What a difference a year makes.
Surviving on $6.9 billion in loans from U.S. and Canadian taxpayers after its emergence from bankruptcy last November, the third largest automaker in the U.S. announced a bold five-year plan. Looking at a required repayment of $2.2 billion of the taxpayer loan by December 2011, Chrysler Group LLC CEO Sergio Marchionne offered few details.
The plan, he offered at the time, included news that the company could break even by selling 1.1 million vehicles in the U.S. and 1.65 million globally.
Furthermore, the Italian no-nonsense businessman also said to increase market share, Chrysler will produce a third of its products for both Fiat and Chrysler. Also, he said, Jeep will become a global brand and Fiat’s Alfa Romeo will re-enter the American market as a full-line brand that will be sold alongside Chrysler products.
Some automotive analysts second-guessed and snickered at Marchionne’s brash objective, especially when Chrysler ended 2009 with a net loss of $3.785 billion. Now, with 16 new or upgraded products on the horizon, Marchionne seems to have silenced at least some of the naysayers by investing billions in his factories to reach the company’s goals.
Marchionne said he expects the company to post a $700 million profit this year. That’s nothing to snicker at.
The 2011 Jeep Grand Cherokee is projected to pull down $100 million in sales next year, growing new jobs along the way.
All this news comes after a third quarter in which the automaker posted an $84 million net loss.
“As time and things progress, we are getting better,” Marchionne told the Kokomo Tribune Tuesday evening at Button Dodge Jeep.
He was in town for President Obama’s visit to the City of Firsts and the company’s announcement that it would invest another $843 million in its Kokomo plants to build a new front-wheel-drive automatic transmission.
That money will be piled onto the $343 million investment the automaker announced earlier this year. That investment will see the manufacturing of an eight-speed automatic transmission in Kokomo.
“I am pretty encouraged,” he said. “We have 16 new products ready to hit the market and [customers] will be pleased.
“This is my first time in Kokomo and my first time visiting the plants,” he continued. “I saw all I needed to see. We will be fine. Watch.”
Product watch
Analysts are keeping a watchful eye on the Auburn Hills, Mich., automaker’s evolving product line, which now includes the Fiat 500, carrying a base price of $15,000.
Jesse Toprak, vice president of industry trends for truecar.com, believes Marchionne is leading Chrysler and Fiat to a better product future despite its financial difficulties.
“Until now, you would have to say Chrysler has been lagging behind the competition with its products,” Toprak said. “But the Fiat 500 had a strong showing at the L.A. Auto Show and the Cherokee has sold well. Next year, I think they will be even more competitive with their products. And with the investments they are making in Kokomo, that will put them ahead of the competition.
“[Marchionne] is playing to the strengths of both Fiat and Chrysler. Fiat is known for its small cars; Chrysler is known for its SUVs and trucks,” he continued. “They both make money. He is playing to those strengths.
“Take the Jeep brand. It has international equity. There are places in the world where a Cherokee means you made it: It’s a symbol of wealth. That may be puzzling to us, but he understands brand equity and how he can capitalize on it.”
New products, new style
The next car Chrysler will introduce in the U.S. will be the Fiat 500 by year’s end. On the highway, the Volkswagen-looking vehicle is expected to get more than 40 miles to the gallon.
Just don’t expect to see it at your local Chrysler dealership.
Currently, Chrysler plans to build 120,000 of the 500s, and half of those will be sold in South America. In the U.S., the car will be sold in cities with numerous small-car registrations.
As a result, Chrysler officials said only dealerships in 37 states and Puerto Rico will get the Fiat 500.
Nevertheless, area dealers remain excited about Chrysler’s future and products.
“There’s just excitement here,” said Mike Lupoi, Button’s general sales manager. “When [Marchionne] was here, he took time to tour the facilities and speak to every department. The enhancements he spoke about to our products has created excitement. The new [Dodge] Durango will be in our showroom Jan. 14, and we are getting calls about it. There’s a lot of positives here.”
Another dealer attributes some of that excitement to Marchionne implementing his Fiat-management style when he took over Chrysler.
It’s a style making dealers and consumers happy, Greg Thompson said.
“It used to be we would get a vehicle and we would have to send it back. Now, they make the effort to make sure a vehicle is ready to ship to a dealer. That has taken a huge burden off dealers,” said Thompson, of Wabash Valley Chrysler LLC, a Five-Star Chrysler dealership.
“I don’t mind waiting two weeks or 30 days for a vehicle that’s ready instead of getting one and returning it 10 days later because of a problem,” Thompson said. “They are spending time and effort on all their vehicles and with the product we have coming down the pipeline, they are concerned about quality. The thing now is, product is hard to get.”
Bob Schwartz watched Marchionne leave from the window of his Chrysler dealership, located right across the highway from Grissom Air Reserve Base.
Like others, Schwartz is excited about the changes Marchionne has brought to the company. He’s heard about all the vehicle upgrades and talked to the customers coming to showrooms wanting to buy the new products.
Only one problem.
“It’s one thing to keep hearing about the products, but it’s another to touch and drive them. That’s going to bring us a whole new level of excitement,” said Schwartz, who has been selling Chryslers since the early 1980s.
“Things are not as good around here as they were, let’s say, three years ago, but things are way better than last year. Once we get that new product in the showroom, people are going to be really excited and things will almost be back to normal.”