The New 2011 Dodge Grand Caravan. General Motors’ IPO far exceeded even the most optimistic expectations, raising a record $23 billion. Could long-troubled Chrysler ride on its crosstown rival’s coattails?
Widely perceived to be the weakest and most troubled of the domestic Big Three makers, Chrysler has its own debt to repay to the U.S. taxpayers who helped bail the company out after last year’s bankruptcy filing. But unlike GM, the smaller automaker still has plenty of obstacles to overcome before it can hope to win Wall Street’s support.
Nonetheless, like its rival, Chrysler has been showing some unexpected momentum in recent months, with sales rising and losses shrinking. And with investors showing a newfound interest in the automotive sector overall, Chrysler’s CEO Sergio Marchionne is starting to sound a note of optimism.
The GM IPO was “great news,” Marchionne told msnbc.com at the Los Angeles Auto Show.
“GM has done a lot to open up the market for us. We’ll do a lot better with [our own] IPO now,” added the Canadian-educated executive, who serves as chief executive for both Chrysler and its Italian partner, Fiat.
There are still plenty of skeptics, of course, who question whether there really is room in the U.S. market for Chrysler, which has slipped well behind not only its traditional American rivals, GM and Ford, but also key import rivals, most notably Toyota.
Chrysler’s image among consumers is tainted, at best. Vehicle like the old Sebring sedan earned the carmaker a drubbing, not only from potential car buyers, but also from key arbiters like J.D. Power & Associates and Consumer Reports magazine.
The latter recently ranked Chrysler’s vehicles among the lowest quality products on the market, with the head of Consumer Reports’ auto test division, David Champion, lamenting that “Chrysler is the one area of the domestic industry that hasn’t improved.”
Mea culpa, responds Chrysler’s Marchionne. “I fully understand the naysayers," he said. "This industry has a big history of overpromising and underdelivering.”
For Chrysler, part of the problem is that its turnaround strategy is far less advanced than those of its rivals.
That’s in large part due to Marchionne’s decision to base much of that revival on pairing the Chrysler and Fiat product lines. The eventual replacement for the oft-maligned Sebring, for example, will be built off of a midsize car platform developed in Italy.
Meanwhile, some of Chrysler’s larger products will eventually wind up providing the underlying “architectures” for various Fiat brands, including Lancia and Alfa Romeo. A version of the new Grand Cherokee sport-utility vehicle, for example, is under consideration for the Maserati lineup.
Product development is a slow process, even for the leanest manufacturers. Despite their best efforts, Fiat and Chrysler won’t really begin launching these new models until late next year — although a version of the Fiat 500 microcar will roll into U.S. showrooms next month, marking the Italian brand’s return to the United States after a two-decade absence.
That’s not say Marchionne’s new management team is sitting back and waiting. Earlier this month, a select group of reporters got a chance to drive nearly a dozen updated Chrysler and Dodge brand vehicles that, notably, included the new Chrysler 200 — a temporary replacement for the old Sebring until a Fiat-based sedan can be brought to market.
The mere fact that the 200 will be available for the 2011 model year is significant. Chrysler took just 12 months to turn it around, a veritable blink of the eye in the auto industry. And although it didn’t have to do much to exceed the old Sebring, the new 200 is getting almost uniformly positive reviews for its cleaner exterior styling, all-new interior and generally improved ride.
Calling it a “better face” for the company, the widely quoted Car & Driver magazine suggested that, “If this is what the new Chrysler can do with one year, we can’t wait to see what it can do with four.”
While new models like the Chrysler 200 and Fiat 500 are big improvements for the automaker, the real challenge will be to convince skeptical car shoppers to visit its showrooms, Chrysler officials admit.
But the carmaker does have a role model it hopes to emulate, and it's not GM, Ford or Toyota.
“Frankly, our strategy is based on what Hyundai did,” Chrysler marketing manager Bruce Velisek said.
The Korean carmaker has faced many of the same problems as Chrysler in the past, and it had to take significant steps to upgrade its image from that of a low-quality producer of bargain-basement products.
Hyundai has scored some surprising successes with design exercises like the current-generation Sonata. And by loading up its products with high-level content it is now seen as a “value” brand, rather than just the cheapest nameplate on the market.
Once the industry’s design trend-setter, Chrysler hopes to rebuild that reputation — while also upgrading its interiors, a place where it has traditionally lagged.
The 200 is an example of what’s to come, according to Ralph Gilles, Chrysler’s corporate design chief and head of the Dodge brand. The carmaker has switched to single-piece instrument panels, for example, which not only look more refined but eliminate many of the problems Chrysler had joining separate pieces. Soft-touch foams and refined graining help gauges, switches and other controls fit together seamlessly.
“It’s not cheap,” said Gilles, noting that women, in particular, are convinced to purchase a vehicle if they are impressed with its interior.
Much like Hyundai, Chrysler is loading up its 2011 vehicles with a variety of features normally found in more expensive models. In many cases Chrysler is making these features standard equipment while dropping the price of many of these vehicles for the new model year.
Better-looking products won’t solve all of Chrysler’s problems, cautioned analyst Joe Phillippi of AutoTrends Consulting. In the longer-term, he stressed, it will depend on improving build quality and vehicle reliability.
But there are signs that Chrysler is finally making headway. And if GM’s IPO was any indication, Wall Street could be ready to reward a turnaround.