Some analysts have reportedly said that Chrysler’s turnaround plan might need its own turnaround plan after the company projected a $US1.2 billion loss for the second quarter and the stumbling US market remains glutted with cars and trucks, the New York Times (NYT) reported.
Go deeper with GlobalData
“Do they have the time to step back and rethink it?” veteran motor industry analyst Maryann Keller asked the newspaper. “You just have to assume that the Japanese are going to continue to create cars faster. They’re now in every segment, and they can build them cheaper than we can.”
According to the New York Times, Keller said the US Big Three car makers in general lacked the “blockbuster saviours” of the past such as Chrysler’s early 1980s invention of the minivan. “Where’s the minivan of 2004?” she reportedly asked.
The paper said the idea behind the 1998 acquisition of Chrysler by Daimler-Benz was that the German company could function as a “rich uncle” and help Chrysler avoid the Big Three bloodletting. By sharing parts and costs with Chrysler, Daimler could have a lean, mean mass-market foothold in the world’s biggest vehicle market, the NYT added.
But the newspaper noted that, since the beginning of 1999, shares in the combined DaimlerChrysler have lost more than two-thirds of their value and the plans of Dieter Zetsche – the executive sent from Germany two years ago to turn Chrysler around – to make the deal work are beginning to be tested as products developed under his eye begin to hit the market, a tough test in a market that seems to be losing strength every month. The new Chryslers share parts with Mercedes and have a “European flavour”, the New York Times said.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData
The paper said that some analysts have said the new Pacifica, a six-seat station wagon ‘crossover’ is overpriced for a Chrysler, starting in the low $30,000 range.
That view has been reflected in a number of consumer motoring writers’ reviews seen by just-auto.
“It’s like they’re selling cars by the pound,” Gerald Meyers, a professor at the University of Michigan who once ran American Motors, now part of Chrysler, told the New York Times. “The heavier it is, the more money they can get. That’s not the way it works, fellas.”
Joseph Phillippi, an industry analyst with Auto Trends Consulting of Short Hills, New Jersey, told the newspaper that sales of the Pacifica have been disappointing so far and suggested that more incentives were needed to increase consumer interest.
“In this market, it doesn’t matter if you’ve got the biggest, hottest product on the block,” he said. “If there’s a portfolio of competitors out there and they have more money than you have, you’ve got to have an awfully compelling product case to make the sale,” Phillippi added, according to the New York Times.
The paper said that Chrysler spokesman Jan Zverina responded that dealers had initially ordered more expensive models and that sales would pick up as the more affordable versions arrived in showrooms and as the company’s advertising increased.
The New York Times also noted that the sporty Crossfire [built in Germany using many Mercedes parts], due for launch later this year, has received positive reaction, but it is not a high-volume product, while sales of minivans are down 24% this year as the company struggles to hold off redesigned rivals from Toyota and Nissan.
“These guys are right at the heart of where the Japanese are focusing their efforts,” Bank of America analyst Ronald Tadross told the paper, adding that Chrysler’s Jeep brand is also in the medium-size sport utility vehicle areas that are well populated by foreign competitors.
“I can’t say there’s anything that differentiates them much from the Japanese,” Tadross said, according to the New York Times.
The New York Times said that Wall Street has not broadly lost faith in Zetsche, but analysts are generally pessimistic about the Big Three’s prospects as sales stumble while incentives soar.
Chrysler has increased its incentives through gritted teeth, the paper noted, but it appeared prepared to make them even more generous after its marketing chief, James Schroer, abruptly resigned last week.
Zetsche acknowledged, in a telephone interview with the New York Times, that Chrysler might have stumbled by publicly insisting that it would keep a lid on incentives.
“What I certainly have to accept is that it might not be the smartest thing to tell customers every day that we are not into incentives,” he said, according to the paper. “Certainly, there were months where we didn’t execute perfectly on the sales side.”
The New York Times said that Chrysler, which had hoped to earn $2 billion this year, has not abandoned its hopes of a profit this year, on top of the $1.6 billion it earned in 2003, but that means Chrysler must earn at least $1 billion over the next two quarters, a difficult task, given that car prices traditionally fall from July until the end of September.
The newspaper said Chrysler has a new Dodge Durango sport utility line due out soon but the next wave of new products after that, rear-drive LX saloons, won’t debut until 2004.
Many of Chrysler’s problems are “beyond [Zetche’s] control,”. Meyers said, according to the New York Times, adding: “I don’t think Chrysler has the strength or the talent to keep their future from eroding, because of the imports.”
Meyers also told the paper that Chrysler has the time and the cash to battle imports if Daimler has the will to do it.
“It’ll cost them dearly,” he told the New York Times. “They’ll have to act like Ford or GM and get the conviction to pour whatever it takes to fight off the Japanese.”
