Posted by: David Welch on October 2, 2009
New Chrysler CEO Sergio Marchionne hasn’t been talking much since the company emerged from bankruptcy on June 2. While rival General Motors has come out with an aggressive advertising campaign that attempts to get skeptics to look at its new cars, Chrysler has stayed under wraps. But Marchionne did take the microphone after sales came out on Oct. 1 and showed that he has a realistic view of Chrysler’s place in the world.
Marchionne spoke on a web video after sales results came out on Oct. 1. He had to pump up the troops a bit, since the numbers were pretty bad. Chrysler’s volume for the month fell 44% (only GM had a steeper decline) and market share fell to 8.3% for the month. That’s below the 9.2% share that Chrysler has been holding throughout the year and well off last year’s 11%. Chrysler figured it could hold 10% in its turnaround plan submitted to the government.
The Italian CEO had a reasonable explanation. He said that the cash for clunkers program started not long after Chrysler emerged from bankruptcy, during which time the company had shuttered plants. When the clunker program started Chrysler already had thin inventory. Of course, Chrysler also had its own incentive programs on top of the clunker cash which blew through inventory of its passenger cars early in the clunker program. But add it all up and Chrysler is being hit harder by the clunker hangover than others, he said. “We just came off cash for clunkers,” Marchionne said. “Most of our plants had been out of spring and substantial part of summer. The heavy incentive checks that one could find in most years are no longer available. Your starting point was exaggerated.”
In other words, the rebates and spiffs artificially inflated the company’s market share. Welcome to Chrysler, Sergio. Chrysler’s product line simply isn’t good enough to claim 10% market share without steep price cuts. Consumer Reports doesn’t recommend any models, despite the fact that erstwhile CEO Robert Nardelli made hundreds of changes to Chrysler’s cars in an effort to bring the lineup up to snuff.
Still, Marchionne said things will get better. “September is not an indication of future performance,” he said. “You may see similar numbers in October. Don’t be alarmed. We’re not bleeding as people think we are. The level of cost consciousness in this high is historical high. The real important issue is to build a future. The future is a lot better than the market share.”
The question is, what will built that future? The company has only the Jeep Grand Cherokee and Chrysler 300 sedan coming in the near future. Both look good but neither of them are game changers. In 18 months or so, Fiat will have some of its cars coming. We’ll see how those cars do. Americans know little about Fiat cars and too few consumers shop Chrysler and Dodge dealerships for compact cars and family sedans. To show a better tomorrow, Marchionne will have to reveal some real surprises with his November plan.