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Small gains drive Chrysler resurgence

  • Choosing a car at dealership. Thoughtful grey hair man in formalwear leaning at the car and looking away

If you have even a passing interest in the automotive world, you couldn’t have missed the gazillion newsprint inches spent on Chrysler over the past few months — for reasons both good and bad.

There were the bright spots: galloping sales south of the border, a 35-month sales-growth streak in Canada, improving market share, better ratings from Consumer Reports, and the company’s Toronto-bred CEO Sergio Marchionne’s business chutzpah.

Then there was the less-savoury stuff: The customary corporate gunfire and union tough talk during Canadian Auto Workers negotiations, Mitt Romney and Donald Trump double-downing on job outsourcing allegations, and the continued misery of the company’s majority stakeholder, Fiat.

But, overall the going has been good — or downright miraculous — for the Chrysler Group in North America, which has triumphed over all kinds of odds and naysayers ever since its bankruptcy nadir in 2009 and consequent amalgamation with Fiat.

Year-to-date vehicle sales of 1.38 million in the U.S. have already exceeded 2011 total sales of 1.37 million. To top it all, Chrysler’s profit grew a whopping 80 per cent in the third quarter, to $381 million (U.S) from $212 million in 2011 Q3.

Canadian growth has also been spectacular. Right after receiving its corporate lifeline in 2009, Chrysler Canada CEO Reid Bigland outlined the automaker’s prospects north of the border. His sales expectations were justifiably modest: 220,000 vehicles per year by 2014.

Chrysler beat that number last year, selling 231,000 vehicles in Canada. This year, it has already sold more than 212,000 vehicles and I wouldn’t be surprised if it hits the 250,000 mark by Christmas.

The conversation around Chrysler’s unlikely resurrection has mostly centred on corporate streamlining, Marchionne’s unifying approach, and the unwavering focus on improving quality.

Although these moves have been vital to the automaker, I believe its sales surge — and its future potential — has been buoyed by an ongoing renewal of the company’s weakest link: sedans and compact cars.

For the longest time, Chrysler has been propped up by its big vehicles: Ram pickups, the Dodge Grand Caravan and some Jeep models. They continue to be volume movers but their growth has been modest and, in some cases, sales have actually flagged.

In the U.S., the Grand Caravan is nowhere near its pre-2008 highs. In Canada, it faces some serious challenge from the Chevy Orlando, GM’s new ticket to the minivan segment. Canadian Caravan sales actually fell in 2011, to 53,000 from 2010’s 55,000, and will be lucky to hit those numbers this year.

However, Chrysler’s passenger car sales are on warp speed.

Replacing the much-maligned Sebring with the Chrysler 200 was a necessary move, and it’s paying off handsomely. The 200 has already sold 109,000 units this year in the U.S., compared to 2011’s 89,413 units. In Canada, year-over-year growth for 200 in September and October was 129 and 116 per cent respectively.

The Fiat 500, often dismissed as too Euro-chic for tough North America, has already doubled its ownership count in the U.S. in 2012. And the newly introduced Dodge Dart, which brings the Italian Alfa Romeo DNA to our shores, is shaking things up in the compact segment with positive reviews and rising sales.

More small cars are expected from Chrysler, which will let the company stake its claim in segments where it had all but disappeared. Some may not be big-volume sellers, but Chrysler will at least have all its bases covered in the fast-growing compact and subcompact segments.

Many of these new cars will be powered by technology from Fiat, a company known for its small-car prowess, which should give industry watchers and consumers more confidence in them.

In the automotive business, segment presence and quality are always key to gaining market share, and that’s why I think this recalibration will be vital to Chrysler’s march through the car market.

In a recent statement, Marchionne said, “We’ve changed the conversation at the Chrysler Group.”

I think I know what he meant by that: after years of thinking big, the automaker’s finally talking small.

The resulting profits speak for themselves.

  • Small gains drive Chrysler resurgence

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