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From the Detroit Free Press:

CHRYSLER'S PLAN FOR SUCCESS: 1 year, 10 cars

Zetsche says they'll keep Auburn Hills division solid

April 13, 2006

BY JOE GUY COLLIER

FREE PRESS BUSINESS WRITER

With the Chrysler Group rolling out a record 10 vehicles this year, DaimlerChrysler AG chief executive Dieter Zetsche is seeing the culmination of his plans to rebuild the Auburn Hills-based division he once led.

Chrysler Group made $1.8 billion last year and increased U.S. sales by 5%, in contrast to the struggling North American divisions of the other two Detroit automakers, Ford Motor Co. and General Motors Corp.

Chrysler's sales should remain stable this year and jump significantly in the next few years, Zetsche told shareholders at DaimlerChrysler's annual meeting Wednesday in Berlin.

"It has performed well in the world's toughest market," Zetsche told shareholders. "For some time now, our U.S.-based competitors have been losing money and market share. The Chrysler Group is the only member of the former Big Three that managed to avoid this fate, for the most part."

DaimlerChrysler has challenges ahead. The Chrysler Group's incentives, which cut into car companies' profits, remain high in the U.S. market. In March, Chrysler had the highest average incentive spending per vehicle at $4,241, according to estimates by Autodata Corp. Also, the Mercedes Car Group is rebounding from a $598-million loss last year.

Zetsche, who became DaimlerChrysler chief executive officer in January, was head of the Chrysler Group from 2000 to 2005. In that time, it went from financial distress to rising profits and sales.

The Chrysler Group's success largely has been credited to one vehicle -- the Chrysler 300, a large sedan with a daring design. But at the shareholders meeting, Zetsche said the Chrysler Group has 10 new models on the way to keep the momentum going.

Zetsche told shareholders that DaimlerChrysler profits will increase this year, and that the Mercedes Car Group has been turned around.

The Chrysler Group's future is bright, he said. Zetsche pointed onstage to a silver Dodge Caliber, a sporty hatchback launched in February that the company is betting will win young customers.

The next six months to nine months are crucial for the Chrysler Group as new vehicles, such as the Caliber, reach dealer lots.

By the end of the year, Dodge, Jeep and Chrysler all will change significantly.

• Dodge is in the process of replacing the cutesy Neon with the Caliber, a sporty five-door compact car. Later this year, it plans to launch the Nitro, a midsize SUV.

• Jeep plans to add a redesigned two-door Wrangler, an all-new four-door Wrangler Unlimited and the Compass and Patriot, two car-based SUVs.

• Chrysler plans to launch the Aspen, a version of the Durango. A replacement for the Sebring midsize sedan also is on the way.

Soon to roll off assembly lines from Michigan to Mexico, these vehicles are where the rubber meets the road for the Chrysler Group's future.

From 2000 to 2005, Zetsche and his management team cut tens of thousands of Chrysler Group jobs to make the automaker more efficient. But those efficiencies may not last unless customers buy the new models.

The Chrysler Group's next wave of products moves the automaker in the right direction, said Erich Merkle, an auto analyst with Grand Rapids-based IRN Inc.

The Caliber and Nitro add boldly styled vehicles to Dodge, and the Wranglers should be well received by Jeep enthusiasts, Merkle said. The new Jeep Compass, a potential flop, is a risk because it doesn't have the rugged off-road capabilities of the rest of the Jeep lineup, he said.

But the Chrysler Group should have enough new products to keep sales strong and maintain market share until 2007, when its minivans are due for a redesign, Merkle said.

"I think this year they could fall back," he said. "You'll see a lot of people ready to jump on the anti-Chrysler bandwagon. I think they will pick up steam again in '07."

Joe Phillippi, principal of AutoTrends Consulting in Short Hills, N.J., agreed. The Chrysler Group isn't due for a major letdown, but it will be difficult to pick up market share, he said.

Chrysler's fate could be determined by its replacement for the Chrysler Sebring, expected late this year, Phillippi said. The Sebring has struggled to win customers in the midsize segment, where the Toyota Camry and Honda Accord lead the pack.

The 300 is doing well in the large-size sedan segment. The Caliber should exceed Neon sales in the compact-car market, Phillippi said. But the Sebring replacement needs to be strong for Chrysler to have a healthy lineup, he said.

"They've got to be successful," Phillippi said. "You just can't survive, in a sense, on a two-car strategy. You've got to have a midsized sedan."

Frank Klegon, the Chrysler Group's executive vice president for product development, wouldn't discuss sales expectations for specific vehicles or details of the new midsize sedans.

But the Chrysler Group is following through on a strategy to add value throughout the entire lineup, Klegon said, adding that the benchmark is the 300.

