Chrysler: No rest despite success
Chrysler's reward will be five more years of hard labor.
DETROIT -- Chrysler Group has rebounded from bankruptcy and the Great Recession, a feat many deemed impossible in 2009.
But expect no victory lap. Chrysler's reward will be five more years of hard labor.
On May 6, CEO Sergio Marchionne and his team will outline the company's five-year product and business plan for analysts and the media.
Here are three key challenges the plan is likely to address:
1. Fuel economy. Chrysler's fleet mileage lags those of other major automakers in the United States.
2. Earnings. Chrysler's profit margins are well behind those of Ford Motor Co. and General Motors.
3. Production capacity. Chrysler's plants are largely maxed out for key vehicles such as Jeeps and some Ram full-sized pickups.
Chrysler's last five-year plan dealt mostly with restoring sales and profits. The new product and business plan likely will tackle obstacles that continue to vex the automaker, such as:
Chrysler's corporate average fuel economy for domestic cars in 2013 ranked lowest among the largest automakers in the United States at 32.1 mpg. In contrast, Nissan's car average last year was 40 mpg. Chrysler's position among light-truck manufacturers is only slightly more competitive. Chrysler also lags far behind some automakers in electric vehicle sales.
Chrysler's profits were $2.8 billion in 2013, or 3.9 percent of revenues, lagging the domestic competition. Almost all of Chrysler's revenues and business came from North America where GM's profit margin was 7.8 percent last year and Ford's was 9.9 percent.
Fiat Chrysler Automobiles, the new name for what will be the combined auto operations, has aggressive global sales goals for Jeep and Alfa Romeo, but must find ways to accomplish them. Jeep wants to sell at least 1 million units in 2014 and continue to grow, but production of the Grand Cherokee and Wrangler SUVs are at maximum capacity. In 2013, Jeep sold 731,565 vehicles worldwide.
Meanwhile, Alfa Romeo lacks sufficient products to reach what the company believes is its global sales potential.
Fiat Chrysler's sales volume continues to trail major competitors in Asia. A recent agreement with Guangzhou Automobile Group Co. will enable the company to build some Jeeps in China for sale there, but Fiat Chrysler needs a full Asian partner to be competitive with other global automakers.
Chrysler's dealers say they are more profitable than ever. Also, Chrysler's brands in North America are more defined than they have been in decades, with creative marketing to support them.
Chrysler's streak of monthly sales increases in the United States stands at four consecutive years.
But problem areas remain that require long-term attention.
Customer satisfaction scores for Chrysler's dealerships are improving but still lag those of competitors. Similarly, the automaker must improve its quality to get off the bottom of yearly quality surveys in the United States.
The automaker would like to expand its North American dealer network for the Maserati luxury brand.
The Fiat and Chrysler brands both need more products to diversify their portfolios. Dodge, which ceded its pickups and commercial vans to Ram in 2009, is still seeking a compelling identity.
You can reach Larry P. Vellequette at email@example.com.