It was ok to design the Caliber but they never should have dropped the Neon.
From Automotive News:
Small-car boom misses Chrysler
July 15, 2008 - 12:01 am ET
DETROIT — In a red-hot market for small cars, Chrysler is struggling to move its few reasonably fuel-efficient vehicles.
On July 3, Chrysler LLC asked dealers to order their small vehicles five months in advance. Why? Before it adds a production shift at its Belvidere, Ill., assembly plant, Chrysler wants to know whether there's enough demand for the three compact vehicles built there: the Dodge Caliber, Jeep Compass and Jeep Patriot.
Enough demand? Rivals Ford, Toyota, General Motors, Honda and Nissan are running their assembly plants virtually around the clock to produce enough small cars to meet demand.
Chrysler's weak sales justify the company's caution. Sales of Chrysler's only small car, the Caliber, dropped 43.6 percent in June, while its platform-mate, the Compass crossover, fell 38.8 percent. The Patriot, another compact crossover on the same platform, enjoyed a June sales increase of 5.5 percent.
Overall sales of the three vehicles are up 18.3 percent this year. The numbers are skewed because the Patriot did not go on sale until March 2007; year-over-year combined sales for the Caliber and Compass are down 5.0 percent.
At the end of June, the Caliber had a 41-day supply, up from 20 days on June 1. Compass supply was 78 days, and Patriot supply was 48 days. The Ford Focus had a 39-day supply, while the Honda Civic had a 16-day supply.
Sales for 2 of Chrysler LLC's 3 compacts plummeted last month.
June 2008 Sales % change from year ago
Dodge Caliber 6,099 43.6%
Jeep Patriot 4,889 5.50%
Jeep Compass 2,075 38.8%
Chrysler has boasted that its status as a privately held company allows it to react quickly to market conditions. But a memo this month to dealers suggests otherwise.
In the July 3 memo Chrysler said demand for the Belvidere plant products had "skyrocketed."
"Chrysler is taking aggressive actions to realign our product volumes to coincide with market demand," the memo said.
Chrysler asked dealers to "forecast sales and order through December production," adding, "With your help, we will ensure that we build as close to market demand as possible."
The five-month lead time is much longer than usual. Chrysler normally asks dealers to order 30 days in advance. Earlier this year the company asked dealers to order 60 days in advance for 2009 models.
In March, just as fuel prices began to soar, Chrysler killed the third shift at Belvidere. Chrysler is now running the plant on two shifts with overtime. A Chrysler spokesperson said Chrysler is monitoring sales but has made no decision about restoring a third shift.
Chrysler small-car blues
As customers rush to fuel-efficient small and mid-sized cars, Chrysler's small-vehicle lineup is struggling vs. its domestic competitors.
Segment hwy. MPG* transaction Price** 2nd-quarter sales (%)
Dodge Caliber 27 $17,257 13.7
Chevy Cobalt 31 $14,751 21.5
Ford Focus 33 $15,885 30.7
Chrysler Sebring 30 $22,955 37.4
Dodge Avenger 30 $20,418 35.5
Chevy Malibu 32 $22,260 47.8
Ford Fusion 28 $19,874 22.7
Jeep Patriot 27 $18,701 61.4
Jeep Compass 27 $19,935 22.9
Saturn Vue 26 $23,247 3.4
Ford Escape 26 $21,872 8.9
*EPA numbers for 2008 model year based on the smallest available 4-cylinder engine, automatic transmission and 2wd
**All versions combined
Source: Automotive News, Power Information Network, www.fueleconomy.gov
Troy Allen, owner of Allen Motors Inc., a Chrysler, Dodge and Jeep dealership in Derry, N.H., that has been selling 30 to 40 new cars a month, says the problem is not availability.
"I can get all the Calibers, Compasses and Patriots I want," he says. "But people are not coming into the dealership looking for high gas mileage cars."
Because sales have been so heavily tilted toward trucks, "the exterior perception of Chrysler is not anything to do with small cars," Allen says.
Allen is not waiting for Chrysler to act. Last week he removed trucks from the front of his lot and replaced them with Chrysler's most fuel-efficient models.
Pen Fry, vice president of sales and operations at Jeff D'Ambrosio's Chrysler-Dodge-Jeep in Downingtown, Pa., is doing the same thing.
He is launching his own promotion called the Over 30 Club. Fry says he's lining up in front of the dealership and under a banner all Chrysler vehicles that get 30 mpg or better on the highway. The Chrysler Sebring and Dodge Avenger are the only Chrysler vehicles with that rating.
"Let's start pushing what sells, what the people want," he says. "I think it's time to stop pushing what we want them to buy."
Chrysler is handcuffed by the product lineup it inherited from its previous owner, Daimler AG. Chrysler has contracted Nissan to build a subcompact based on the Versa. The car, expected to be called the Dodge Hornet, is scheduled to arrive in showrooms in 2010. Chrysler also is working with China's Chery Automobile Co. on small cars, but no dates have been set for North American availability.
Meanwhile, in the midst of a major restructuring under the ownership of Cerberus Capital Management LP, Chrysler is trying to stick to its guns on slashing unprofitable fleet sales. Retail sales haven't compensated for the fleet cuts. Year to date, Chrysler has cut sales to fleets more than 20 percent, the company says. Chrysler does not divulge its fleet sales numbers.
Despite the cut in fleet sales this year through April, fleet sales still account for about 35 percent of total sales at Chrysler, according to an Automotive News analysis of data supplied by R.L. Polk & Co. last month.
To make money selling smaller vehicles, says Jim Arrigo, owner of Arrigo Dodge in West Palm Beach, Fla., and chairman of the Chrysler-Jeep national dealer council, Chrysler will have to rethink the way it operates.
"They've got to open up the ability to order as many as you want and order them the way you need them," Arrigo says. "There's not a lot of margin, so you've got to sell them in volume."
Jesse Toprak, an analyst at Edmunds.com, says Chrysler's new management team didn't inherit much of a portfolio for the huge leap into small cars: "It's a bit unfair. Chrysler three years from now will be nothing like the Chrysler we see today. They're dealing with what they've inherited. There's not much you can do with the existing product line."