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Fiat Counts On Beating `Jeep Jinx' to Make Grand Cherokee Lead Turnaround
Jun 20, 2010



With its new Jeep Grand Cherokee, Fiat SpA faces a challenge that has bedeviled all of Jeep’s previous corporate masters: how to appeal to mainstream drivers without alienating off-road enthusiasts.

Fiat, which acquired Jeep after taking a controlling stake in Chrysler Group last year, wants to make the brand sufficiently middle-of-the-road to sell 800,000 vehicles a year worldwide by 2014, up 61 percent from 2008.

The 2011 Grand Cherokee, which began shipping yesterday, features luxury touches -- leather seats, interior wood trim -- and can drive in 20 inches of water without stalling.

“The Grand Cherokee is a sign we’re moving toward a broader appeal,” Mike Manley, head of the Jeep brand and Chrysler’s international operations, said in an interview.

The redesigned Jeep is the first major new model Chrysler has introduced since Fiat took control and is crucial to the Auburn Hills, Michigan-based company’s turnaround plans.

“Jeep is arguably one of the most important brands for the company because of its global appeal, and Grand Cherokee is the Jeep that makes them the most money,” said Rebecca Lindland, an analyst at IHS Global Insight Inc. in Lexington, Massachusetts. “This is a company that is coming out of a major surgery and every setback is a threat to survival. This is really, really important that they get it right.”

The new Grand Cherokee has 4 inches of extra leg room in the rear and 17 percent more cargo space than the previous version, which was last redesigned for the 2005 model year. The vehicle has onboard television and converts into a Wi-Fi hot spot. It starts at $30,995, about $500 cheaper than its predecessor. The priciest version costs $42,995.

Frustrated

Jeep has frustrated a string of owners since its 1941 debut as an all-purpose vehicle for the U.S. Army -- something Richard Truesdell, a self-styled Jeep historian and editorial director of the Automotive Traveler website, calls the “Jeep jinx.”

From inventor Willys-Overland Motors through Kaiser Jeep, American Motors Corp., Renault SA, Chrysler Corp., DaimlerChrysler AG, Cerberus Capital Management LP and now Fiat, each new landlord tried, with varying degrees of success, to break out of the rut dug by the original military model.

Over the years, Jeep’s stewards churned out convertibles, pickups, work trucks, delivery models and about 20 precursors to the Grand Cherokee, starting with a 1946 wagon.

‘People Complain’

“Anytime Jeep tries to move away from its roots, people complain,” said Patrick Foster, who wrote the 1998 book “The Story of Jeep.” “People didn’t complain that Toyota moved away from its car roots when it made SUVs.”

Jeep sales peaked in the U.S. at 554,466 in 1999, a year after Daimler AG acquired Chrysler and released a new Grand Cherokee. Last year, sales fell to 231,710 as Chrysler went through the $12.5 billion, U.S.-backed bankruptcy that left Fiat in control. Jeep sold about 300,000 Grand Cherokees in 1999 and 50,328 in 2009, according to forecaster IHS Global Insight.

Jeep’s previous owners failed to anticipate the stampede to carlike SUVs such as Honda Motor Co.’s Pilot and Ford Motor Co.’s Escape, said Dennis Pietrowski, managing director of RDA Group, a market researcher in Bloomfield Hills, Michigan.

Jeep defectors cite low fuel economy and rough ride and handling when explaining their decision to move on, he said.

Quality Woes

Quality also hurts Jeep’s ability to compete with luxury models from Toyota Motor Corp.’s Lexus or Honda’s Acura, Pietrowski said. Jeep placed 27th out of 33 brands in J.D. Power and Associates’ ranking of initial quality released last week.

The challenge is to make sure the latest iteration stands out in a group of rival SUVs that now includes about 20 models, Jeep chief Manley said.

Jeep designers included a system that allows Grand Cherokee owners to raise and lower the suspension. With the touch of a switch, the SUV can achieve 10.7 inches of ground clearance and then can be lowered again for highway driving, Manley said.

To help the Grand Cherokee compete with such luxury models as the Lexus RX 350, the vehicle has been equipped with improved suspension and handling.

Chrysler wants to make Jeep the “No. 1 SUV brand again,” Manley said, and is determined not to let the Grand Cherokee become a “niche” vehicle.

Jeep should spend less time worrying about evoking its design heritage and more on turning heads, Foster said.

“The purists say it’s got to have heritage and all this baloney, so they keep rehashing the old designs,” said Foster, who also sold Jeeps from 1979 to 1985. Jeep needs to take more risks, as it did with the original Cherokee, he said.

If the new Grand Cherokee sells better than its most recent predecessor that may be largely because Fiat has an international presence, Truesdell said.

“There’s a better chance of success with Fiat,” he said. “There’s nothing in their brand portfolio like Jeep. The thing working in Jeep’s favor is that Fiat is a global brand and can expand sales opportunities.”

LINK: Fiat Counts On Beating `Jeep Jinx' to Make Grand Cherokee Lead Turnaround - Bloomberg
 
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