Key to Chrysler's strategy will be the reduction of underperforming models within their Chrysler, Dodge and Jeep brands and the introduction of Fiat and Alfa Romeo models to the U.S. market. Fiat hasn't sold a car in the U.S. since 1984; Alfa Romeo left our shores in 1995.
What's Going Away
When Chrysler's plans become apparent next Wednesday, more than a few models are expected to hit the chopping block. When reached for comment, Chrysler representatives told AOL Autos that "since the story relates to future products we can't comment." We expected that, of course.
Nevertheless, insiders have confirmed to us a wave of products that will die either by year's end or at the end of their current production run. The list of production models going away is listed at the right.
Why Kill Models?
With market share at a dismal 8.3% at the end of September, it's difficult to see the wisdom in the elimination of brands. Furthermore, in aggregate these models represent millions of points of contact with customers. Why walk away from that?
The truth is that few of the products on this list are worth saving. Chrysler's product portfolio in America has been inconsistent and out of pace with the rest of the industry.
"The Caliber, the Avenger, the Commander, as well as the Compass, Patriot, and Dodge Nitro triplets, are vehicles that really failed to endear themselves to the American consumer, and the automotive media and quality analysts were never bullish on them, either," said Chris Paukert, executive editor of Autoblog.com. "As none of these are exactly long-time, storied nameplates, I don't see many mourning their passing."
Except their owners, of course. The way that Chrysler deals with the death of these products will be critical. Should you find yourself in possession of one of these vehicles when the announcements become official, you shouldn't panic. Chrysler will honor its warranties with owners and supply parts for a reasonable amount of time. While the models might be going away, don't expect they'll forget about your car payments, of course. Your resale values will likely be affected, though; market logic follows that fewer buyers will see the value in buying Chrysler products after they've been discontinued.
New Models Coming
In the automotive business, the speed at which you refresh your model lineup is your lifeblood. It's the same way that all the experts tell you to get your oil changed every three months -- in the car business, those refreshes and redesigns need to happen every four years or so. When you wait much longer, as Chrysler has, customers walk away and fast-moving competitors take the lead. As Chrysler slowed the rate at which it brought new models to bear, its U.S. sales dropped; in 2008 U.S. sales fell 30% from the previous year but in reality the entire decade underperformed the company's real potential. No year in the past decade came close to the sales they saw in the 1990s; in 1999 Chrysler sold over 2.6 million cars. In 2009 they are on pace for about half of that.
The problem a few years back continues to be a problem today: Chrysler really doesn't have much new stuff to bring out. The new Grand Cherokee is expected to arrive next year as a 2011 model and the Dodge Charger and Chrysler 300 will receive a redesign at the same time. Other than that, though, the pipeline is dry. Meanwhile, other companies are hot to refresh and redesign new models. Ford recently announced a company-wide goal to be 90% refreshed by 2012.
So, what's Chrysler's solution? Instead of begging for new products, they're simply going to borrow them.
Fiat builds and sells a number of exciting products in Europe and Chrysler could do a lot worse than simply bringing them over. And that's exactly what they're going to do. Fiat is expected to bring a few of those to the U.S. in short order to help Chrysler stay afloat.
Expected to arrive in the U.S. will be the Alfa Romeo Mito, Alfa Romeo Milano and the Fiat Cinquecento (the ultra-exclusive Alfa Romeo 8C Competizione actually already went on sale late last year). A few new programs, in cooperation between Fiat and Chrysler, will bear fruit for the company on both shores further down the road. As an example, a mid-size sedan under development by Alfa Romeo could provide a next-generation replacement for the outgoing Dodge Avenger and Chrysler Sebring.
Of course, it's not a simple copy and paste procedure to sell cars in the U.S.; the models from Europe would need to meet U.S. safety standards. Beyond that, the expensive task of actually marketing these vehicles would be a massive undertaking, especially in the case of a brand like Alfa Romeo which, in America, carries more baggage than a luggage cart.
Drastic Times, Drastic Measures
In 1998, Mercedes-Benz acquired Chrysler, and although the "merger of equals" sounded like a great idea, the reality never rang true. The relationship ended in a divorce. Unlike most domestic partnerships, however, love probably never brought the two together in the first place. The dreamy, 90s concept of massive efficiencies of scale wafted through the executive ranks in Germany and Detroit and produced one of the auto business's worst partnerships. Both Mercedes and Chrysler were worse off in the end.
So, why should we expect anything different with Chrysler's new owner, Fiat? After just 42 days of bankruptcy earlier this year, the Italian conglomerate took over (they now own 20% of Chrysler Group LLC with an option to buy up to 51%). Cynics might say that history will repeat itself, but this new chapter looks to be different.
"Mercedes really couldn't use anything they got out of Chrysler," said Jim Hall, an analyst with 2953 Analytics in Birmingham, Michigan. "The water really didn't flow from America to anything of value for Mercedes. But now, Fiat gets the company for a song, gets them the volume they need to maintain critical mass purchasing and the ability to sell Jeep around the world. It's win, win. The problem is bridging the next two years."
Even with these bold announcements to come next week, Hall's warning is prescient: it will be a good while before we'll actually see these models hit the showroom floor. Until then, Chrysler just needs to hold on and wait for the tide to come in.
The decision to cut models, tighten their (Italian leather) belt and hope for a brighter tomorrow is the best decision they could make right now, even if it's unpopular.