“IF YOU CAN FIND A BETTER CAR (OR A REALLY CHEAP CHRYSLER), BUY IT!”

11/5/09

Chrysler told analysts and dealers yesterday that it is on the way back, vowing to return to profitability by 2011 and to repay its debt to the U.S. government by 2014. Chrysler broke even in September and has been cash flow positive in the last few months. The latter is good news, but not much of a feat with cash for clunkers providing a taxpayer financed shot in the arm and with most of Chrysler’s debt having been eliminated, courtesy of the long suffering, but still magnanimous, taxpayers. The former is a fantasy.

Why am I so pessimistic (besides my general nature) about Chrysler’s future? As I’ve said before (See, most saliently, my 5/1/09 post “CAN THEY MAKE IT? CAN THEY MAKE IT?”), it boils down to product, which the analysts don’t understand at all, mostly because few would be caught dead in a domestically branded car, and which one would think the dealers would understand if one were not as familiar as is yours truly with how dealers do business. With my usual caveat that there is no really bad product out there, and if one can get a really good deal on a Chrysler, and one seeks only transportation from one’s automobile, one should buy a Chrysler, it is clear that, in relative terms, Chrysler’s product line is pathetic and there is nothing in the pipeline, with the possible exception of the new Grand Cherokee, to change that any time in the near future.

In order to meet its goal of returning to profitability in 2011 and getting off the dole by 2014, Chrysler yesterday told its audience that it would:

--boost sales of its Ram trucks by 50% over the next five years.
--increase global Jeep sales by 60% over the next five years.
--double U.S. sales of Chrysler branded products over the next five years.
--power half of Chrysler’s products with engines based on Fiat technology by 2014.

Hmm…

Even if we assume that the economy and car sales will return to the halcyon days of 2005-2007 by 2014, one has the following questions:

--What is it about the Ram that will cause its sales to increase 50% by 2014? The Ram is one of the few competitive products that Chrysler produces, but its sales still come in third in a field of three. Pickup driver are a loyal bunch; getting such a customer into a rival’s product, even when that product is clearly superior, is difficult. Getting an F-150 or a Silverado driver into a merely competitive Ram is well nigh impossible.

--How are Jeep sales going to increase by 60% over five years? As I’ve said before, only Wall Street thinks Jeep is a great brand, probably because Jeep is one of the few domestic products a Wall Street, or even a buy side, analyst would consider, probably because Jeeps make them feel extra manly, but I digress. Jeep’s momentary day in the sun was eclipsed when other manufacturers jumped on the SUV wagon about fifteen years ago. Now that the world has moved to crossovers, Jeep gives us the Compass and the Patriot and, some might argue, the new Grand Cherokee. Oh boy.

--Double U.S. sales of the Chrysler brand in five years? How? Chrysler has nothing, except for its minivans, and even those, while selling well, are widely acknowledged to trail both their Honda and Toyota competitors in any measure, other than post heavily incentivized price. Chrysler cars are a relative joke and there is nothing on the reasonable horizon to change that. Does the “analytical community” think the Fiat 500, about the size of a Mini-Cooper, will make a significant dent in the U.S. market? Does anyone not on the Chrysler payroll think the rest of the proposed Fiat based products, which fit awkwardly into standard U.S. size classifications and represent no discernible breakthroughs, will suddenly become smash hits in the U.S.? If those products don’t result in at least a few tectonic shifts in the U.S. car market, there is no basis for even fantasizing about Chrysler’s doubling sales in five years.

--Why does the idea of having Fiat designed engines’ powering half of Chrysler products by 2014 get the juices flowing so salubriously? There will be some savings involved, and that is a good thing. But beyond that, why the excitement? If there is such pent-up demand for Fiat products and technology in this country, if there are indeed legions of Americans out there saying, or even thinking, “Boy, I’d really like a Fiat, but I guess I’ll just have to settle for a Toyota,” why has Fiat been out of this country for over fifteen years? Why has it waited for Chrysler to offer itself for nothing in order to attempt to repenetrate this market?

I’ve said it before and I’ll say it again: Unless the government has decided that it will do whatever is necessary to keep Chrysler alive, Chrysler is doomed because its products simply are not competitive, and companies, especially car companies, are a collection of products, not numbers on financial statements. Fiat is by no means the joke it was ten years ago; it has made remarkable progress under the very coolly named (even in an industry characterized by executives with very cool names) Sergio Marchionne. But Fiat is not Toyota, Honda, VW, or even Daimler, which could not turn around Chrysler. Americans are not crying out for Fiats or Alfa Romeos. And they certainly aren’t buying Chryslers.