- Feb 4, 2011
Opinion: Chrysler no longer left for dead, biggest test still coming
I'm starting to hear a similar sound, not quite so loud, but this time emerging from Auburn Hills, Michigan, where Chrysler is headquartered. Call it a hum, maybe a rumble, though definitely not yet the sort of buzz that would follow a similarly seismic event – in this case the turnaround of a company most folks had long written off for dead.
This wasn't supposed to be a particularly good year for the smallest of the Detroit makers. Its product pipeline, went the conventional wisdom, was all but empty, other than the completely-remade Jeep Grand Cherokee and redesigned Chrysler 300, due later in the model-year. But I think most of us in the media were delivered a pleasant surprise a few months back when we got a first good look at the rest of the maker's 2011 lineup.
Paul A. Eisenstein is Publisher of TheDetroitBureau.com, and a 30-year veteran of the automotive beat. His editorials bring his unique perspective and deep understanding of the auto world to Autoblog readers on a regular basis.
True, we won't begin to see the real impact of Chrysler's critical new partnership with Fiat until 2012 or '13 at the earliest, but the latest offerings are, for the most part, a lot better than the dreary holdovers we were anticipating. Sure, the new 200 is just a placeholder until a Fiat-based replacement arrives – but it's also much more than just a new nameplate slapped onto the dreadful old Sebring. Indeed, perhaps the biggest news of the year from Chrysler is that the maker has finally embraced the need to upgrade its interiors.
Sure, exterior design is the first thing to catch your eye, but you live in the interior, acknowledges Klaus Busse, the design director whose team gave us the new look, banishing what he describes as those "acres of battleship gray plastic."
Significantly, in a year when Chrysler wasn't supposed to have much of a story to tell, two models, the Grand Cherokee and the reborn Dodge Durango, landed as finalists in the much-scrutinized bid for the North American Car of the Year trophy – though ultimately losing to the ground-up redesign of the Ford Explorer.
No, few would say Chrysler's products are yet at what might be called the renaissance stage. But as someone who finds the cocktail party chatter frequently turn to my automotive recommendations, I no longer need tell friends, family and strangers alike to go running as fast as possible away from a Chrysler showroom.
There's no question there are plenty of challenges ahead for the new management team led by Sergio Marchionne, the sweater-clad CEO who runs both Chrysler and Fiat. One of the biggest is quality. The maker has routinely lagged at the back of the pack by almost every metric. Chrysler has "a long road ahead," said J.D. Power and Associates analyst, Dave Sargent, before it can "prove to consumers that (it) can produce models with quality that equals or beats that of the import brands."
Or Ford, for that matter, the cross-town rival that is intent on demonstrating that a domestic automaker really can keep up – indeed lead – the best of them.
Overcoming a reputation for quality problems isn't easy, and even when the numbers start creeping back upward, perception routinely lags reality by a number of years. So, Chrysler will have to make big gains in other ways to win back skeptical buyers. Those improved interiors will help. And new products, like the Fiat 500, as well as the redesigns of the Grand Cherokee and 300 are starting to turn heads.
There are some early signs of success. The maker posted its 10th consecutive increase in sales last month, a significantly reversal of what, for several years, seemed a downward spiral into oblivion. The 23-percent increase was one of the biggest in the industry, and it delivered a modest but still significant improvement in market share.
The sales gain followed just days after Marchionne's team announced a fourth-quarter operating profit of $198 million. Of course, the maker's bottom line was still in the red to the tune of $199 million, but that was a far cry from the $2.7 billion loss during the October – December period the year before.
Now comes the real test, the Canadian-educated Marchionne is promising that Chrysler will report anywhere from $200 million to $500 million in profits for 2011. Not operating income, net. And you can be sure a lot of folks will be watching closely, everyone from potential investors to the White House, which is under intense pressure to get the government out of the automotive business.
Marchionne is now firmly committed to staging an initial public offering during the second half of the year. He says the November 2010 IPO at GM was a "snowplow," preparing the market for Chrysler to follow. But investors will demand solid results, as they demonstrated last week by driving Ford stock down 12% in a single day after it just slightly missed its earnings target.
There is reason to be cautiously optimistic, but that hum hasn't turned into a full-fledged buzz at Chrysler, yet. The maker has plenty of challenges ahead of it. But if it can turn things around, you can be sure it will register in seismic proportions.
[Image: Drew Phillips/AOL]