Chrysler is embarking on a bold and ambitious plan to dramatically reduce the number of dealers it has. And it wants to free up a bunch of money for new product development. It's a clever plan that neatly side-steps the franchise laws in this country. It will also result in a much smaller company.
So far Chrysler hasn't released a whole lot of details about what it plans to do. But it wants to kill off a bunch of models and get into new market segments where it currently doesn't compete.
So what should it kill off, what should it keep, and where should it get into? I've got my ideas. I'll bet you've got some, too.
John McElroy is host of the TV program "Autoline Detroit". Every week he brings his unique insights as an auto industry insider to Autoblog readers. Follow the jump to finish reading this week's editorial.
First, let's look at why the company is considering taking such drastic action.
Like the other two Detroit automakers, Chrysler LLC has too many dealers, about 3,700. Toyota, which sells more vehicles, has around 1,500. A Chrysler store sells a little over 200 vehicles a year, a Dodge store sells about 378, and a Jeep store sells about 166. Compare that to an average of 1,800 sales at a Toyota store.
As a result, Toyota dealers are far more profitable and powerful than their domestic competitors. Worse yet, with too many dealers in each major market, Chrysler stores compete more against each other than they do against the competition, which hurts their profitability even more.
But the franchise laws in this country provide powerful contracts that protect dealers. It's very costly and time consuming for automakers to get rid of retailers they don't want. It cost GM nearly $1 billion to shut down the Oldsmobile franchises. I believe Isuzu Motors America essentially let itself go out of business in passenger vehicles rather than pay to shut its dealers down. Chrysler doesn't have the time or money to go that route, so it's trying a different tact.
The idea is to combine Chrysler, Dodge and Jeep dealers under one roof. A number of dealers already do this, especially in rural areas, but the company wants them all to do it. And to ensure they do, without getting into trouble with the franchise laws, it's going to drastically reduce the number of models each brand sells. Dodge dealers, for example, will no longer have a full line-up of vehicles. That means they will not be able to survive on their own unless they combine with the other two brands, and vice versa. As the dealers combine there will be fewer of them.
With everything under one roof, it's pretty easy to figure out where the company can eliminate duplication. At the entry level it has two models, the Chrysler PT Cruiser and Dodge Caliber. Kill the PT!
Jeep has four C-size vehicles, the Liberty, Patriot, Compass and Wrangler. I say kill the Patriot and Compass.
They don't need two C-size cars either. Keep the Chrysler Sebring and kill the Avenger, or maybe do it the other way around. They don't need two minivans, either. Kill the Town and Country.
While we're at it, let's kill the Chrysler Pacifica and Dodge Nitro, as well as the Dodge Charger and Magnum, the Jeep Commander and Chrysler Aspen.
Notice I don't touch the Ram, Dakota, Challenger or Viper. Keep them!
But at the same time we're killing off models, we're going to add some, too. Chrysler desperately needs a mini car, a B-segment car, an entry-lux competitor and a full-size crossover. That's going to cost a lot of money. But I figure with all the models we killed off, that'll free up about a billion dollars a year in the product development budget.
So what does a future Chrysler-Dodge-Jeep showroom look like? I see an inexpensive mini car sold by Dodge and developed with Indian automaker Mahindra & Mahindra. There will be a B-segment Dodge Hornet developed with Chinese automaker Chery, and a B-segment Jeep Wrangler.
The C-segment would have the Dodge Caliber with a crossover variant, and the Jeep Liberty.
The D-segment should include the Chrysler Sebring passenger car, the Dodge Journey crossover, the Jeep Grand Cherokee SUV and the Dodge Caravan minivan.
In the E-segment there's the Chrysler 300 (which needs to become a true entry-lux car), a new Jeep (let's call it the Wagoneer), and a full-size Chrysler crossover (why not call it the Town & Country?).
Now if the rumors are right and Chrysler is contemplating selling off Jeep, all these ideas will have to change. Or at least my ideas will have to change. What kind of a model line-up would you keep or kill to create a profitable Chrysler?
Autoline Detroit
Airs every Sunday at 7:00AM on Speed and 10:30AM on Detroit Public Television.
