Chrysler planning to make deep cuts in models
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Chrysler planning to make deep cuts in models
http://www.freep.com/apps/pbcs.dll/a...wbtegvdW4Ac%3D
February 8, 2008
By TIM HIGGINS
FREE PRESS BUSINESS WRITER
SAN FRANCISCO -- Chrysler LLC, undergoing a rapid realignment, is making plans to cut the number of models it sells by perhaps half as it also moves aggressively to slim down its dealer network, according to people briefed on the plans.
The Auburn Hills automaker has been working under its so-called Project Alpha to get more of its dealers to sell all three of its brands -- Dodge, Chrysler and Jeep -- under one roof. But Chrysler, purchased last year by private-equity firm Cerberus Capital Management, has realized it must work to eliminate duplication in its product lineup to speed the process, the Free Press was told.
"Alpha is only good if you don't have competing nameplates underneath the same franchises," a dealer told the Free Press. Chrysler has about 3,700 dealers.
Alpha is being replaced by Project Genesis to eliminate more models and be more aggressive about dealer consolidation.
Dealers familiar with the new plan say they've not yet been told which models will be eliminated, nor have they been given a definite number.
Chrysler President Jim Press is slated to speak to Chrysler dealers in San Francisco this weekend during the National Automobile Dealers Association's annual meeting.
A Chrysler spokeswoman would not comment on the reports to the Free Press late Thursday.
A year ago at the dealers meeting, Steve Girsky, a former Morgan Stanley analyst and adviser to General Motors Corp. Chief Executive Officer Rick Wagoner, said that two-thirds of domestic-brand dealerships needed to go before the remaining stores would be as profitable as import-brand dealerships.
Other experts say that eliminating as few as 20% of domestic-brand dealers would be sufficient, but that would still involve thousands of dealerships across the country.
The Free Press reported last summer that excess dealerships cost the Detroit automakers as much as $4 billion a year. Dealers who sell Ford, Chevrolet and Chrysler average fewer than 600 sales per store each year. Those selling Toyota, Honda or Nissan average more than 1,200.
Many dealers, however, are reluctant to sell their businesses, and state franchise laws protect dealers from being forced out of business, giving them leverage in negotiating a price.
Since Cerberus took control in August, Chrysler, as the first major U.S. automaker to be privately held in more than 50 years, has moved quickly. In November, Chrysler CEO Bob Nardelli announced the elimination of as many as 12,000 jobs on top of 13,000 already planned. At the time, he also cut four models, including the Chrysler Crossfire and Dodge Magnum.
He also has indicated the automaker could sell as many as 200,000 fewer vehicles in the less-desirable fleet market.
Dealers in Detroit heard about Genesis during a Feb. 1 meeting with top Chrysler executives, who pointed to Boston as an example of how their consolidation efforts need to work, according to people familiar with the meeting. The Boston market has about 27 dealers. Under the new Genesis plan, Boston might have nine dealers.
Late last year, Chrysler denied reports in the Wall Street Journal that the automaker was contemplating a plan to eliminate as many as 1,000 dealers. Under the Boston example, one dealer said the 1,000 seemed possible.
"If you're a single-point store, you may only have a couple vehicles to sell. Your future is with the big three" -- Chrysler, Dodge and Jeep, another dealer said Thursday.
To help speed up consolidation, Chrysler is working through its regional business centers to help put together deals to sell or buy franchises, according to people familiar with the actions.
One dealer, who attended the meeting, said Chrysler actively is soliciting ideas from dealers on what they want to do and suggested that Cerberus would be involved in ways, such as providing experts on finance, real estate and, possibly loans, to help accelerate the process.
When Cerberus first acquired Chrysler from DaimlerChrysler AG, some dealers speculated that the private-equity firm planned to spend big money to help consolidate quicker. Chrysler, which was on track to lose $1.6 billion last year, seems to be watching its cash flow very closely. That could damper dealers' hopes of a big payout
February 8, 2008
By TIM HIGGINS
FREE PRESS BUSINESS WRITER
SAN FRANCISCO -- Chrysler LLC, undergoing a rapid realignment, is making plans to cut the number of models it sells by perhaps half as it also moves aggressively to slim down its dealer network, according to people briefed on the plans.
The Auburn Hills automaker has been working under its so-called Project Alpha to get more of its dealers to sell all three of its brands -- Dodge, Chrysler and Jeep -- under one roof. But Chrysler, purchased last year by private-equity firm Cerberus Capital Management, has realized it must work to eliminate duplication in its product lineup to speed the process, the Free Press was told.
"Alpha is only good if you don't have competing nameplates underneath the same franchises," a dealer told the Free Press. Chrysler has about 3,700 dealers.
Alpha is being replaced by Project Genesis to eliminate more models and be more aggressive about dealer consolidation.
Dealers familiar with the new plan say they've not yet been told which models will be eliminated, nor have they been given a definite number.
Chrysler President Jim Press is slated to speak to Chrysler dealers in San Francisco this weekend during the National Automobile Dealers Association's annual meeting.
