While Chrysler Corp. ponders the product volume and mix of a factory to replace the aged Toledo, Ohio, assembly plant, sales of that plant's principal model are weakening.
Jeep Cherokee sales in the United States in May were off 7.2 percent from May 1996. Cherokee sales were down 19.4 percent for the first five months of the year.
The dip, which began in December, follows a hot year. Dealers sold 148,544 Cherokees in the United States last year, making 1996 the third-best year since the Cherokee debuted in 1983 as a 1984 model.
Industry observers say the downturn should not derail Chrysler's plans to build a new Jeep plant and the next-generation Cherokee. Parts of the Toledo plant were built in 1910. The next Wrangler, a small sport-utility also made in Toledo, and a four-door derivative, are expected in the 2002 model year.
The sales slump comes at a critical juncture. Chrysler has yet to select a site for the new Jeep plant, and the company last week opened contract talks with UAW Local 12, which represents workers at the Toledo plant. The current seven-year local contract expires Sept. 14.
With so much at stake, neither the Jeep workers nor Chrysler want slipping Cherokee sales to taint their plans.
Chrysler last week responded by extending the normal two-week summer shutdown of the Cherokee line to four weeks. The shutdown begins July 3.
A six-month drop in year-to-year sales is significant, particularly because the Cherokee was freshened late last fall, said Ronald Harbour, president of Harbour and Associates Inc., an automotive consultant firm in Troy, Mich.
The Cherokee's popularity will be a crucial factor in Chrysler's decision whether to build a new Jeep plant, Harbour said.
'But Chrysler also is considering what other vehicles it can put in there,' Harbour said. 'We've seen several knockoffs at the auto show. They're not just looking at Cherokee and Wrangler.'
Chrysler is looking ahead to its next-generation Cherokee, known as the KJ program, for the 2000 model year, said Christopher Cedergren, managing director of Nextrend, an automotive consultant firm in Thousand Oaks, Calif. If Chrysler can keep the price of the new Cherokee significantly below the Jeep Grand Cherokee, the company will be able to sell 150,000 to 200,000 Cherokees a year, Cedergren predicted.
MAJOR CHANGE FOR 2000
The next Cherokee will have the most significant changes since the nameplate was launched by American Motors in 1983, he said.
'The chassis will be heavily upgraded,' Cedergren said. 'While the style change will be evolutionary, you will be able to tell that it has been redesigned.'
Although the Cherokee was refined for the 1997 model year, it still looks somewhat dated, Cedergren said.
Chrysler invested about $215 million to rejuvenate the Cherokee. Much of the makeover focused on a new interior and changes to reduce noise, vibration and harshness.
Chrysler raised prices an average of $831, or 4.4 percent, on the 1997 Cherokee line. Now, it must compete against other compact sport-utilities that carry attractive incentives in a segment that is experiencing softer sales, Cedergren said.
Chrysler currently has a $500 dealer incentive on the 1997 Cherokee. In contrast, Chevrolet has a $1,000 rebate on its 1997 and 1996 Blazer, and GMC offers a $1,000 rebate on its 1997 Jimmy.
Wrangler sales, incidentally, are ahead this year, up 22.2 percent through May.