The irony couldn't be thicker. German automaker Daimler, parent of Mercedes-Benz, made many of the German war vehicles used against the Allied forces during the historic conflict. But during the decade it owned Chrysler and Jeep, it created a trio of the worst Jeep-branded vehicles in the storied maque's history: The Commander, Compass and Patriot. According to internal research at Chrysler, the value of Jeep dealer franchises actually went down under Daimler's ownership. Perhaps it is even more ironic that an automaker from Italy, Germany's reluctant partner in World War II, is working closely with their new American colleagues to restore Jeep, both in the U.S. and globally, to what the company hopes is a leadership position in the sport utility market.
To be fair, earlier this year Jeep launched an all-new Grand Cherokee, arguably the best-ever iteration of the Jeep flagship vehicle. This version came from a joint product-development program with the Mercedes M Class started by Daimler. Chrysler executives had to convince a reluctant Cerberus Capital, which owned Chrysler from 2007-2009, to fund the Grand Cherokee's completion, but it was money well spent.
Piggy-backing on the Grand Cherokee are substantially refreshed versions of the Jeep Compass and Patriot, and nicely improved versions of the Liberty and Wrangler. These upgrades were funded and executed largely under Fiat's control, and point to signs that the Italians have a much greater understanding, appreciation and commitment to Jeep than the Germans or Cerberus ever had.
Strong Brand, Despite Reputation
And why not? Conventional wisdom has long said that the most valuable part of Chrysler is Jeep. Anytime buyers have sniffed around the perennially troubled Chrysler, be it Nissan, GM or the Chinese -- the order of interest is Jeep, Dodge pickups and minivans. Indeed, when General Motors and Chrysler were both going through bankruptcy in 2009, the White House task force proposed possibly combining just those three parts of Chrysler with GM's strongest three brands to form one competitive automaker.
"At the top of [our] list of assets worth saving [at Chrysler] was Jeep, a brand known all over the world and whose customers stayed loyal despite the fact that the products were less than innovative and often lagged behind both international and domestic rivals in handling and fuel economy," wrote auto task force director Steven Rattner in his book, "Overhaul: An Insider's account of the Obama Administration's Emergency Rescue of the Auto Industry."
The transformation under Fiat looks good, and it is encouraging to hear the enthusiasm from Chrysler engineers and designers again. "Daimler was completely obsessed with process rather than executing great vehicles," says Jim Morrison, head of product marketing at Jeep for Grand Cherokee, Compass and Patriot. "By the time we got done studying a possible product enhancement or new vehicle idea, the trend we were trying to seize on was over," says Morrison.
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An example he points to is the Grand Cherokee Overland Summit, which with all its features tops out at around $47,000. "When we proposed it to Sergio [Machionne, Chrysler CEO], he said, 'Go get it done by the end of the year... you people know whether it will sell or not, I just want it done fast and right,'" said Morrison.
After a bumpy beginning of the marriage between Fiat and Chrysler, which included Marchionne firing the heads of Chysler and Dodge brands weeks after appointing them, it looks like the combination has a strong chance of trumping the ten year ownership by Daimler. "I think it comes down to the fact that Fiat sells the same kinds of vehicles we do to the same kinds of customers," says Mark Allen, head of Jeep design.
In 18 months of ownership by Fiat, Chrysler has redone the interiors of most of its vehicles. At Jeep, perhaps no vehicles have come as far as the Compass and Patriot, the upgraded versions of which will go on sale in the first quarter of 2011. Launched in 2006 as a 2007 model, the car suffered in part from Daimler ordering a 40% cut in cost on the interior of the vehicle, as well its two assembly plant linemates -- Dodge Caliber and Jeep Patriot. The interiors were universally derided for their cheapness and road noise that was intolerable by 21st century standards.
The 2012 Compass is all new from the A-pillar forward, with a revised grille, headlight treatments, and front and rear fascias. The headlights were actually taken from the Grand Cherokee, while other aspects draw on the luxury styling cues of the brand's flagship. The interior plastics have been redone, with a new steering wheel and upgraded switchgear. In short, the Compass has gone from being a car almost no one recommended to one that stands up well to competition, especially the few in the segment that offer all-wheel-drive. The upper two trim levels can now be legitimately compared with Subaru Outback and Forester. It went "from napkin sketch to released surface, usually a six-month program, in five weeks," said Allen.
Indeed, the Compass and Patriot both impressed with their all-wheel-drive capability during a drive in Jackson Hole, Wyoming, as the two vehicles took on deep snowy trails and rocky terrain that's usually the province of Jeep's traditional rock-crawling Wrangler. "The capability of these two vehicles has always been overlooked because of all the negative chatter about them for their interiors created under Daimler," said Allen.
Jeep is trying to reposition the Compass as a slightly more premium vehicle in the compact crossover segment. It is also separating it from the Patriot, which shares the same platform, engine and options, and was similarly priced. While the refreshed Patriot keeps its $15,995 starting price (minus destination charges), the starting price of the Compass is $4,000 higher, and goes to around $26,000 for the top-end Limited.
The Patriot also received new front and rear fascias, along with upgraded interior materials, switchgear and steering wheel, and suspension revisions to increase ride height. The Wrangler gets an all-new interior with improved road-noise suppression, new steering wheel controls, standard electronic stability and hill-start-assist, and larger rear windows.
All these improvements are much needed to bolster Jeep's position. It is galling to Chrysler executives that Toyota has become the top seller of SUV's in the U.S., by virtue of the large volume of RAV4's it sells. Toyota also markets a number of other SUVs: 4Runner, Sequoia, and Highlander. Sales of Jeep, though, are on the rise, climbing to more than 260,000 in the U.S. through November, up 23 percent overall from last year.
Where To From Here?
In 2013, Chrysler will launch full replacements for the Compass and Patriot -- one new vehicle to replace them both, a ground-up replacement for the Liberty, and a small Jeep priced below the Compass replacement, but still offering all-wheel-drive and off-roading capability. All three will be based on Fiat engineering platforms, which Allen says are "completely up to the task."
Fiat is also building a Maserati-based SUV in Detroit that will be based on the Jeep Grand Cherokee platform. The Italians want to add 500,000 units to Jeep's global production volume, in part through a joint-venture with Russian automaker OAO Sollers to build Grand Cherokees, Compasses, Patriots and Wranglers for Russia and Eastern Europe. Fiat also has plans to build Jeeps in Italy.
Signs of Jeep's success and momentum are key to the initial public offering Chrysler plans to do next year. Fiat owns just 20 percent of Chrysler right now, with the rest owned by the U.S. government, the United Auto Workers healthcare trust, the Canadian government, and bond holders of the old Chrysler. But there are reports that Fiat may refinance its government loans next year, before the IPO, allowing Fiat to buy a larger stake in the second quarter.
"Taking control of Chrysler came across as a clear priority during Fiat's de-merger roadshow meetings," said Philippe Houchois, the London-based lead analyst on a UBS report to clients. Fiat has been briefing analysts as part of its effort to spin off its truck and tractor divisions to focus on car-making.
Chrysler may borrow money to repay the U.S. Treasury in the first quarter, consolidate with Fiat during the second quarter and hold an initial public offering in the third quarter, Houchois said, calling it "an aggressive, but in our view, realistic timeframe."
In Steve Rattner's "Overhaul," he goes on at length to praise Fiat's Marchionne as a tough negotiator and "brilliant." Says Jeep's Allen, "He is totally driven to win, and I am glad Jeep is playing such an important role in that."