the new product plan, Chrysler plans to drop several Dodge products including the Caliber compact, the Nitro SUV and the Avenger sedan, but will keep the Dodge Challenger, a muscle car, and the full-size Charger sedan.
"I like that plan a lot. Dodge can be the performance brand. They don't have to be something to everyone, but they have to start being profitable," said Ms. Lindland of IHS Global Insight.
Mr. Marchionne aims to introduce the Fiat 500 subcompact to the U.S. in 2011 as the first offering from the Italian auto maker, according to a person familiar with the company's thinking. The 500 will be the only Fiat model to come to the U.S. and will be marketed as the 500.
The Alfa Romeo products will be launched in 2012 with the MiTo subcompact hatchback, followed by a midsize sedan in early 2013 and the Alfa Milano, according to this person. These vehicles will be made in North America.
As the Fiat models arrive, many current Chrysler models will die. The Jeep Commander is slated to end next year. And by 2012, the PT Cruiser, Chrysler Sebring midsize sedan and the Jeep Compass and Jeep Patriot SUVs all will exit the market. The auto maker also plans to phase out the Dodge Caravan minivan in the next five years, leaving the Chrysler Town and Country as the company's only vehicle in that segment.
Based on a Fiat "platform," or underpinnings, Chrysler plans to introduce a new midsize sedan in 2012 as well as a compact Jeep a year or two later. A Chrysler compact sedan also will be developed for release in 2012 based on Fiat technology.
Reintroducing Alfa Romeos to the U.S. market will come with challenges, including defining the brand to a public that has very low understanding of it or even holds the brand in low regard. Alfa Romeo pulled out of the U.S. market in the mid-1990s, and has only sold a super-luxury sports car there recently.
"Bringing in the Alfa name I'm not sure how that is going to help Chrysler," said Adam Lee, president of Lee Auto Malls in Maine. "I'm just not convinced that people in this country have a warm spot in their heart or feel intellectually that it is a good product."
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