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Chrysler's comeback: Performance nothing short of stunning

Sun. Nov. 6 2011

Chrysler just finished a stunning week, posting double-digit sales gains in both Canada and the United States, while also nailing a profitable third quarter.

If this keeps up, those who condemned the government loans that kept the Chrysler Group alive in the wake of the 2009 bankruptcy will be looking at a dish of crow.

First, a few numbers. Chrysler sales in Canada were up 12.4 per cent in October and are up 14 per cent on the year. That's good, but the company's performance in the United States is nothing short of stunning: sales up 24 per cent in October and 27 per cent on the year.

While consumers have been snapping up good, solid deals on Chrysler's models, the company remains profitable in a tough market. The Auburn Hills., Mich., auto maker reported a profit of $212 million for the third quarter, compared with a loss of $84 million a year ago. Revenue climbed 19 per cent to $13.1 billion (all figures in U.S. dollars).

Not only did Chrysler swing back into the black in the third quarter, the company, which is 53.5 per cent owned by Fiat SpA of Italy, predicted its first full-year net profit since 2005. Chrysler says it expects net income of $600 million for 2011.

Chrysler's story is as much about pushing hard with hot vehicles as it is about cost cutting and a balance sheet cleansed by bankruptcy. Two of the top three best-selling vehicles in Canada are from Chrysler (the Dodge Ram and Dodge Grand Caravan) and the country's best-selling crossover wagon is the Dodge Journey.

Profit and sales aside, Chrysler has recently found taking qualified praise from Consumer Reports of all places. In CR's 2011 reliability survey, the Jeep brand jumped seven places to become the top-rated domestic brand. Meanwhile, the Chrysler brand jumped 12 places and Dodge (including Ram) jumped three spots.

David Champion, director of CR's auto testing, told an audience in Detroit that Chrysler did a good job introducing 16 new or revamped vehicles for the 2011 model.

"They had to improve," said Champion, as reported in the Detroit News. "Had they launched their new crop of vehicles with bad reliability, that would have been the final nail in the coffin."

Chrysler is no longer a laughing stock. While it would be a stretch to say Chrysler is a lock to become a viable, profitable, growing, respected car company just two years out of bankruptcy, what's happened so far has exceeded the expectations of almost everyone.

Indeed, by late May of this year Fiat and Chrysler had repaid $7.6 billion in U.S. and Canadian government loans, reducing the U.S. government's then-stake to 6.6 per cent from 8.6 per cent, and Canada's interest to 1.7 per cent from 2.2 per cent. By year's end, Fiat expects to raise its stake in Chrysler Group to 58.5 per cent from the current 53.5 per cent.

The Fiat-Chrysler group has set a global sales target of around six million vehicles by 2014, with revenue of about $80 billion.

"Long-term, neither Fiat nor Chrysler would have made it on their own," CEO Sergio Marchionne said on Oct. 7 in Montreal, as reported by Bloomberg. "Fiat was too small and too handicapped by an inadequate business model in Europe to have any hope of a future."

Let's go back to this time last year. Chrysler was in the early stages of launching more than a dozen new or seriously refreshed models. The product blitz started in the summer of 2010 with the arrival of a reinvented Jeep Grand Cherokee, then continued on through the fall, winter and spring of 2011.

Working with limited resources, the Chrysler Group introduced an all-new Dodge Durango and completed major updates to such core models as the Journey, Grand Caravan, Chrysler Sebring (renamed the Chrysler 200), Dodge Avenger, Jeep Patriot and Compass, and more.

The Chrysler 300 was also given a major makeover, the Dodge Charger likewise. Just weeks ago, Chrysler also reintroduced a new SRT high performance lineup.

For the most part, these product moves have been reasonably well received by both buyers and critics. The testers at Consumer Reports have referred to "a new sense of purpose at Chrysler," with auto testing director Champion telling The Detroit News that the once-maligned Journey "has come a long, long way."

Most recently, the revamped 2011 Chrysler 300C scored an "Excellent" overall road test score of 80 in CR's latest tests of four upscale sedans. The 300C now ranks mid-pack among the 10 upscale sedans that have been tested by CR.

"The 300C's quick, muscular 5.7-litre V-8 engine is now complemented by responsive handling and a more comfortable ride," said Champion. "And, thanks to a major upgrade, its roomy interior is now quieter, more luxurious, and has improved visibility."

While the recent reliability scores from CR are encouraging, Chrysler still needs work on the quality front. The company ranks below average in short-term quality, as measured by J.D. Power and Associates Initial Quality Study, and Chrysler is near the bottom in the arguably more telling long-term J.D. Power Vehicle Dependability Study.

Here is the last big question: how long can Chrysler remain profitable while offering such rich sales incentives?

Most of Chrysler offerings are being juiced with fat sweeteners worth thousands and thousands per model. The deal-making keeps Chrysler in bargain brand territory and that is not a long-term strategy for success.

At least for now, though, Chrysler is emerging as the most impressive success story in the car business for 2011. Who would have thought such a thing possible just 24 months ago?

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