The tough US car market is forcing DaimlerChrysler to turn cautious and tone down its once overtly aggressive battle plan to expand sales of its US-based Chrysler group, a Bloomberg News report punlished on Thursday in the Detroit News said.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
The report added that, nevertheless, DaimlerChrysler is pressing ahead with its long-term strategy to inject more Mercedes parts and engineering into Chrysler and Dodge models sold in the United States – exemplified by the new Dodge Sprinter commercial van, which went on sale in January.
Bloomberg News said the Dodge Sprinter is an identical twin of the Mercedes Sprinter commercial van sold worldwide, except for the badges and grille, and DaimlerChrysler executives believe they can improve consumer opinions across the Dodge and Chrysler lineup by adding the flavour of German engineering and design, and thereby increase prices customers are willing to pay.
The report noted that DaimlerChrysler announced on May 22 it was scrapping plans to build a fourth assembly plant in Canada to assemble a new small pickup truck and disclosed it was considering a new $US750 million factory, possibly in Savannah, Georgia, to build the Sprinter.
Two months later, Bloomberg News added, DaimlerChrysler posted a 90% decline in second-quarter profit, stemming from an operating loss of $1.1 billion in the United States, which had been caused by greater-than-anticipated rebates and other sales incentives.
Now, the report said, DaimlerChrysler is shelving the Georgia Sprinter plant, at least for the moment, and instead will import Sprinters from its factory in Dusseldorf, Germany – some will arrive fully assembled; others will be assembled from kits in a plant in Gaffney, South Carolina.
“There’s just too much excess plant capacity out there,” Erich Merkle, automotive analyst for forecasting firm IRN Inc. in Grand Rapids, Michigan, told Bloomberg News, adding that North American factories would build 15.9 million vehicles in 2003, compared with more than 17 million in 2000.
Bloomberg News said that relatively weak demand for vehicles means that DaimlerChrysler and other manufacturers must offer bigger and bigger cash rebates or subsidised financing to stimulate sales and keep plants running and noted that, this year, Chrysler, in the face of withering competition, stopped selling its full-size Ram vans, which competed with Ford’s top-selling Econoline van and General Motors’ GMC Savanna and Chevrolet Express vans.
Bloomberg News said the diesel-powered Sprinter is bigger and sturdier than the Ram and others in that class – a six-footer can stand up inside without bending over – and, at prices ranging from $US29,000 to $36,000, it’s also more expensive.
The news agency said that the Sprinter appears to be a strong entry – given its worldwide popularity – and its situation shows, in microcosm, that Daimler-Benz initially didn’t understand the US market well when it acquired Chrysler Corporation for $US36 billion in 1998.
Bloomberg News said that, with hindsight, DaimlerChrysler is realising how far behind GM and Ford it is – not to mention Honda and Toyota – in many market segments and noted that, lately, Chrysler models are using more and more Mercedes technology, such as in the Crossfire roadster, which has a Mercedes engine and transmission, among other components.
Bloomberg News noted that, based on this strategy, Chrysler CEO Dieter Zetsche in July 2002 predicted an increase of 36%, or one million vehicles, in global sales by 2011 – on the strength of 11 all-new cars and trucks and many updated models.
“The Dodge Sprinter is a perfect example of the merger between Daimler and Chrysler,” Chrysler director of commercial marketing Craig Fisher told Bloomberg News, which added that the giant vehicle maker may also bring Mercedes’ smaller van, the Vito, to the United States.
“I won’t tell you we’re giving up on another Ram [designed and developed in the US to replace the outgoing Dodge van line], but we don’t have any plans right now,” Craig told the news agency.
Bloomberg News said that, this year, Chrysler hopes to sell 7,500 Sprinter vans and perhaps 15,000 next year, a relatively small number in a market segment of about 200,000 vehicles annually and added that whether the Sprinter will ever attract enough buyers to justify a US assembly plant is anyone’s guess.
Bloomberg News also noted that DaimlerChrysler would also prefer to avoid United Auto Worker representation in current and future US Mercedes plants, something the union [whose membership is falling due to ‘Big Three’ plant closures, members retiring and foreign brands’ new non-union plants coming on-stream in southern states] is trying to win.
Bloomberg News said DaimlerChrysler executives must feel humbled now they understand how swiftly a company can lose lots of money in the United States, and how much more the Stuttgart-based company must learn about doing business in the country, beyond just selling Mercedes-Benz sedans.
