Tuesday, October 27, 2009

Chrysler Will Announce Huge Company Revamp Plans November 4

On November 4, Chrysler will announce some controversial plans to revamp the company phasing out many Chrysler, Dodge and Jeep models, and slowly introducing many Fiat designed products into the company's new product lineup. Chrysler intends to continue it's appeal to high performance buyers on the one hand, while adding many new European styled models in hopes of extending the company's appeal on the other hand. However, some auto analysts are highly critical of Chrysler's plans. Some experts feel that the company will have more than enough problems trying not to lose more market share, let alone expand it at all by bringing in a new customer base for the Fiat designed products.

For at least the next two years. Chrysler will largely attempt to market their existing line of models, however an updated Jeep Grand Cherokee and a new version of the Chrysler 300 will be marketed next year. But many existing models will be phased out by 2012, and these include the Chrysler PT Cruiser, Chrysler Sebring, Chrysler Town and Country, Dodge Caliber, Dodge Nitro, Dodge Avenger, and the Jeep Compass and Patriot SUV models. What will remain is a core of high performance cars, sport utility vehicles and the new Fiat products. Chrysler will also bring in some Alfa Romeo products in 2012 and 2013.

However, one possible major problem for Chrysler might be that Fiat and Alfa Romeo products have always had a troubled history of very poor U.S. sales. Further, many Fiat and Alfa Romeo products haven't been held in very high regard by many American consumers in the past, even though Alfa Romeo is certainly a higher priced brand. Fiat and Alfa Romeo have had the very same problems that Renault has had with American consumers, poor U.S. market penetration. Can American consumers be taught to buy brands that they don't want to buy? Unlike many upstart Asian brands which seem to always capture a decent hold on the American market, many older European brands such as Fiat just never seem to capture any decent hold on market share in the U.S. and have quit the states before.

Another serious problem for bringing European models into the states is a very unfavorable dollar vs. Euro exchange rate. As the American dollar loses more value, and the Euro and other European currencies rise in value, Fiat and Alfa Romeo products might just find themselves priced uncompetitively compared to Asian models or other domestic offerings.

Chrysler's hope is that their future might be brighter. However, the reality is that their company has heavily banked on trucks and sport utility vehicles at a time in which rising fuel prices and a tight economy have boosted smaller car sales. In the late 1970's Chrysler nearly went bankrupt at that time by marketing too many big cars, when GM had the little Vega, Ford the Pinto, and little AMC the Gremlin and Hornet cars. Chrysler needed a government bailout to survive back then and to develop the line of small cars like the Omni and Horizon and the K-car designed line. This past year, Chrysler found itself once again asking for government help. But the government strongly encouraged Chrysler to accept Fiat as a partner although Fiat isn't really giving Chrysler any money, just products, technology and management skills. Fiat is certainly hedging their bet with Chrysler despite a 20% ownership share in the company.

Will this near shotgun marriage between Chrysler and Fiat, largely arranged by government regulators save Chrysler, or just be a final chapter for the company? Last year, Chrysler had a 11.1% market share. This year that market share declined down to just 8.3%. Much more of a decline and Chrysler could be gone for good.


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