Chrysler’s Product Euthanasia

Let me just say how impressed I’ve been with Chrysler since the new leadership took over. With so much action in the little time since Cerberus grabbed the reigns from an exhausted Daimler, it looks positively non-Detroit-like at Chrysler.

One of the most important factors to the progress is Cerberus’ private ownership. In a country where true success is often sacrificed in pursuit of an ever-increasing stock price, it is nice to see a company forgo the pressures of Wall Street volatility and focus on constructing financial, operational, manufacturing, and marketing foundations on which long term success can be based.

Certainly the most visible hard-core decision to come down was the one to shut-down production of four relatively young products. Not only did that show the new leadership wasn’t tied to any specific model, but also that the corresponding lines and workers were going to be held to a very strict performance model.

When the news broke a couple weeks ago, the financial news stations praised the decision to get leaner and meaner. Nobody really rolled-up their sleeves, however, and looked at the effects of the axed cars on the company and its marketing strategy.

So which cars were booted? After 2008 Chrysler will lose the Crossfire (both coupe and convertible), the Pacifica and the PT Cruiser Convertible. Dodge will no longer offer the Magnum.

Let’s look at the Crossfire first. Designed as a sports-luxury halo car for the Chrysler brand, the model never lived-up to the promise. While it actually delivered a very pretty and identifiable look, the proportions turned out to be way too small. I once attempted a test drive, but simply couldn’t find a way to fit my 6’4” frame into the cabin in a way that enabled operation of the controls.

Those who could fit found the car to be tuned so softly that it made the Audi TT and BMW Z3 look like Lotus Elises. The car’s six cylinder engine wasn’t nearly potent enough and controls were numb. Even the supercharged SRT-6 version was out of its league against competitors like the BMW M Coupe and Roadster.

The Crossfire coupe and convertible have combined to sell just 8401 units in 2007 through October…which means it doesn’t sell, isn’t profitable and doesn’t bring people into showrooms. Cutting it was a no brainer.

The PT Cruiser convertible arrived early as a 2005-model year pick-me-up for the maturing PT Cruiser sedan-ute. Chrysler never quoted convertible production separate from sedans, but based on year-to-year sales, it looks like the convertible has accounted for roughly sixteen percent of its annual 116,000ish total units. And based on PT demographics, which shows the average owners as sixty-something women, the product lifecycle seems to have little future.

The Pacifica should have been a hit. A small minivan-ute hybrid with room for a family and their crap seemed like a good recipe for success. After a few years in production, though, the Pacifica will sell under 55,000 units for 2007.

I spent a week with a Pacifica two years ago in southern California and disliked almost every moment. The car was gutless, delivered no feedback via the steering wheel or pedals and was just moderately comfortable. Most importantly, the combination of large headrests and insanely wide pillars delivered a lack of visibility only rivaled by skiing out-of-bounds after dark. Even Town Cars managed to hide in the Pacifica’s Jabba-the-Hut-sized blind spots.

Oh, and the electric tailgate refused to latch close two days in, requiring a swap for another Pacifica. But quality is not what did the Pacifica in. The higher-end and better quality Mercedes R-Class, which shares all too much of the Pacifica has also been a disappointment with just 13,000 units so far in 2007. Chalk it up to poor design throughout.

The axed model that raised the most eyebrows was the Dodge Magnum. This wagon might not have been predicted to be the choice of the country club set, but even I have been surprised at the lack of sales success among the image-over-substance NASCAR-loving demographic. Magnum sales are down 25 percent on the year to a pace that will likely come in around 32,000 units when 2007 comes to a close – a figure on par with the completely derided Jeep Patriot.

Magnum’s lack of success seems to lie somewhere around the fact that designers spent too much time styling and engineers spent too little time adding functionality. It looks sporty, but isn’t. It appears huge, but passenger and luggage space are tiny. For Hemi Magnum money, one could get one of many sportier, more capable family hauler\wagons (such as those from Audi, BMW and Subaru.)

And herein is the core problem over at Chrysler: the company must stop filling its showrooms with niche products. At some point Chrysler needs high-quality core products beyond the Town and Country and Caravan.

The magic number in the world of automobile production for break-even used to be 100,000 units annually. Anything above this mark generally was profitable. Modern flexible production lines and streamlined distribution channels have brought this number down for some products, but the number still stands as a good measure of success for a core offering not intended as a halo.

There are really only four 100,000 sellers at Chrysler-Dodge-Jeep. The 300/Charger shared platform sells over 200K, and a quarter-million Town & Country/Caravan combined units hit showrooms annually. Other than that, the only other true successes are the Ram pickup and Grand Cherokee, which surprisingly still will manage over 110,000.

In contrast, two out of four Honda cars are 100K-plus sellers, with the Accord and Civic balancing out the niche Fit and S2000 sports car. On the truck/ute side, three out of five are in triple digits. Odyssey, Pilot and CR-V are all ultra-successful, while the Element and Ridgeline have fairly underwhelming sales. Still, this is a great slugging percentage.

Let’s hope this is just the start, and that Cerberus is busy looking for other horribly designed products that have already failed in the market (Patriot, Compass, Aspen, Nitro, Caliber) to cut. From the ruins of the multi-niche strategy Chrysler can rebuild with products that appeal to the mass market.

And it’s not just good enough to take GM’s strategy of mediocrity. If Cerberus expects a good return on investment, then they better have in the pipeline sedans, minivans and wagons with Japanese-beating quality, European-beating style and Korean-beating content-to-price ratio.

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2 Responses to Chrysler’s Product Euthanasia

  1. Indeed, but …

    Chrysler at least still makes CARS. Unlike the F & GM, who seem to have settled into being truck makers. Quick, beyond the Mustang & Corvette, name the *cars* those two make. Most people can’t. Execrables & Yuckahoes certainly, but no real *cars* it seems.

    I suspect that Chrysler will end up on top of the market at some point, or US-based manufacturers. Ford, GM, or both will slide into bankruptcy, leaving the market to the Japanese, Koreans, and Europeans.

    –chuck
    http://chuck.goolsbee.org

  2. You probably don’t want me to try to name all the current sedans and coupes made by GM and FoMoCo. I can probably gag through naming almost every one…yes every last lackluster, boring, uncomfortable, bottom-of-class offering not on a truck chassis. Malibu, Impala, G6, Lacrosse, Lucerne, Taurus, Taurus X, MXZ …hold on, let me get a bucket, I feel something coming up!!!

    You’re absolutely correct, Chuck. The 300 has been the cornerstone of Chrysler’s survival, along with the minivans. Chrysler’s future, as well as that of GM and Ford, depends on creating high-quality sedans.

    Unfortunately, over the last five years, Chrysler has allowed Dodge to move away from sedans and coupes. The Neon, while a piece of garbage in terms of quality, was a great-selling entry-level sedan. (A sedan in platform, but available as a two door coupe.) The DCX brass, for some reason I’ll never understand, replaced it with the Caliber mini-Ute. Whereas the Neon was a popular item with racers and got a lot of people jazzed about owning a potent little Dodge, the Caliber is basically purchased by people who are somewhat indifferent about brand and model identity.

    The bottom line is that the Big Three need to spend less time worrying about short-term niche products like crossovers and more time worrying about sedans, wagons and coupes (as well as fuel economy/alternative energy solutions) that will serve long-term benefits. It seems like the US focuses on niches, and cuts corners on bread and butter products, while everywhere else, the focus is always on b&b vehicles, while offering one or two niche products here and there as icing on the cake.

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