http://money.cnn.com/2007/11/27/news...tune/index.htm


Downsizing Dodge

(Fortune) -- One of the biggest challenges U.S. automakers face is how to realign their aging brands and oversupply of dealers for the realities of the 21st century.

General Motors (Charts, Fortune 500), Ford, and Chrysler have more outlets in stagnant or shrinking markets than they can support with their sliding market shares. Tired brands like Buick and Mercury don't resonate with today's buyers.

So Chrysler has come up with a better idea. According to news reports, it is considering stripping the Dodge name from its passenger cars and the Chrysler name from light trucks to create two distinct brands with no product overlap. Chrysler would become the car brand and Dodge the truck plan. SUVs would go to Jeep, which would also keep traditional off-road vehicles.

Change is hard, and I can already hear the moaning from traditionalists, decrying the indignity wreaked upon the glorious automotive heritage of Walter Chrysler and the Dodge brothers, as well as the loss of historic (or less so) nameplates like the Dodge Charger. And there is always the chance Chrysler could be making a big mistake. After all, it decided to stop production of the PT Cruiser, despite its long and successful run.

Still, save the tears. With the industry headed towards a weak year or two of auto sales, Chrysler can't make the change fast enough. I think the idea makes good sense, and here are the reasons why:

1. Dodge and Chrysler basically sell variations of each other's products. Chrysler's minivans and Dodge's minivans are identical except for some trim and option items. Likewise, the Dodge Avenger and Chrysler Sebring share the same engineering.

Back when the Big Three were really the Big Three, customers didn't seem to mind. General Motors marketed the same car under four different brands. Now, customers do care. Except for Toyota (Charts), which seems to have no difficulty selling the Toyota Camry and its upscale twin, the Lexus ES350, badge engineering doesn't work any longer.

2. Dodge and Chrysler basically appeal to the same kind of buyers. Historically, Dodge and Chrysler have been known as blue-collar brands that connect best with Middle America. To be sure, Chrysler is seen as a bit more upscale, but attempts to establish it as a true sub-luxury brand have failed, in part because its product offerings are not well-differentiated from Dodge. If the two brands were separated from each other, Chrysler will have the opportunity to rise on its own.

3. Consolidating the product lineup would allow Chrysler to accelerate the downsizing of its dealer body. For several years, Chrysler has been trying to move stand-alone dealers that sell only one or two of its brands into so-called Alpha stores that sell Dodge, Chrysler, and Jeep together. If the Dodge dealer in Terre Haute, for instance, learned that he was only going to be selling pickups and commercial trucks going forward, he would have lots of incentive to merge with a nearby Chrysler-Jeep outlet.

4. Marketing costs would shrink and profits per vehicle could rise. Maintaining separate brands is expensive for both the manufacturer and dealer. In addition to the cost of assembly and launch, there is the expense of invent/ory and advertising. Smaller inventories mean less need for rebates to move surplus cars.

For sure, there are drawbacks. Some dealers who can't or won't consolidate may have to be bought out of their franchises. Also, Dodge sold about 276,500 passenger cars through the first ten months of this year; some of those sales will get lost in the shuffle. The damage will be far less on the Chrysler side. One of its three light truck nameplates -- the Pacifica crossover -- is headed for extinction anyway.

Most important for Chrysler, and for GM and Ford (Charts, Fortune 500) as well, is to stabilize market share at a level that is both sustainable and profitable. One of the big changes in the new contract with the United Auto Workers is that the automakers now have the flexibility to cut production without paying onerous penalties to laid-off workers. But for that to pay off, they have to find a level of the market where they can survive and prosper.

When GM shed Oldsmobile and Chrysler Plymouth, the reverse happened: sales were lost and market share continued to decline. Dropping one or two marginal brands is risky enough, but Chrysler is making a much bigger bet now -- one that it can't afford to lose.

 

I don't think this opinion piece was written by anyonone with a real understanding of the automobile business, and very little knowledge of Chrysler. I get he's just giving a "business" opinion without really actually knowing what is going on at Chrysler.

Sometimes, a writer coughs up something... anything... just to make a paycheck and keep his job. It doesn't matter if it makes sense, is well researched, or is factual or not. You can easily identify these articles when while reading them, you come on phrases like "Change is hard, and I can already hear the moaning from traditionalists.." which indicate that this is a personal opinion and not real. Usually, it's also hidden behind the old "According to news reports..." to give it a certain legitamacy. "National Enquirer" and "Weekly Word News" are chock full of "News Reports", but I doubt too many people treat it in the same regard as "Time" or "Newsweek".

FWIW: His last paragraph also contradicts his premise.

 

There is some core bit of truth here. Chrysler is consolidating their dealerships, and they are eliminating duplicate products (like some of their kajillion crossovers).

