Analysts: Chrysler’s 6 million vehicles sales goal lofty but noble
September 23, 2009 09:07 pm
KOKOMO — In athletics, if you talk the talk, you have to walk the walk.
Or sit down and shut up.
Fiat/Chrysler Group LLC CEO Sergio Marchionne is talking and driving his walk. However, what remains to be revealed is if it’s all nothing but small talk. Last week, at the Frankfurt Motor Show, Marchionne announced his company’s new sales goals. Currently, the world’s six-largest automaker has produced 4.2 million vehicles.
With an expanded world-wide market — Chrysler sold 2,856 vehicles in Western and Central Europe in August — Marchionne said Fiat-Chrysler will meet its sales goals of 5.5 million to 6 million vehicles.
After taking over Chrysler, he told the Automotive News, “We were surprised by how little had been done in the past 24 months. It will be a slow process in the beginning, but we will see significant improvement in 2010.”
But before Marchionne can improve in 2010, he still has the remainder of 2009 in which to charter his automaking ship through testy times.
Furthermore, all his tall talk may not make it an easy walk for accomplishing his 2010 goals.
The old Chrysler, now known as Old Carco, lost $344 million in July. It owes the U.S. Treasury Department $3.8 billion; not to mention millions owed in personal-property taxes to Howard County and the city of Kokomo.
But Old Carco — Chrysler Group’s remaining assets in bankruptcy court — isn’t the only one in debt to the government.
A lien has been placed on Jim Press, Chrysler deputy CEO, because he owes the U.S. Internal Revenue Service nearly $1 million in back taxes. He is also being sued by a Western Federal Credit Union in California because he allegedly defaulted on a $609,286 loan.
During the four-week Cash for Clunkers program, only Kia, Hyundai and Nissan had a smaller, clunker-market share than Chrysler.
The bankruptcy-emerged automaker had 8.3 percent of the clunker-trade-in market. That market share was with Chrysler doubling the government’s $4,500 rebate, escalating it to $9,000. Yet, Marchionne wants to increase sales and no new vehicles are expected until late 2010.
With Marchionne’s company being owned by two governments and an international union, perhaps his talk is more directed to a direct audience who isn’t walking to a dealership to purchase a car, said a senior automotive editor.
Marchionne plans to announce Chrysler’s five-year business plan in November.
“Selling 6 million? That looks and sounds shaky,” said Bill Visnic, senior editor of AutoObserver.com. “That’s not to say it isn’t feasible, but the way the global 1/8automotive 3/8 market is, that would be difficult for any automaker.
”At least his talk is sending a message. That the bluster of business speak. You have to talk a good game so you get your message out. Being owned by the governments, they have to get a message out that there is a plan. A five-year plan? They need to first put out a message that they plan on being here for a while. What he is saying does that.
“That talk gives him a foundation to build upon, but 6 million units? There’s going to be a lot of skepticism on that.”
Michelle Krebs, senior analyst for Edmonds.com, wasn’t surprised Marchionne said very little has been done at Chrysler for the past 24 months because of the company’s critical condition in which Marchionne found it.
“Daimler neglected Chrysler. Ceberus came in and slashed cost. The cost-cuttting was so significant, I can remember driving past their 1/8Auburn Hills, Mich. 3/8 headquarters and seeing dark, empty rooms,” said Krebs.
“I think 6 million will be difficult. Their biggest shortcoming is they have no small car; their SUVs have been their biggest sellers, but I don’t think we will see them sold like in the ’90s, and Chrysler really needs a mid-size sedan. What they have 1/8Sebring and Avenger 3/8 is not up to par with what is on the market.
”On its own, Fiat has issues. They do not have a good reputation for quality overseas and their vehicles have been listed near the bottom in quality.“
Although it’s coming with bruised feelings, 178 Fenton workers — replacing 178 Kokomo workers based on seniority — will begin working in Kokomo’s Chrysler’s plants Monday.
Keeping workers in the factories is one reason a local salesman believes Marchionne is talking the truth. Some automotive analysts also believe Chrysler’s ”significant improvement“ will also be attached to the redone Chrysler 300C, which is scheduled to come out in late 2010 or early 2011.
”I think it can be done,“ Aaron Arriaga, new car sales manager for Button Chrysler Dodge, said of the 6 million unit goal. ”We are expecting 18 new units in 2011 and three models will be built on the Fiat platform.
I think what is going on now is exciting for us. We have a small SUV that will get up to 23 miles-a-gallon and hybrid sedan that will get 40 miles.
These will put us on the market and give us an edge over General Motors.
“The main thing is we are increasing our production. We are growing instead of closing plants and cutting back. That’s why it can be done.”
Yet, with other pressing issues to address before 2010, Marchionne’s talk may be enough to keep Chrysler afloat while he restructures the company the same way he did with Fiat.
“The number seems extremely high,” said Howard Wial, an economic analyst for the Brookings Institute. “The overall demand for cars is down worldwide. The 6 million would be a huge share of the market. It’s hard to see how that can happen overnight when the market still has to recover.
”I haven’t looked at it in detail, but it may be too soon to tell.“
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