The Chrysler Group, once the third largest automaker in the world and current producer of Chrysler, Jeep and Dodge, has had a tough time of it lately. While General Motors and Ford have managed to fight back after the recession, Chrysler has not managed to turn the corner: The company recently reported a US$199 million fourth-quarter net loss, bringing the total loss for 2010 to US$652 million.
Despite these bleak financials the company exceeded sales and operating expectations and a spate of new and refreshed models could see a turn-around in 2011.
Key to its future success is – undoubtedly – the company’s product strategy and the ability to shrug off a US$5,6 billion debt obligation in rescue loans from the US government. Despite posting a healthy operating profit and increasing sales and market share, Chrysler reeled under a US$1,2 billion interest cost for 2010. A key to both these hurdles is its tie-up with Fiat.
Fiat – which currently owns 25 per cent of Chrysler, but with ambitions to boost this by 16 per cent later this year – not only provided the company with much-needed equity, but Chrysler is developing smaller cars based on Fiats and the Italian company is using Chrysler as a springboard for the American market – most notably with the recent introduction of the 500. It is this cooperation – however strange and unlikely – which could save Chrysler and turn Fiat into a true global brand.
CEO Sergio Marchionne recently spent US$1,1 billion to makeover 14 models in the Jeep, Dodge and Chrysler line-ups and a few all-new models are also in the pipeline. We were recently at the local introduction of the Jeep Grand Cherokee – a model which represents the company’s new-found focus on product improvements – and chatted with Guy Franken, Chrysler SA’s head of group marketing and corporate affairs, over the future of Chrysler in South Africa.
Q: The tie-up between Fiat and Chrysler is certainly an interesting one and I think that everyone raised an eyebrow at the Freemont that was recently announced, but how will product sharing affect your strategies in South Africa?
A: This has had little immediate affect over the short-term strategies of the company and I think it is important to note that this sort of platform or model sharing between Fiat and Chrysler will be handled very holistically. One benefit is that there is a strong push for growth in international markets and this requires new products. Locally we will benefit from the availability of such products.
Q: So, Fiat will not be launching the Freemont in South Africa?
A: No. The Dodge Journey will continue to be sold by Chrysler.
Q: What direct positive spin-offs do you see for the Chrysler Group in South Africa in the short-term with this tie-up?
A: Direct benefits accrue from being able to negotiate more attractive deals with mutual local suppliers; good examples here being deals struck with creative agencies and most importantly media purchasing.
Q: Following on the previous question, are there any specific models from Fiat that you would consider launching with a Chrysler, Jeep or Dodge logo? Given the presence of Fiat and Alfa, would Lancia be an attractive pool for Chrysler?
A: We are examining all options available to us to best determine which models should be contained in future product ranges – be it Chrysler, Jeep or Dodge. The long term future may indeed hold such opportunities for Chrysler.
Q: How about in South Africa? Do you plan to work more closely with Fiat in South Africa?
A: We remain two separate companies, but foresee a closer professional relationship in the future.
Q: Future products are of great importance, yet we are already missing out on vehicles such as the Chrysler 200 because it is not available as a right-hand drive model. Do you see this as a potential hindrance locally?
A: We do not anticipate a lack of right-hand drive models in the future.
Q: So Chrysler will not end up like Cadillac and stop development on all right-hand drive projects?
A: Definitely not.
Q: Would the 200 have worked locally?
A: I presume that the 200 would have done very well locally. Then again, Sergio Marchionne has invested a large amount of money in future products and I think our customers will appreciate the quality drives planned for our current line-up. We also look forward to all-new products that may be perfectly suited for our market.
Q: Even with the solid sales performance of Chrysler in 2010, the range is still very limited. Would it not make more sense to rationalise and concentrate on a single brand in South Africa? Dodge and Jeep do offer more depth, don’t they?
A: At the moment they do, but I cannot agree with this. We market three distinct brands in SA – each having its own particular strengths. Jeep is the biggest selling of the three and has established itself as one of the leading providers of 4X4 SUV’s in SA. The brand has demonstrated the depth to have extensive brand extensions. Dodge has only been back in South Africa for some five years and is on a very strong growth trajectory. The Chrysler brand has since its re-launch into SA in 1996 had a differing number of models and derivatives available over these years and currently offers the 300C, Sebring Convertible and the Voyager – which is the undisputed market leader in the large luxury MPV segment. And sales remain strong: The Grand Voyager showed an improvement of 466 per cent compared with 2009 and even the Jeep Grand Cherokee (which has just been replaced) managed an increase of 64 per cent. Every vehicle in our line-up showed growth in 2010 and our three brands posted a 26 per cent improvement in local sales in 2010. This is monumental and we are confident that further improvements to our products will see an even better performance.