Last Week's Show: "Outside In"
Autoline Detroit Podcast
Click here to subscribe in iTunes
So far Chrysler hasn't released a whole lot of details about what it plans to do. But it wants to kill off a bunch of models and get into new market segments where it currently doesn't compete.
So what should it kill off, what should it keep, and where should it get into? I've got my ideas. I'll bet you've got some, too.
John McElroy is host of the TV program "Autoline Detroit". Every week he brings his unique insights as an auto industry insider to Autoblog readers. Follow the jump to finish reading this week's editorial.
First, let's look at why the company is considering taking such drastic action.
Like the other two Detroit automakers, Chrysler LLC has too many dealers, about 3,700. Toyota, which sells more vehicles, has around 1,500. A Chrysler store sells a little over 200 vehicles a year, a Dodge store sells about 378, and a Jeep store sells about 166. Compare that to an average of 1,800 sales at a Toyota store.
As a result, Toyota dealers are far more profitable and powerful than their domestic competitors. Worse yet, with too many dealers in each major market, Chrysler stores compete more against each other than they do against the competition, which hurts their profitability even more.
But the franchise laws in this country provide powerful contracts that protect dealers. It's very costly and time consuming for automakers to get rid of retailers they don't want. It cost GM nearly $1 billion to shut down the Oldsmobile franchises. I believe Isuzu Motors America essentially let itself go out of business in passenger vehicles rather than pay to shut its dealers down. Chrysler doesn't have the time or money to go that route, so it's trying a different tact.
The idea is to combine Chrysler, Dodge and Jeep dealers under one roof. A number of dealers already do this, especially in rural areas, but the company wants them all to do it. And to ensure they do, without getting into trouble with the franchise laws, it's going to drastically reduce the number of models each brand sells. Dodge dealers, for example, will no longer have a full line-up of vehicles. That means they will not be able to survive on their own unless they combine with the other two brands, and vice versa. As the dealers combine there will be fewer of them.
With everything under one roof, it's pretty easy to figure out where the company can eliminate duplication. At the entry level it has two models, the Chrysler PT Cruiser and Dodge Caliber. Kill the PT!
Jeep has four C-size vehicles, the Liberty, Patriot, Compass and Wrangler. I say kill the Patriot and Compass.
They don't need two C-size cars either. Keep the Chrysler Sebring and kill the Avenger, or maybe do it the other way around. They don't need two minivans, either. Kill the Town and Country.
While we're at it, let's kill the Chrysler Pacifica and Dodge Nitro, as well as the Dodge Charger and Magnum, the Jeep Commander and Chrysler Aspen.
Notice I don't touch the Ram, Dakota, Challenger or Viper. Keep them!
But at the same time we're killing off models, we're going to add some, too. Chrysler desperately needs a mini car, a B-segment car, an entry-lux competitor and a full-size crossover. That's going to cost a lot of money. But I figure with all the models we killed off, that'll free up about a billion dollars a year in the product development budget.
So what does a future Chrysler-Dodge-Jeep showroom look like? I see an inexpensive mini car sold by Dodge and developed with Indian automaker Mahindra & Mahindra. There will be a B-segment Dodge Hornet developed with Chinese automaker Chery, and a B-segment Jeep Wrangler.
The C-segment would have the Dodge Caliber with a crossover variant, and the Jeep Liberty.
The D-segment should include the Chrysler Sebring passenger car, the Dodge Journey crossover, the Jeep Grand Cherokee SUV and the Dodge Caravan minivan.
In the E-segment there's the Chrysler 300 (which needs to become a true entry-lux car), a new Jeep (let's call it the Wagoneer), and a full-size Chrysler crossover (why not call it the Town & Country?).
Now if the rumors are right and Chrysler is contemplating selling off Jeep, all these ideas will have to change. Or at least my ideas will have to change. What kind of a model line-up would you keep or kill to create a profitable Chrysler?
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Autoline Detroit
Airs every Sunday at 7:00AM on Speed and 10:30AM on Detroit Public Television.
Last Week's Show: "Outside In"
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Autoline Detroit Podcast
Click here to subscribe in iTunes
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