Chrysler set to ax models
Up to 5 that compete with other company vehicles are likely to go
October 16, 2007
BY TIM HIGGINS
FREE PRESS BUSINESS WRITER
Chrysler LLC could cut as many as five nameplates within the month as part of its quick and dramatic makeover as a newly private company.
It's "highly likely" Chrysler's top brass will approve plans to kill vehicles this month, a person familiar with the situation told the Free Press. About five vehicles are being considered for elimination, but the source would not reveal which ones.
The boardroom drama could help explain why the UAW was unable to win the same sort of future-product guarantees in its tentative labor deal with the Auburn Hills automaker as it did in its deal with General Motors Corp.
The product review comes as the automaker is seeking to get its tentative agreement with the UAW ratified by rank-and-file union members.
GM has already won ratification of what analysts see as a potentially transformational contract that can give Detroit automakers nearly equal labor costs to Toyota Motor Corp.'s nonunionized U.S. factories.
But Chrysler union local leaders have complained that unlike the GM contract, the proposed Chrysler deal fails to reclassify lower-paid temporary workers as permanent hires and lacks the kind of plant-by-plant outline of possible future products listed in the union's description of the GM agreement.
Bob Nardelli, who became Chrysler's chief executive officer in August, shortly after Cerberus Capital Management took majority control, indicated in a September speech that the company could reduce its model offerings.
Once Chrysler's product evaluation committee makes its decision about eliminating nameplates, it's believed the decision will be sent to Cerberus management for approval.
Chrysler officials say the company has been meeting about the product lineup, assessing the vehicles sold by the company and contemplating what needs to be cut.
"We have models that overlap, where we have two or three vehicles that serve the same market segment and maybe the same customer and actually compete with each other to some extent," Chrysler President and Vice Chairman Jim Press told reporters last week. "We also have markets where we have insufficient coverage. Where we don't have enough product."
Press did not discuss specific model eliminations. A Chrysler spokesman declined to comment.
The likeliest models to go
Auto industry analysts predict the Chrysler Pacifica, Dodge Dakota, and Jeep Commander and Compass could face elimination.
A company insider included those vehicles among a list of vehicles facing review. The source and another familiar with Chrysler's design pipeline also questioned the future of the Chrysler Sebring and Dodge Durango
The Chrysler Sebring is being considered for a complete makeover, though if that is not feasible, the car will probably be eliminated, the company insider said.
Yet another person familiar with Cerberus' thinking said the private equity firm questions why Chrysler's lineup includes the Dodge Durango SUV
, which has seen its U.S. sales slide 30% this year.
A Cerberus spokesman did not respond to an inquiry regarding this story.
The number of eliminations "could go higher in the sense that products as we know them today, but something will take their place, just not a direct next-generation replacement," analyst Catherine Madden of Global Insight said.
The Durango is built at the Newark, Del., assembly plant, which will be closed in 2009.
"I think the Durango is dead in the water. I won't order a Durango anymore. I told my guys don't ever order another Durango," said Carl Galeana of Galeana Automotive Group, which includes Van **** Dodge in Warren.
The UAW's summary of the tentative labor agreement with Chrysler says the automaker's next generation crossover will be built at the Jefferson North Assembly Plant in Detroit, where the Jeep Grand Cherokee and Jeep Commander are currently made.
The idea of fewer Chrysler, Dodge and Jeep nameplates in North America was first hinted at in February when then-CEO Tom LaSorda unveiled the company's plan to stop losses. The plan called for avoiding nameplate redundancies.
Looking for a new image
Chrysler lost $680 million last year and $2 billion in the first three months of this year. Its U.S. sales are down 3% so far this year while its market share has remained steady -- something its Detroit rivals can not claim. The automaker wants to recast its brands' images, Press said, making Chrysler seen as upscale; Jeep as rugged and off-road capable; and Dodge as high-volume cars and trucks.
"There are probably a lot of things being rethought at Chrysler right now," said Erich Merkle, director of forecasting for IRN Inc. "Just because you have a platform doesn't necessarily mean it has to go across all three divisions."
Upset at UAW
Several local UAW leaders are unhappy that the tentative agreement does not give specific future-product guarantees at many of the assembly plants -- including the Sterling Heights Assembly Plant, which makes the Sebring, and the Belivdere Assembly Plant in Illinois, which makes the Jeep Compass and Patriot. The UAW's summary of the agreement says only that vehicles at those plants will continue through the product lifecycle.
"Virtually no Chrysler plant received commitment beyond the scope of their current product," Bill Parker, president of Local 1700 and chairman of the union's Chrysler bargaining committee, wrote in an opinion against the deal.
The Chrysler Sebring was redesigned and launched last year. Its convertible sibling followed with a launch earlier this year. Both were widely panned by automotive critics.
The week Nardelli was made Chrysler's CEO, Los Angeles Times critic Dan Neil welcomed him with a review of the Sebring convertible, recommending that he drive a 2008 Limited model with a retractable hardtop. "See, Bob, that's a bad one.
"Not just bad, but a veritable chalice of wretchedness, a rattling, thumping, lolling tragedy of a car, a summary indictment of Chrysler's recent management and its self-eradicating product planning, all cast in plastic worthy of a Chinese water pistol."
Jim Hall, vice president for industry analysis in the Southfield office of consultant AutoPacific, said Chrysler could be looking to just recoup the expense of tooling for the Sebring -- something that takes three years from the vehicle's launch.
"If they are planning on integrating their retail outlets into a single Chrysler -- large C -- dealership, then they've got to trim the overlap in the product," Hall said.
Chrysler has already made one high profile change to the product plan this year.
In July, about two months after the Cerberus acquisition was announced, Chrysler pulled the plug on plans for the Chrysler Imperial, which was going to be a full-size luxury sedan built on the same platform as the Chrysler 300 and Dodge Charger and Magnum.
GOOD NEWS (if true) Don't see the NITRO!!!