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COMMENT: DaimlerChrysler: new challenge in Europe

By Datamonitor Commentwire | 18 December 2003

DaimlerChrysler's plan to sell its popular US Dodge models in Europe is an attempt to turn around low sales in the region. However, the US-German manufacturer may encounter difficulties in penetrating the already over crowded European market, especially as the aesthetically chunkier US models are traditionally less well liked than their European or Japanese counterparts.

DaimlerChrysler's decision to introduce its Dodge models, its best selling make in the US, to the European market in 2004 could provide a welcome boost to its sales. Dodge, which markets passenger cars as well as the Durango large sport utility vehicle, pick up trucks and minivans sold 1.26 million units in the US last year.

The merger of Daimler-Benz and Chrysler in 1998 has already allowed Chrysler to penetrate the European market, where it sells its retro-styled PT Cruiser and Voyager minivan. By selling some of its Dodge models in Europe, DaimlerChrysler could further broaden its global reach.

However, American-made cars and trucks, which traditionally have a squarer, chunkier style than European and Japanese makes, have always had difficulties with penetrating the European automotive market.

Daimler-Chrysler saw a difficult first quarter in 2003 in the US, where sales of Mercedes and Chrysler Group cars and trucks fell a combined 6.5%. In August 2003 DaimlerChrysler announced a $US1.1 billion operating loss at its Chrysler division, with a net income plunge of 90% in the second quarter from the comparable period last year. The group is also battling with low sales in Europe, reporting a sharp decline in profits.

The Chrysler Group is planning to spend an extra $250 million on promoting new or redesigned vehicles to freshen up its product portfolio and hopefully reverse slumping sales in the US. The strategy to help revitalise DaimlerChrysler's European operations seems to be to bank on the introduction of Dodge products in key segments. However, with the earnings of European car manufacturers already squeezed by a decreasing market, this will prove to be more than a challenge for DaimlerChrysler.