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Chrysler Puts Some Muscle On The Street


When Chrysler launched a major new family sedan program, codenamed LH, in 1992, the joke in Detroit was that it stood for "Last Hope." The auto maker was in deep financial trouble and desperately needed a success. It worked, for about four years: The stylish Dodge Intrepid, Chrysler Concorde, and Eagle Vision gave the company a boost in the mid '90s. But, plagued by quality problems and stiff competition, Chrysler gradually saw its car share slip back, from nearly 10% in 1996 to 6% today. Now, Chrysler is taking another shot at car glory as it rolls out its newest sedan: the boldly styled, muscular Chrysler 300.

The stakes couldn't be higher. In the past three years, Detroit's No. 3 auto maker has racked up operating losses of more than $4.5 billion. CEO Dieter Zetsche has vowed that Chrysler will break even this year and is counting on its cars to help it do so. But his grand plan to move the Chrysler brand upscale and free it from the industry's brutal price wars got off to a stumbling start last year. The new Pacifica minivan was panned as too expensive, underpowered, and poorly advertised. Chrysler's swoopy Crossfire coupe fared little better. Rising gas prices are putting even more pressure on the company's core truck lineup, which faces a glut of competition. And with parent DaimlerChrysler (DCX) beset by quality problems at its flagship Mercedes-Benz (DCX) division and planning to dump its 34% stake in Mitsubishi Motors and 10.5% stake in Hyundai Motor, the pressure is on to finally turn things around in Auburn Hills.

The good news is this time Chrysler appears to have the right cars to gain some traction. The new 300 sedan and Dodge Magnum sport wagon have been a hit with critics and dealers. Starting with their massive egg-crate chrome grilles, they made an instant impression. "This mobster in a pinstripe may just save the franchise," proclaims the headline on Car and Driver's review of the high-end 300C. Hip hop artists have adopted the head-turning 300C as their new favorite ride. The car even wins raves from Ford loyalists at BlueOvalNews.com, an unauthorized Web site for Ford devotees, where 46% voted the 300C "excellent." Says Wes Brown of auto consultant Iceology: "It makes the majority of vehicles on the road look like blobs."

NICE PRICE

Chrysler has also avoided pricing itself out of the market. The 300 sedan, which went on sale in April, starts at $25,000. The Dodge Magnum, a sports wagon built on the same platform, hits showrooms in June and starts at $22,500. That has helped the new models get off to a fast start. The company already has sold more than 10,000 of the 300s and has orders for 55,000 more. Chrysler execs won't divulge volume goals for the two cars, but auto forecasters expect the company to sell 155,000 to 200,000 in the first full year of sales. That's about half what the top-selling Toyota Camry sells, but better than the 130,000 LH cars Chrysler sold last year. Chrysler execs hope the strong reception gives credibility to their vow to sell leading vehicles in key high-volume segments. Says Zetsche: "This is a bold target, and the 300C makes people [think] this might be realistic."

No one is expecting the 300 to become a once-a-decade hit on the scale of Chrysler's first minivan in the '80s or the Ford Mustang in the '60s. But with few other new Chrysler cars coming out in 2004 -- most of the company's new-product blitz is in pickups, SUVs, and minivans -- this is clearly Chrysler's most important introduction in years. If all goes well, Chrysler will set the stage for an overhauled Neon small car scheduled to hit showrooms in the fall of 2005, followed by a replacement for the midsize Dodge Stratus a year later. "We are known as a truck company, with not much reputation for cars," says Zetsche. "Changing that is very important."

It won't be a slam dunk. The carmaker must ensure that the models don't lose their appeal after the initial flurry of interest dies down. Dodge's decision to offer only a wagon version of the Magnum may turn off customers looking for a family sedan, who will now find nothing larger in the Dodge lineup than the Stratus. Dodge won't confirm widespread expectations that it will introduce a Magnum sedan next summer, dubbed the Charger.

Chrysler also faces a challenge in persuading Americans of the advantages of rear-wheel drive. For drivers worried about how those vehicles handle on icy roads, Chrysler will provide traction control and electronic-stability control on high-end versions and as options on others. But Chrysler isn't the only U.S. auto maker that's making a big push with new cars. The 300 and Magnum will face off against Ford's latest family cars this fall when the Ford Five Hundred and Mercury Montego sedans and the Freestyle wagon arrive.

At least Chrysler seems to be learning from its mistakes. Consumers were turned off by the sappy Pacifica ads featuring singer Celine Dion. The 300 is clearly being sold as a performance alternative to dull family cars. And no one would call the 300C underpowered. Equipped with a 340-horsepower Hemi V-8, the sedan can smoke most other autos in suburbia. It is gaining street cred, too. Rap artists 50 Cent and G Unit included a 300C in a recent music video. Says Iceology's Brown: "This could be Chrysler's Escalade."

Of course, all that horsepower might be a liability if gas prices stay up in the stratosphere. Here, too, though, Chrysler may have an answer: The biggest engine in the 300 and the Magnum is a more fuel-efficient version of Chrysler's popular Hemi V-8. It comes equipped with displacement on demand, which cuts off half of the cylinders when extra power isn't needed. That can improve fuel economy as much as 20%, resulting in combined city and highway mileage for both the 300 and the Magnum of 20.6 mpg.

A muscle car that doesn't gulp down gas? Chrysler might have a winner at last.

By Kathleen Kerwin in Detroit


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