A Chrysler spokeswoman would not comment on the reports to the Free Press late Thursday.
A year ago at the dealers meeting, Steve Girsky, a former Morgan Stanley analyst and adviser to General Motors Corp. Chief Executive Officer Rick Wagoner, said that two-thirds of domestic-brand dealerships needed to go before the remaining stores would be as profitable as import-brand dealerships.
Other experts say that eliminating as few as 20% of domestic-brand dealers would be sufficient, but that would still involve thousands of dealerships across the country.
The Free Press reported last summer that excess dealerships cost the Detroit automakers as much as $4 billion a year. Dealers who sell Ford, Chevrolet and Chrysler average fewer than 600 sales per store each year. Those selling Toyota, Honda or Nissan average more than 1,200.
Many dealers, however, are reluctant to sell their businesses, and state franchise laws protect dealers from being forced out of business, giving them leverage in negotiating a price.
Since Cerberus took control in August, Chrysler, as the first major U.S. automaker to be privately held in more than 50 years, has moved quickly. In November, Chrysler CEO Bob Nardelli announced the elimination of as many as 12,000 jobs on top of 13,000 already planned. At the time, he also cut four models, including the Chrysler Crossfire and Dodge Magnum.
He also has indicated the automaker could sell as many as 200,000 fewer vehicles in the less-desirable fleet market.
Dealers in Detroit heard about Genesis during a Feb. 1 meeting with top Chrysler executives, who pointed to Boston as an example of how their consolidation efforts need to work, according to people familiar with the meeting. The Boston market has about 27 dealers. Under the new Genesis plan, Boston might have nine dealers.
Late last year, Chrysler denied reports in the Wall Street Journal that the automaker was contemplating a plan to eliminate as many as 1,000 dealers. Under the Boston example, one dealer said the 1,000 seemed possible.
"If you're a single-point store, you may only have a couple vehicles to sell. Your future is with the big three" -- Chrysler, Dodge and Jeep, another dealer said Thursday.
To help speed up consolidation, Chrysler is working through its regional business centers to help put together deals to sell or buy franchises, according to people familiar with the actions.
One dealer, who attended the meeting, said Chrysler actively is soliciting ideas from dealers on what they want to do and suggested that Cerberus would be involved in ways, such as providing experts on finance, real estate and, possibly loans, to help accelerate the process.
When Cerberus first acquired Chrysler from DaimlerChrysler AG, some dealers speculated that the private-equity firm planned to spend big money to help consolidate quicker. Chrysler, which was on track to lose $1.6 billion last year, seems to be watching its cash flow very closely. That could damper dealers' hopes of a big payout
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Joined: Oct 2006
Posts: 976
From: SE MI
GMAC losses are also hurting Cerberus. They paid $14 billion for 51% of GMAC in 2006 and GMAC made $2.1 billion that year. 2007 has been a different story as GMAC lost $2.3 billion due to subprime housing crisis and bad car loans. Cerberus needs to straighten out Chrysler and cut the losses.
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Joined: Aug 2000
Posts: 610
From: Akron, OH.
Glad to see them cut models. After checking out half their products at the STL auto show I was very dissappointed at the quality of their interiors. They were horrible and embarrassing to American cars. The newly redisgned Dakota and Jeep products were the worst. I thought the car mags were picking on them but after seeing it in person they are selling some very substandard stuff.
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Joined: Dec 2005
Posts: 2,802
From: Annapolis MD
related article
February 8 2008: 3:39 PM ESTEmail | Print Type Size
The Chrysler steamroller
http://money.cnn.com/2008/02/08/news...ion=2008020815
Step one[for Bob Nardelli] was putting the supplier community on notice that Chrysler isn't willing to subsidize failing companies. After it and other automakers were burned by the bankruptcy of parts supplier Collins & Aikman last year to the tune - according to some estimates - of a hundred million dollars, Nardelli said enough is enough....
CLIP
For his second act, Nardelli is slashing Chrysler's model lineup along with its dealer network to get it to profitable size. From the National Automotive Dealers Association conference in San Francisco came word that Chrysler is cutting its lineup of models about in half - from 30 to 15 nameplates - and plans to offer them all in one facility. The handwriting has been on the wall for a long time but that effectively spells the end of standalone Jeep, Dodge, and Chrysler outlets. They simply won't be able to survive on their own, selling five or so models.
By moving as quickly he has, Nardelli reduces the financial pain. As the product lines whither away, dealers will be forced to merge into three-brand outlets or go out of business, and Nardelli won't be stuck with a lot of termination payments. By contrast, General Motors (GM, Fortune 500) rang up huge and unexpected bills when it pulled the plug on Oldsmobile.
This could be a good thing
Originally Posted by The Chrysler steamroller MotorWorld by Alex Taylor III Column archive
February 8 2008: 3:39 PM ESTEmail | Print Type Size
The Chrysler steamroller
http://money.cnn.com/2008/02/08/news...ion=2008020815
Step one[for Bob Nardelli] was putting the supplier community on notice that Chrysler isn't willing to subsidize failing companies. After it and other automakers were burned by the bankruptcy of parts supplier Collins & Aikman last year to the tune - according to some estimates - of a hundred million dollars, Nardelli said enough is enough....