The 300, released in 2004, is the symbol of Chrysler's resurgence because it revived interest in the company overall, convincing customers to give Chrysler a new look. It continues to pick up sales without the use of incentives, ranking as the Chrysler Group's best-selling car last year with U.S. sales of 144,000 units.

When Chrysler was developing the 300, some critics said it should pull back from the car market, Zetsche said Wednesday. "It's a good thing we didn't listen to them," he told shareholders.

Since the 300's launch, Chrysler has yet to find another home run. The Dodge Charger, based on the same platform, has done well but can't match 300 sales. The Jeep Commander, a seven-passenger SUV launched last fall, has required incentives to compete in the lagging large SUV market.

DaimlerChrysler officials said they have high hopes that Caliber will be the next big hit. The Chrysler Group sold 6,500 Calibers in March, the first full month of production.

"We feel pretty good with the early indicators," Klegon said.

The rest of the lineup also should do well, he said, adding that each vehicle serves a purpose.

The Compass and Patriot provide small, fuel-efficient SUVs. The Aspen, based on the Durango platform, gives Chrysler a large, luxury SUV. The four-door Wrangler Unlimited could attract customers who have shied from the Wrangler because it only comes in a two-door version.

The new models

*

The Chrysler Group plans to launch 10 vehicles this year.

Here's a rundown of what has been released and what is on the way.

Dodge Nitro

• Release: Late Fall. Price: Not available. Assembly plant: Toledo.

• Early rundown: An edgy vehicle that gives Dodge a midsize SUV; receiving favorable reviews for styling.

Dodge Caliber

• Release: On sale since February. Base price: $13,985. Assembly plant: Belvidere, Ill.

• Early rundown: A replacement for the Neon that is receiving good reviews, it gives Dodge a sporty hatchback for the small-car segment.

Jeep Wrangler

• Release: Fall. Price: Not available. Assembly plant: Toledo.

• Early rundown: A bigger, more powerful version of the Wrangler that stays true to Jeep's rugged roots.

Jeep Wrangler Unlimited

• Release: Fall. Price: Not available. Assembly plant: Toledo.

• Early rundown: A four-door Jeep that could attract customers who like the Wrangler, but not its current two-door limitations.

Jeep Patriot

• Release: Late Fall. Price: Not disclosed, but base is less than the $15,985 for the Compass.

Assembly plant: Belvidere, Ill.

• Early rundown: A small, boxy Jeep that gives the automaker another entrant in the growing compact SUV market.

Chrysler Sebring

• Release: Not available. Price: Not available. Assembly plant: Sterling Heights.

• Early rundown: Expected to be unveiled this summer, it should provide a much-needed update for Chrysler's midsize sedan.


Jeep Compass

• Release: Summer. Base price: $15,985. Assembly plant: Belvidere, Ill.

• Early rundown: A compact SUV that Jeep hopes will attract customers who want the off-road image without the extreme off-road capabilities.

Chrysler Aspen

• Release: Fall. Price: Not available. Assembly plant: Newark, Del.

• Early rundown: An SUV that is based on the Dodge Durango platform; not expected to have big sales numbers, but it gives Chrysler a large SUV.

Dodge Ram 3500 Chassis Cab

• Release: Fall. Base price: Not available. Assembly plant: Saltillo (Coahuila, Mexico).

• Early rundown: A brawny Ram that should help Dodge win more commercial customers.


Jeep Grand Cherokee SRT8

• Release: January. Base price: $39,995. Assembly plant: Jefferson North (Detroit).

• Early rundown: A 420-horsepower version of the Grand Cherokee that should attract performance enthusiasts, but it's not likely to provide big sales numbers.

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Highlights from the DaimlerChrysler AG shareholders meeting

*

• Chairman and Chief Executive Officer Dieter Zetsche said he expected profits for the company to increase this year. "We have set ourselves challenging but realistic goals, which we intend to achieve in the foreseeable future," he said.

• For the first time, DaimlerChrysler provided details on compensation for its top executive. Zetsche will have a base pay of $1.8 million in 2006. He could receive another $2.7 million in bonuses if DaimlerChrysler meets all of its financial targets.

• The supervisory and management boards approved paying a dividend of 1.50 euros, or $1.82 a share, this year, the same as last year.

• Chrysler Group sales are expected to stay stable in 2006 and start increasing as new models come to market.

• The Mercedes Car Group, which lost $598 million last year, is increasing sales and is almost done with a major workforce reduction. Through March, about 7,800 Mercedes employees had taken voluntary buyouts, closing in on the company's target of 8,500.

• More than 8,000 people attended the meeting.
 
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