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Is Chrysler Spinning Its Wheels?


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Is Chrysler Spinning Its Wheels?

New minivans may not be the mega-hits the carmaker aims for

Anyone looking for a scapegoat for DaimlerChrysler's woes can easily point a finger at its U.S. Chrysler unit. The auto industry is booming. But Chrysler, stuck with a stable of aging models, seems to be running out of gas.

Nowhere is this truer than in the pivotal minivan market, where Chrysler, the segment leader, lost more than five percentage points of market share in a year. Sales of its Dodge Caravan and its Chrysler Voyager and Town & Country minivans are down 3% so far this year--even as demand for newer models such as the Honda Odyssey and Toyota Sienna continues to soar. With minivans responsible for about one-third of Chrysler's bottom line, the company's operating profits fell 7% to $1.3 billion on $18 billion in first-quarter revenues.

Help may be on the way. While Chrysler has a hit in its niche market PT Cruiser, the launch that has executives' and investors' hopes up is the next generation of minivans. The new models will not arrive in showrooms until fall, but production starts next month, and the hype--well, it starts now.

Chrysler executives are bragging that they've raised the bar again. The new minivans are dramatically quieter, with peppier engines and an innovative power-liftgate feature. Execs are hoping for a repeat of 1995, when Chrysler's last generation of minivans trounced rivals.

This time around, however, industry analysts aren't so sure that the beleaguered company has the mega-hit it is hoping for. Those who have driven early prototypes of the 2001 models say the ride is definitely more refined. But the new vans don't look much different. And in a controversial move, Chrysler decided not to copy Honda's popular third-row seat that folds into the floor. In the past, "they've leapfrogged the competition with new minivans," says automotive consultant Wesley R. Brown of Nextrend Inc. "This time they really played catch-up, instead of taking it another step."

Chrysler's engineers opted not to match Honda's seat because it would make four-wheel drive impossible and increase noise. And for the rest, Chrysler may not have had much choice. In today's saturated market, Chrysler would be taking risks with really radical changes, says Merrill Lynch & Co. analyst John A. Casesa. "You've got to keep with what made you great," he says. Others have also wondered out loud about whether the 1998 merger with Daimler distracted the company.RETOOLING. What risks it is not taking in the way of design, it is attempting in production: trying to move at an uncharacteristically fast pace for Detroit. This will be the most aggressive product launch in the company's history, says President James Holden. It has to be. With profits depressed and with many new rivals, executives are under intense pressure to minimize lost production from retooling factories for the new models. By introducing flexible manufacturing methods at its Windsor (Ont.) minivan plant, Chrysler figures it will cut factory downtime by 80% and save about $500 million. By copying the technique on future product launches, the company expects to save $3 billion by 2004. That's no small feat. "A five-week launch for a new vehicle out of a Chrysler facility is extremely ambitious," says auto consultant Michael Robinet, managing director of CSM Forecasting Inc. in Northville, Mich. No doubt, the speed "adds an element of terror to the whole equation," concedes Jamie Jameson, Chrysler's vice-president for sales and marketing.

To help ensure a smooth transition, the company is building prototypes of the new minivans on the same assembly line as the current generation. By working out the production kinks ahead of time, Chrysler expects its Windsor plant to be up to full production--370,000 minivans a year--in just four or five weeks. This would be very good news. Even if the new minivans don't leave the competition in the dust, the quick turnaround should still bring a boost to the company's bottom line.By Joann Muller, with Kathleen Kerwin, in DetroitReturn to top


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