2005 Frankfurt Auto Show, Part I Page 3

September 12, 2005

2005 Jeep Compass concept

LaSorda Lays Out Chrysler Plans


Chrysler will roll out at least 10 new products in the coming calendar year, making it “our biggest launch year in our history,” said new CEO Tom LaSorda. Overall, the plan is to add or replace 25 products in a three-year blitz, LaSorda explained during a meeting with reporters at the Frankfurt Motor Show.


While the new chief executive tried to position Chrysler as having a solid grip on its future, LaSorda acknowledged that changing economic conditions and world events could force it to rethink many of its basic strategies. Soaring fuel prices are, not surprisingly, at the top of its list. And that could lead the American arm of DaimlerChrysler AG to increase the number of diesel products it sells in the U.S. “The likelihood,” hinted LaSorda, “is more than 50/50 there will be.”


Chrysler, he added, might also consider moving into new small car segment. Right now, there is nothing in the B-car segment, below the current Neon model, LaSorda stressed, because “it is tough to make money” in that segment. But hinting that the thought has been raised in Chrysler planning meetings, he added that “If we did, we wouldn’t do it alone.” Indeed, LaSorda pointed out, the U.S.automaker is looking at many opportunities to spread out risk. In Toledo, Ohio, it is building a new Jeep plant with the help of three major suppliers, each putting up a significant portion of the project’s total cost.


Recent media reports have suggested Chrysler might even expand the utilization of its minivan plants by producing a version for Volkswagen AG. During LaSorda’s meeting with reporters, Chrysler’s chief spokesman, Jason Vines, acknowledged the talks with VW, though he stressed a decision has not yet been made.


Asked about the impact of Hurricane Katrina, LaSorda noted that about 40 of Chrysler’s 4500 U.S.dealers were impacted, with “10 totally devastated.” Another 10 could take months to resume operations. Several thousand Chrysler vehicles were destroyed on dealer lots during the storm, he added, suggesting some overtime may be added at Chrysler plants to recover the losses. As the GulfCoastbegins to rebuild, LaSorda added, it actually could be a boon to the auto industry, especially light truck sales, since construction crews will need lots of new pickups.



Euros Join Hybrid Brigade


In steady procession, European automakers lifted the covers on an assortment of hybrids and gasoline-electric concept vehicles during the first day of media previews in Frankfurt . It’s a simple recognition of two facts, said one well-placed industry observer. First, fuel prices have risen so high, even grudgingly complacent European motorists have had enough. Secondly, he added, Japanese makers like Toyota have done too good a job making hybrids seem the greenest of all powertrain technology in the mind of the public. On Monday, Audi unveiled a hybrid-electric concept, based on its new Q7 sport-utility vehicle. MINI showed a prototype that could use the technology, as well.


Despite the growing groundswell, skepticism remains high among European industry leaders, most of whom see diesel power as a more effective alternative. During the Mercedes-Benz news conference, the brand’s new boss, Dieter Zetsche, repeatedly referred to a report in the German paper, AutoBild, which found that on an across-the-U.S. test drive, a diesel-powered Mercedes M-Class delivered significantly better mileage than the new hybrid Lexus RX400h (echoing concerns raised earlier this year by TheCarConnection.com). But even DaimlerChrysler isn’t writing off gasoline-electric technology. Mercedes will reportedly show a diesel hybrid later in the week, and its U.S.sibling, DaimlerChrysler, is developing a new form of gasoline-electric propulsion under a joint venture with General Motors. In fact, another frequent hybrid naysayer, BMW, signed on with the JV recently.



Paybacks Are Indeed a Bitch


After some serious setbacks earlier this year, things started to look a lot better over the summer for the U.S. Big Three. Of course, it didn’t hurt to have some of the largest incentive programs ever luring customers in. But a growing chorus of industry analysts fear that with Detroit ’s employee pricing programs now winding down, the coming months could prove disastrous. “A lot of folks who were originally planning to buy cars later this year decided to move their purchases up,” cautioned analyst Joe Phillippi, of AutoTrends, Inc. He believes there will now be significantly fewer potential customers in the market during the final months of the year.


A quick and admittedly unscientific survey of analysts suggests payback from the mid-year incentives could cut sales by perhaps 100,000 a month during the fourth quarter. Phillippi fears the situation could stretch well into 2006, though Michael Robinet, of CSM Forecasting, predicts things will improve by next year, but agrees there’s likely to be rough times in the near-term. Not everyone is so pessimistic. Speaking in Frankfurt, where he attended the annual motor show, Chrysler Group CEO Tom LaSorda insisted “We don’t see any major…payback.” Of course, he added, Chrysler got the last bang for its employee pricing buck, with sales relatively flat. LaSorda acknowledged that General Motors, which scored a 47-percent gain in July sales, has already shown signs of payback, with August sales down 13.2 percent.

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