CLIP
For his second act, Nardelli is slashing Chrysler's model lineup along with its dealer network to get it to profitable size. From the National Automotive Dealers Association conference in San Francisco came word that Chrysler is cutting its lineup of models about in half - from 30 to 15 nameplates - and plans to offer them all in one facility. The handwriting has been on the wall for a long time but that effectively spells the end of standalone Jeep, Dodge, and Chrysler outlets. They simply won't be able to survive on their own, selling five or so models.
By moving as quickly he has, Nardelli reduces the financial pain. As the product lines whither away, dealers will be forced to merge into three-brand outlets or go out of business, and Nardelli won't be stuck with a lot of termination payments. By contrast, General Motors (GM, Fortune 500) rang up huge and unexpected bills when it pulled the plug on Oldsmobile.
Registered User
Joined: Jun 2001
Posts: 4,600
From: Pewee Valley, KY
Glad to see them cut models. After checking out half their products at the STL auto show I was very dissappointed at the quality of their interiors. They were horrible and embarrassing to American cars. The newly redisgned Dakota and Jeep products were the worst. I thought the car mags were picking on them but after seeing it in person they are selling some very substandard stuff.
Registered User
Joined: May 2001
Posts: 1,018
Did they drop the 2.7 in the LX cars? I know they are dropping the Magnum entirely, so that leaves the Charger and the 300. I just saw an ad that the 3.5 is now standard on all Chargers followed by Dodge's "It's a new day" coolaid at the end of the commercial.
Registered User
Joined: Dec 2005
Posts: 689
Glad to see them cut models. After checking out half their products at the STL auto show I was very dissappointed at the quality of their interiors. They were horrible and embarrassing to American cars. The newly redisgned Dakota and Jeep products were the worst. I thought the car mags were picking on them but after seeing it in person they are selling some very substandard stuff.
Registered User
Joined: Mar 2003
Posts: 1,495
From: Westmont, IL
It seems to me that Jeep would be great place to start cutting out duplicate models. Jeep...JEEP has SEVEN different models, I mean seriously, how many different types of SUV do they think people need
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Joined: Jun 2001
Posts: 4,600
From: Pewee Valley, KY
Commander and Patriot are dead. Wrangler, Grand Cherokee, and Patriot are all great Jeeps. What other models do they have besides the ones I mentioned?
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Joined: Mar 2002
Posts: 3,180
From: Yadkinville, NC USA
From the original article... "the automaker could sell as many as 200,000 fewer vehicles in the less-desirable fleet market" . Now you see why Ford walked away from it.
Wonder how many of the 200k units would be Special Service Chargers?
Seems a sug in the groin to have developed a cop car platform only to give it away.
I see several Dodge rental cars, but not 200k/year worth.
Looks like GM and Toyota can fight it out for the rental car market now. Ford bowed-out of it last year. If this keeps up, we will all be renting Hyundais and Toyotas at Hertz and National counters soon.
Wonder how many of the 200k units would be Special Service Chargers?
Seems a sug in the groin to have developed a cop car platform only to give it away.
I see several Dodge rental cars, but not 200k/year worth.
Looks like GM and Toyota can fight it out for the rental car market now. Ford bowed-out of it last year. If this keeps up, we will all be renting Hyundais and Toyotas at Hertz and National counters soon.
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Joined: Nov 2000
Posts: 1,958
From: Kansas City, MO
Grand Cherokee
Liberty
Patriot
Wrangler
Which I think is an OK lineup for Jeep. Patriot isn't bad as an entry level model even though it's not a "real" Jeep. Though none of this may matter if today's rumor of Jeep being sold to Mahindra is true.
Registered User
Joined: Jun 2001
Posts: 4,600
From: Pewee Valley, KY
Do you mean Compass in the first line and Liberty in the second? I believe that Jeep are dropping Compass and Commander. That will leave:
Grand Cherokee
Liberty
Patriot
Wrangler
Which I think is an OK lineup for Jeep. Patriot isn't bad as an entry level model even though it's not a "real" Jeep. Though none of this may matter if today's rumor of Jeep being sold to Mahindra is true.
Grand Cherokee
Liberty
Patriot
Wrangler
Which I think is an OK lineup for Jeep. Patriot isn't bad as an entry level model even though it's not a "real" Jeep. Though none of this may matter if today's rumor of Jeep being sold to Mahindra is true.
Registered User
Joined: Aug 2000
Posts: 610
From: Akron, OH.
I think I went on saturday afternoon. My first one in STL. With them going to four models it seems like a good fix, the interiors should be HIGH up on the list, very 80's, lots of right angles and horrible textures. They really need to fill the huge hole left by the cherokee. Compass and partoit sales combined wont meet average Cherokee sales. The patroit is okay but a tad too small. A 3600lb unibody with a simple interior solid rear axle, maybe even a front one too. It would be a good replacement for the porky and poorly reviewed Liberty.
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