Bloomberg News

Chrysler Seeks Detroit Splash by Making Over Eminem’s 200

January 13, 2014

2014 Chrysler 200 Convertible

The 200 is Chrysler’s bid to field a model that can woo buyers in the mid-size auto segment. Photograph via Chrysler Group LLC

Chuck Eddy, who has been a Chrysler dealer for 45 years, has to go back to the time of Jimmy Carter’s White House to recall when he last had a strong mid-size car to sell. That will change, he says, after this morning’s Chrysler sedan unveiling at the Detroit auto show.

The North American International Auto Show that starts today will feature debuts for some of the auto world’s most important models. Ford Motor Co. (F:US) is introducing the latest version of its record-selling F-Series pickup, made of aluminum components. Mercedes-Benz is giving the first viewing of the latest C-Class, its top-selling model. Chevrolet is showing the new Corvette Z06, a high-performance version of the longest-running U.S. sports car.

Jostling for attention at the show, which draws more journalists than any other car show and sets the tone for the auto year, will be Chrysler Group LLC (CGC:US)’s introduction of its new 200 sedan, an upgrade to a model last refreshed for 2011.

The 200 is Chrysler’s bid to field a model that can woo buyers in the mid-size auto segment, standing up to stalwarts such as Toyota Motor Corp. (TM:US)’s Camry, Honda Motor Co. (HMC:US)’s Accord and Nissan Motor Co. (NSANY:US)’s Altima. It will also vie with the best-received sedans in a generation from Ford and General Motors Co. (GM:US)

The vehicle represents one of Chrysler’s biggest investments in a new model in the almost five years since Fiat SpA (F)’s Sergio Marchionne took control of Chrysler after the U.S. automaker’s emergence from bankruptcy.

Marchionne Stays

Marchionne, who earlier this month reached a $4.35 billion deal to buy the rest of Auburn Hills, Michigan-based Chrysler, needs a hit to continue to lift the automaker back to relevance in the U.S. and shore up Turin-based Fiat’s operations in Europe.

Chrysler’s market position within the combined automaker means the U.S. will have a “large claim” as the headquarters for the company, Marchionne told reporters today at the auto show in Detroit. The company will make decision on the location at its board meeting on Jan. 29, he said. The combined company will bear a name that includes both the Fiat and Chrysler brands, Marchionne said.

Separately, Fiat Chairman John Elkann told reporters today in Detroit that Marchionne will remain CEO at least three more years.

Auto dealer Eddy says the 200 has the potential to be his modern-day LeBaron, the last mid-size Chrysler car that was a legitimate hit on his northeast Ohio showroom floor.

Stiff Competition

“This car will kick some butt in a very difficult segment,” he said in an interview. “And we can’t have a failure right now. No one can have a failure right now. The competition is just too stout.”

The 200 faces stiffer competition than the boxy LeBaron ever did. The Camry, Accord, Altima and Ford Fusion accounted for 1.39 million vehicles sold in the U.S. in 2013, more than half of the segment’s volume.

While the top-selling model lines in the U.S. are full-size pickups, the biggest segment is family cars. One out of every six cars sold in the U.S. is a mid-size sedan, Chrysler said. An automaker without a top-selling family car is a bit like Hollywood studio without a summer blockbuster.

“The competition is brutal,” Al Gardner, who took over as Chrysler brand chief in November, said in a press briefing before the Detroit show. “This segment is absolutely a place that you absolutely have to be and you’ve got to be as competitive as you possibly can.”

Evocative Design

The Detroit show, in its 107th year, drew 795,000 attendees in 2013, with more than 5,000 reporters from 62 countries credentialed. Global automakers typically reveal some of their most important new vehicles at the show, including 61 last year.

The new 200, which goes on sale in the spring, is sleeker than its predecessor, with a gently curving roofline and headlights and grille arranged into a scowl. Chrysler’s pitch is that the car evokes the simplicity of American materials and lines showcased in designs such as the Airstream trailer, Chris-Craft boat and Eames lounge chair. Its looks wouldn’t be out of place on a lot full of Fusions and Hyundai Sonatas.

Chrysler said it improved aerodynamics by 21 percent and added a nine-speed automatic transmission, which it said helps improve highway fuel efficiency by about five miles (eight kilometers) per gallon to 35.

Standard features include an electronic shifter, which frees console space for a pass-through storage area lined with a rubber mat embossed with the Detroit skyline, minus the Renaissance Center, GM’s headquarters. Available options include paddle shifters, wood trim and perpendicular park assist.

$21,700 Price

The 200 is made at Chrysler’s Sterling Heights, Michigan, factory, which recently underwent at $1 billion makeover of its own, the company said. It will be on dealer lots in the second quarter with a starting price of $21,700 for the base LX model, which is $95 less than the current version.

It has the potential for as much as 250,000 in annual U.S. sales, which would almost double the annual record for the car, said Jeff Schuster, an analyst with LMC Automotive.

“It may not push the segment in a new direction, but it at least gets Chrysler to the level of where things are now,” Schuster said. “It should be highly competitive in the segment.”

Overhauls or redesigns of the Jeep Grand Cherokee and Cherokee, as well as the Chrysler 300 and Ram pickup, have helped Marchionne lead Chrysler to 45 straight monthly sales gains and start to win over consumers and critics.

‘Lolling Tragedy’

The 200 began life as the Sebring, a lackluster sedan savaged in 2007 by Pulitzer-prize winning auto reviewer Dan Neil as a “lolling tragedy of a car.”

Chrysler patched up the car and rebadged it the 200. It featured it in a 2011 Super Bowl ad that put rapper Eminem behind the wheel and set the stage for Chrysler’s recovery with the tagline “Imported from Detroit.”

Sales more than doubled in 2011 to 87,033, peaking the next year at 125,476. That still left Chrysler well short of the leaders such as the Camry, which last year outsold the 200 by more than three to one.

The timing of the new 200 may be good, Schuster said. While the competition is strong, it has been two years since the last show-stopping redesign in the segment, the Ford Fusion, he said.

“Chrysler is coming out with what looks to be a much more competitive product just as the competition is aging,” he said. “There’s opportunity in the segment if they’re able to hit it.”

Family Car

Fielding a strong family car is more important for Chrysler than it is for Ford and GM, said Kevin Tynan, auto analyst for Bloomberg Industries, explaining that the other two automakers can count on sales of their luxury brands, Lincoln and Cadillac, to generate higher margins.

Chrysler reported a modified operating profit margin of 4.9 percent in the third quarter, compared with Ford’s 7 percent operating margin for its automotive operations and 6.8 percent at GM, excluding its financing arm.

Chrysler also is still battling the perception among buyers that its cars don’t measure up.

“It’s going to have to be markedly better than what buyers in that segment have seen before,” Tynan said. “It’s going to have to be a lot better to get Camry, Fusion, Elantra and Accord buyers to notice, which is not an easy task.”

Eddy, the Ohio dealer, said that while Chrysler cars have improved under Marchionne, buyers’ “perception level” is slowing climbing. His sales rose about 9 percent last year after 10 percent growth in 2012.

“I still know our car says Chrysler on it,” Eddy said. “I get that. But every day, it gets better and better.”

To contact the reporter on this story: Mark Clothier in Southfield, Michigan at mclothier@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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