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Chrysler will trim products, dealers

From Automotive News:

Chrysler will trim products, dealers
Bradford Wernle

Automotive News
February 7, 2008 - 5:28 pm ET


DETROIT -- Chrysler LLC is rolling out a dealership consolidation plan teamed with a sharp reduction in the product lineup that would allow more retailers to sell all three Chrysler brands under one roof.

Project Alpha, the company's previous consolidation strategy, has been scrapped. In its place is a new program called Project Genesis, which will impact all parts of the business, including product planning, manufacturing, and marketing.

Business teams have begun fanning out to help dealers arrange to buy or sell franchises to speed up the process.

In meetings with dealers around the country last week, Chrysler executives described the program as " Project Alpha on steroids."
" Genesis incorporates the whole company getting on the same alignment with the same overall strategy," said Chrysler co-President Jim Press in an interview Thursday. " The dealer network component is a piece of an overall plan."

Project Genesis is intended to match Chrysler's products with a realigned dealer network -- and its reduced production capacity. In the future, that product portfolio will be geared to dealers who sell all three brands under one roof. Chrysler now has about 3,600 dealers.

" To have the most profit and viability, you have to have all three brands under roof to get the full lineup of Chrysler Corp. everywhere," Press said.

That means Chrysler will look to eliminate duplicate models on the same platform. Dealers attending the meetings say Chrysler will cut the numbers of duplicate cars, SUVs and crossovers. Press said Chrysler won't just cut products. It also will develop new ones in segments where it doesn't have current entries.

Metro areas targeted
Project Genesis will be aimed primarily at major metro areas and secondary markets -- regions where Chrysler added lots of dealerships during the 1970s and '80s. But those dealerships, many of them single-brand stores, have struggled as Chrysler's market share has shrunk.

Business teams will descend on those cities to help dealers arrange to buy or sell franchises to make the consolidation happen. Chrysler will draw on its own resources and those of its parent, Cerberus Capital Management LP, to assemble the teams. The advisers will be chosen for their expertise in areas such as real estate, taxation, investment planning and estate planning.

" We've done a couple of market meetings already," said Steven Landry, executive vice president of North American sales. " Each of the business centers will hold metro market meetings" and review the volumes in those markets.

He said Chrysler will then hold " individual meetings with dealers and review whether they want to be a willing buyer or willing seller."

Fewer points on the map
In meetings with dealers this week, Press and Landry used the Boston metro area as an example. And the cuts apparently would be deep. Boston now has about 22 dealers with Chrysler franchises; the company would like to see that number cut to eight, each selling all three brands.

" Competition has put us in the position where dealerships are seven, eight miles apart," Landry said. " We want them to be 25 miles apart." Landry and Press said the mileage figures were approximate and would differ from one market to the next.

Among the ideas Chrysler is exploring are satellite dealerships and service-only outlets, Press said.

Getting dealerships to combine is often a tricky process because buyers and sellers often can't agree on how much a deal is worth. Project Genesis will not be a " push program," and there will be no deadlines or timetables. Nor will the company open the Cerberus bank account to dealers, Press said.

" We have to be clear that we don't have a big checkbook," he said. " We're not in the financial position to make this a big bunch of checks and paydays.

We need to do it with a process of working together looking at alternatives."
Since Chrysler launched Project Alpha in 2004, Chrysler completed about 250 Alpha combinations and trimmed its dealer body from about 4,000 to 3,600.
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