In the race for No. 2 in sales in Canada – and it’s quite the race, no question – Chrysler Canada trails one-time No. 1 General Motors of Canada by a paltry 5,000 units. Shocking.
And consider this: two of the top three best-selling vehicles in Canada are from Chrysler (the Dodge Ram and Dodge Grand Caravan) and the country’s best-selling crossover wagon is the Dodge Journey.
As car company rebounds go, the bounce back of Chrysler from bankruptcy is looking increasingly impressive – especially in Canada. Chrysler’s turnaround is also a godsend for majority owner Fiat. With its European business suffering from depressed sales related to the debt crisis among other things, Chrysler is now coming to Fiat’s rescue.
Chrysler, reports a Bloomberg News analyst survey, is set to outpace Fiat’s operating profit by 87 per cent in the second half of 2011. Look for more of the same in 2012.
“Fiat would be very vulnerable now without Chrysler, with few industrial and financial options on its hands,” Emanuele Vizzini, chief investment officer at Investitori Sgr in Milan, told Bloomberg.
What’s going on here? Is Chrysler out of the woods? Did the much-criticized bailout actually work? It would be a stretch to say yes. But two years ago who would have predicted Chrysler would be helping Fiat?
And who, also, would have guessed that by last May Fiat and Chrysler would have repaid $7.6-billion in U.S. and Canadian government loans, reducing the U.S. government's then-stake to 6.6 per cent from 8.6, and Canada’s interest to 1.7 per cent from 2.2. By year’s end, Fiat expects to raise its stake in Chrysler Group to 58.5 per cent from the current 53.5.
The Fiat-Chrysler group still faces plenty of challenges, but just last month officials said the global sales target remains around six million vehicles by 2014, with revenue of about $80-billion.
“Long-term, neither Fiat nor Chrysler would have made it on their own,” CEO Sergio Marchionne said on Oct. 7 in Montreal, as reported by Bloomberg. “Fiat was too small and too handicapped by an inadequate business model in Europe to have any hope of a future.”
The point here is that Chrysler’s health is now critical to the health of Fiat, the purported Chrysler saviour barely two year ago when the Auburn Hills, Mich., company emerged from bankruptcy. For any car company, health is measured by the success of new models rolling out of dealer showrooms. Which brings us back to those sales numbers.
About this time last year, Chrysler was in the early stages of launching more than a dozen new or seriously refreshed models. The product blitz started in the summer of 2010 with the arrival of a reinvented Jeep Grand Cherokee, then continued on through the fall, winter and spring of 2011.
Working with limited resources, the Chrysler Group introduced an all-new Dodge Durango and completed major updates to such core models as the Journey, Grand Caravan, Chrysler Sebring (renamed the Chrysler 200), Dodge Avenger, Jeep Patriot and Compass, and more. The Chrysler 300 was also given a major makeover, the Dodge Charger likewise. Just weeks ago, Chrysler also reintroduced a new SRT high-performance lineup.
For the most part, these product moves have been reasonably well received by both buyers and critics. The testers at Consumer Reports have referred to “a new sense of purpose at Chrysler,” with auto testing director David Champion telling The Detroit News that the once-maligned Journey “has come a long, long way.”
Most recently, the revamped 2011 Chrysler 300C scored an “Excellent” overall road test score of 80 in CR’s latest tests of four upscale sedans. That was jump from a score of 64 for the previous model. The 300C now ranks mid-pack among the 10 upscale sedans that have been tested by CR.
“The 300C’s quick, muscular 5.7-litre V-8 engine is now complemented by responsive handling and a more comfortable ride,” said Champion. “And, thanks to a major upgrade, its roomy interior is now quieter, more luxurious, and has improved visibility.”
Still, let’s not get carried away. The Chrysler lineup as a whole scored near the bottom in the latest CR new-car ratings. Chrysler needs to improve its reliability, and not just according to CR research. Chrysler ranks below average in short-term quality, as measured by J.D. Power and Associates Initial Quality Study, and Chrysler is near the bottom in the arguably more telling long-term J.D. Power Vehicle Dependability Study.
As well, while the sales numbers in Canada are strong, as the president of a rival auto company here in Canada points out, Chrysler is relying heavily on rich sales incentives to move even all-new and nicely revamped models off dealer lots.
For instance, through the summer and into the fall, Journey sales were juiced by incentives worth as much as $3,000 or more that could be combined with cut-rate financing deals of 1.99 per cent. And the deal-making goes on: current Chrysler leaseholders might want to take advantage of the $3,000 in cash Chrysler Canada has for them when they purchase a new Jeep Liberty.
That Chrysler 200 that is the star of many company ads? The base price of the 200 is $19,995, but for cash buyers Chrysler Canada has a $3,500 factory-to-dealer rebate in play. The right shopper conceivably could get a new Chrysler 200 for something like $16,500 plus taxes and fees.
Selling vehicles on the cheap is not a long-term recipe for success and profitability. As Chrysler moves into the next phase of its turnaround, the challenge remains: build better, more desirable vehicles that buyers craze and for which they are willing to pay.
In the meantime, at least as 2011 plays out, that sales race between Chrysler and GM will be fun to watch as it plays out over the next few months – a sales race between two companies whose parents emerged from bankruptcy barely two years ago.