And you have to ask yourself why they have (say) the Avenger and the Sebring parked next to each other on the same dealership lot. Same size, same price, seems like a waste of money to me.

 

I agree that getting rid of some redundancies would be a good thing. If you have a Dodge/Chrysler/Jeep dealership, do you really need Liberty, Nitro, Patriot, Compass and Journey all on the same lot? But yeah if they consolidate Dodge just down to trucks what do they have? Ram and Dakota?

All of the money poured into Challenger shows that Dodge isn't going to be a "truck only" division anytime soon...

 

I don't think that's a great idea. They do have way too much overlap, Compass, Patriot, Liberty, Nitro etc... But they could cut that without making a dodge a "truck" brand.

I think the idea of trying to position Chrysler above dodge is entirely doable, but I don't know if they can afford the short term loss. At base the ES and Camry are fairly easy to differentiate, although you can easily option a Camry up to ES levels.

 

Dodge will not become "the truck brand". The company has already refuted this. Won't happen.

The source for that report was a WSJ article. The source for the WSJ article was a group of three dealers who may have had axes to grind or may just have been drunk or insane.

 

I agree with this statement.

 

I applaud the folks at Chrysler for trying to be creative, but their plan is clearly not prudent. Dividing the company this way creates more product confusion, not less, and severely limits the company's market breadth. What kind and class of car will Chrysler build? Are they going to sell everything from compacts to full-size? If so, their going to further water down a brand name that's already in trouble. If they don't and try to compete in only a few segments, they'll have to effectively become a bit player. They'll also be blowing up Dodge - not a great thing to do to your best selling car brand.

Here's a better idea: significantly prune the Chrysler lineup by getting rid of everything but Aspen and 300C (hang with me) and Pacifica. As this writer correctly said, everything else is pure overlap with Dodge. Then rebuild it as a near-luxury brand ala Buick.

I think the new Chrysler may be overthinking their strategy a bit. As recently as three or four years ago, and for a decade before that, Chrysler showed everyone that a Detroit company can come back simply by building exciting cars that people want to drive. GM is putting that model into play, and early returns look good (COTY Award, three 10Best entries, climbing Buick sales etc). Don't reinvent the wheel Chrysler (or more accurately, Cerberus).

 

If Dodge loses cars....then where's their entry level division?!?!?

 

Actually, what Chrysler (Jim Press I think) said is that he'd like to make Dodge a full line division and Chrysler upscale. Seems sort of like ... umm ... hmm ... Toyota and Lexus?

I think they also want to take Jeep back to its roots (probably means ditching the Compass and maybe the Patriot).


The difference is that while Toyota and Lexus have separate dealerships in major U.S. markets, I don't think they envision separating Dodge and Chrysler again -- at least not in the near future.

 

Does this writer even have his basic facts right? I thought they were only killing off the PT Cruiser convertible, not the whole PT line? Didn't they sell close to 100,000 PTs this year? Or am I wrong?

 

Ehhh, the PT Cruiser is dying slowly, it's needs to be refreshed or the HHR will kick it's butt.


"Actually, what Chrysler (Jim Press I think) said is that he'd like to make Dodge a full line division and Chrysler upscale. Seems sort of like ... umm ... hmm ... Toyota and Lexus?"

I was just thinking of what ""luxury" brand Chrysler could strive to be more like, and Lexus or Infiniti would be perfect.

The problem with Chrysler's products is that there is no semi-performance coupe like Infiniti, Caddy, Lexus, or even the germans. This is also something that Buick (but there's Caddy)
and Lincoln face. Plus, they're not all that luxurios. All they really have are those croosovers and the 300C, the Sebring will not be as succesful as it was, is an opinion.

So do they want to continue it to be different brand or a luxury brand? Choose one or the either. Because if they keep what they got, they've basically turned it into Plymouth, a badge with less and less interest.

 

They're on it. Chrysler's lineup is already being overhauled.

There's a crash program underway to completely revamp the Sebring. A larger-than-300 luxury sedan is under development, and may be shown shortly (in NY, says the rumor mill.) There's a sports car in the mix, too, and there might be a two-door LC (not a 'Cuda, a modern Chrysler) coming as well.

Pacifica is dead. PT will be dead before too long, though there are whispers of a successor in the works. The 300 is being redone.

Give 'em 2-3 years. It'll be interesting.

 

I'll give them time since Cerberus is in control and I am very interested to see what they will do, and I am gaining more and more interest in their products(Avenger), let's just see where the Pentastar can take us.

 

The Imperial? They've been trying to push something like that through forever, and I think it's better they haven't suceeded. Fullsize modern coupe would be something that would interest in me.