According to David Olive at the Great Recession blog
It’s only a matter of time, but Chrysler will fail, this time for good.
There arguably was still a need for Chrysler the previous two times it dug a grave for itself and started covering itself with dirt. But no longer. Chrysler has outlived its usefulness, as its dwindling customer base makes clear. It will join Hudson, Pierce-Arrow and Studebaker down the memory hole. My best guess now is that the funeral will be in 2012, quite possibly sooner.
What matters about Chrysler’s government-assisted reorganization under creditor protection that was unveiled Thursday is solely that it spares Chrysler’s remaining workforce in Canada and the U.S. from joining the unemployment rolls at a time when an anemic economy cannot provide alternative jobs to Chrysler’s workforce.
But the Chrysler-Fiat alliance soon to emerge from bankruptcy will not revive along with the general economic recovery.
Chrysler was stripped of its engineering capabilities in new-product development by previous owner Daimler. And beyond the short-term government bailout funds from Washington, Ottawa and Queen’s Park, the culturally cumbersome Chrysler-Fiat entity will lack the money to be a viable competitor against a slew of rivals. Fiat is providing not a dime in capital for Chrysler’s revival. And the small-car technology Fiat is making available to Chrysler in exchange for 20 per cent of the "New Chrysler" is of dubious value, given Fiat’s dismal owner-satisfaction performance (worse even than Chrysler’s own abysmal customer-satisfaction ratings).
The Fiat subcompacts and minicars that we’re told are essential to Chrysler’s survival won’t arrive for years, since they and the Chrysler plants in which they are to be built need to be retrofitted to North America’s strict regulatory requirements. In the meantime, Chrysler will be stuck for several years with its incomplete product line. And those aging Chrysler products will be starved of the funds required to "refresh" them.
It’s likely that the arrival of the Fiat small cars meant to plug the hole in Chrysler’s truck-and-SUV-heavy line-up will coincide with the anticipated assault on the North American market by far cheaper Chinese and Indian small-car models. The wide-open North American market is already crowded with Subarus, Suzukis, Kias and the small-car output of Toyota, Honda, Nissan, Ford, GM and even Daimler (Smart) and BMW (Mini Cooper). Fiat’s "help" will be too little, too late.
He does bring one possible idea, that is Chrysler as a mini-van company
As with the 500-channel media universe, the auto business is fragmenting into niches and niche players. In time we will have global firms that specialize in light and heavy-duty trucks and off-road vehicles, others in luxury, others in sports and roadster "performance" cars, others in plain-vanilla family people movers, be they crossovers, traditional sedans or minivans.
Chrysler can have a place in this new 21st-century industry, but only as a minivan producer and likely under a different name. The Chrysler name, sadly, has come to represent corporate brinksmanship rather than automaking.
If it weren’t for Chrysler’s "legacy" obligations to workers and retirees and the current rancid state of the economy, the firm’s obvious option to rebrand itself as "the minivan store" would now be taken. Chrysler did for a while successfully market its minivan operations with that name, which should be applied to the entire company, shorn of its other, non-viable operations. GM and Ford each have helpfully quit the minivan segment. A minivan-only firm – and this Chrysler remnant would be the only producer able to make that claim – would have to be the innovator in that sector to survive. And thus it would.
Outside of the job losses and losses for it’s dealers, there doesn’t really seem to be a reason for Chrysler’s existence, it isn’t that large of a company any longer and what Daimler did to it was almost criminal. While losing 58,000 jobs (plus related job losses at dealers and parts manufacturers) would be substantial, the steps the Obama administration and Fiat took this week seems to be only prolonging the suffering instead of dealing with the issue that Chrysler no longer makes enough new vehicles that are desired by the North American market to keep it viable. I don’t see that changing anytime soon.
As far as US brands go, Chrysler has some great niche dominance. Minivans are more popular again, with gas looking to hit 4 bucks again. They are profitable, and families are willing to spend more for fancier interiors.
Until they come up with a cure for Borderline Personality Disorder, there will always be Jeep – immensely profitable, and medium volume. Minivans and Jeeps are the core of Chrysler’s brands, and, with fewer dealers, can compete with any other brands. The rest of Chrysler brands are head-to-head, me-too cars that don’t excite the writers at Motor Trend, and the other head-to-head, me-too magazines, but that’s what most buyers want, and Chrysler will get their share. Profits are slim, but the longer they keep the lines open, the continued volume will amortize tooling.
Fiat has a lot of cars that are almost ready for US safety and economy standards, by slightly tweaking the European requirements. Most US car factories have 2 or 3 lines, so shutting down one (while still producing on the others) doesn’t kill the whjole factory. Fiat is used to building worldwide, so tooling up for US production will take 18 months, look for midyear introduction of American Fiats in January 2011.
Fiat has two products that will sell well – the 500 is a competitor to the Yaris and Fit, and will hold its own. There is a huge pent up demand for cars – people quit buying but didn’t quit driving. Fiat technology will allow Chrysler to sell diesels head to head with popular Volkswagen models. Another product is the Fiat Strada – a small pickup that harkens back to the Chevy LUV or Subaru Brat. Pickups grow over time and ther is a market for a true (seventies) mini pickup. Plus, Fiat has Lancia and Alfa cars that could be good for the US market.
More brands than Studebaker, and with a shrunken GM, labor concessions (which not only make the cars cheaper, but help with long term pension requirements), Chrysler has a chance.
Here’s Fiat’s Welterweight Diesel that would be good in a Dakota Pickup, as well as many sedans.
And smaller ones, along with hybrid technology . 900 cc and 2.3 L engines will round out the mix.
Fiat also has a 1.9 L diesel, I don’t know if it is still in production.
I would argue that Chrysler’s problems started when they discontinued the Neon which meant they did not have an entry level car. When that happened, they lost the first time car market and while some of their cars seemed cool, they were incredibly expensive. The Sunfire/Cavalier/Cobalt moves a lot of units for GM and Chrysler no longer had an answer. Even Ford had the Focus.
They had the PT Cruiser which I still like but it hasn’t been updated since Mark was born. That’s a long time with the same aging design. What could Dr. Z have been thinking?
They have the best minivan on the market and people still care about Dodge trucks.
The problem with FIAT and small cars is small profit margins. The Aveo has a $300 profit margin according to one article I read and it serves as an entry to the company like the Yaris does. Even if I buy a FIAT, will there be other products that I can move into?
In general, car makers use the small cars to bring their fleet economy numbers into line. Selling an Aveo with 300 bucks profit allows a sale of a bigger car with 10k profit.
Here’s a story from the NY Times.
and one from the Detroit Free Press.
Bankruptcy Timeline
Since this is the blog where dogs come back to life, how about cars, too:
Remember the Wartburg.
Yes, you could trade in a Trabant
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