Although Chrysler Group LLC will not release its five-year plan until next month, comments made by Chrysler’s brand chief, Peter Fong, at last month’s Frankfurt Auto Show left some industry experts bewildered. According to Fong, Chrysler plans to position itself, “a notch above Lincoln, a notch above Cadillac.”
Chrysler has declined to discuss the comments.
Fiat SpA, which holds a controlling share in the company, has experience in the high-end luxury market with its Alfa Romeo brand. However, transforming Chrysler into a viable contender with Audi, Lexus, BMW, Mercedes-Benz, Jaguar and others would likely be a hard sell according to most analysts.
DaimlerChrysler AG attempted to upgrade the Chrysler brand a few years ago, with the introduction of its sporty Crossfire roadster and Pacifica crossover models. Most analysts fear that the challenges are compounded by the automaker’s tainted, post-bankruptcy image and the global economic malaise.
President of the Society of Automotive Analysts, Tom Libby said, “I can understand why they want to do it. They don’t have a luxury brand and luxury brands are more profitable.” However, he predicts that launching new luxury lines in the current down market is “going to be an extremely difficult task, requiring patience and perseverance.” In short, it will take time and money – two things Chrysler has a short supply of.
HIS Global Insight’s head of industry research for the Americas, Rebecca Lindland, draws a poignant comparison to GM’s luxury Cadillac brand. Lindland said, “GM spent $2 billion and 10 years on Cadillac, and it was already upscale.” By contrast, Chrysler has been sustained by approximately $15 billion in federal bailout funds and watched sales continue to tumble since emerging from restructuring bankruptcy this past summer.
Chrysler plans to launch relatively few all-new products over the next year and a half compared to the competition, and many analysts fear that an up-market move would distract the company’s focus and weaken their position even further.
Joe Phillippi of AutoTrends Consulting, Incorporated puts a fine point to his criticism of the plan. “At this stage of their rehabilitation,” he says, “I think that’s real folly.”
Last year, Chrysler sales totaled over 335,000 vehicles. Although that number is down from the 650,000 figure posted for 2005, the Chrysler brand still represents between 30% and 45% of Chrysler Group’s total sales across all brands which include Jeep and Dodge.
Director of information content for Ward’s Information Products, John Sousanis says, “To maintain anywhere near their former healthy volumes, they would be counting heavily on Dodge vehicles to capture current Chrysler buyers, which is in no way a given.”
Lindland feels that Fiat’s management doesn’t have a firm grasp of the current U.S. market. She said, “Fiat needs to do a tremendous amount of market research before jumping into this.”
DaimlerChrysler’s attempt to up-market the Chrysler brand was short lived. Both the Pacifica crossover and Crossfire roadster were removed from production in 2007 due to disappointing sales. Other luxury concepts, including the Imperial full-size luxury sedan never made it to production.
According to Tom Libby, the Chrysler brand became “extremely blurry and not distinctive” after the company was sold to Cerberus Capital Management LP by Daimler. Earlier this year, there was even talk of completely eliminating the brand as the company entered into bailout and bankruptcy negotiations.
Rick Deneau, a spokesman for the automaker, quickly dismissed reports of discussions to retire the Chrysler brand. “This brand for us is vitally important,” Deneau said, “It shares a name with the overall organization.”