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Memo to New Owners: Bring Back Chrysler's Product Mojo

Date posted: 06-17-2007

When Chrysler's new owner, Cerberus Capital Management, takes over the auto company sometime next month, it should put the revival of the automaker's product mojo at the top of its to-do list.

Since its near-death experience and subsequent resurrection at the hands of Lee Iacocca in 1979, Chrysler has become famous for innovative products.

It started with the minivan in 1984. Then Chrysler helped resuscitate the U.S. convertible market; first with the K-car and later with the 1996 introduction of the Chrysler Sebring, which has since become America's best-selling convertible. It popularized retro styling with the PT Cruiser and Plymouth Prowler. It jazzed up the small-car market with the spirited Neon. It brought back bold American performance with the Dodge Viper. And it developed roomy but cool-looking family sedans, from the cab-forward LH models to the Chrysler 300.

Now Chrysler needs something just as big as these past successes.

Looking for the Big Hit
By the end of 2007, Chrysler will have launched 18 new or redesigned vehicles in the past two years, but it hasn't had a hit in awhile.

The introduction of the Chrysler Aspen couldn't have been more poorly timed, as this large SUV came on the market just as gas prices soared, so hefty incentives have been required to move this heavy metal almost from Day One. Meanwhile, reviews have been mixed for the Dodge Caliber as well as the Caliber-derived midsize cars, the Dodge Avenger and Chrysler Sebring.

The once-dazzling Chrysler 300 has lost its luster, and sales have been falling by double digits even as sales incentives have been rising by triple digits (as confirmed by Edmunds.com's calculations of Total Cost of Incentives).

Chrysler needs a couple of home runs to demonstrate to the world that it still has styling chutzpah. The influx of $7 billion in investment capital from Cerberus should help.

Indeed, Chrysler CEO Tom LaSorda said after the announcement of the Cerberus purchase that the deal would allow Chrysler, "to renew its focus on what has always made us special — our passion, creativity and commitment to delivering exciting Chrysler, Jeep and Dodge vehicles."

Playing Small Ball Isn't Working
Chrysler is striking out in small cars, crossovers and hybrids.

Small-car sales have been hot, hot, hot in recent months, and they are expected to get even hotter throughout the summer. Based on Edmunds.com's analysis of consumer intent, small cars are showing the largest increase in interest by car shoppers of any vehicle segment. Rising consumer purchase intent translates to less discounting.

But Chrysler only has the Caliber, which is bigger than small, a crossover more than a small car, and carries a price tag that starts at about $14,000. Chrysler has absolutely nothing — and won't for a couple of years — to compete against the tiny gas-sippers from Honda, Nissan and Toyota.

Similarly, Edmunds.com's consumer purchase intent shows hybrids are hot. Chrysler won't have one until early next year and then it will be a large SUV.

About 70 percent of Chrysler sales have been in trucks and SUVs, the highest percentage in the industry. Unfortunately this is the era of high gas prices. With new minivans and a new Ram pickup on the way, Chrysler will remain heavy on the truck side even as it introduces new cars and small SUV-type vehicles.

Edmunds.com's study of consumer intent for the next few months shows waning interest in large and midsize SUVs and large trucks, suggesting a continued struggle for Chrysler.

So What's the Game Plan?

Chrysler's turnaround plan, as announced February 14 (the same day Daimler put Chrysler on the auction block) and subsequently blessed by new owner Cerberus, calls for the introduction of more than 20 new vehicles and 13 refresh