Blind Spot: Catching Up With Chrysler

With the government still waiting to see how much it will get out of its equity in General Motors, The General seems to be attracting more of the media commentary than Chrysler these days. And not without good reason: GM saw the greatest drop in market share last month of any Detroit automaker, its government-hyped Volt is flopping, Opel continues to be an open sore and it can't help but flaunt its cluelessness about youth marketing. But interest in GM's shortcomings seems to be driven by little more than election-year political implications, which Chrysler was able to avoid by borrowing cash and misleadingly claiming to have squared up with the American taxpayer. After all, Chrysler is facing just as many challenges as GM, if not more. And despite having formally closed the bailout chapter of its history, Chrysler's performance still bears on the decision to rescue America's weakest major automaker. Evidence that Chrysler is receiving something of a free pass from the media is not difficult to find, with Sunday's CBS interview with CEO Sergio Marchionne serving as Exhibit A. A fluffy profile of the Fiat/Chrysler boss, the CBS piece is so lacking in journalistic rigor that ends up providing more misinformation than verifiable facts. The "paid back the loans with interest" line makes an appearance, without any qualifications that might have explained the full truth of Chrysler's "payback." Another straight-up whopper: Sergio's assessment that Chrysler can "afford" to screw up on a single car. Chrysler only has one new post-Fiat car on the immediate horizon, the 2013 Dodge Dart… if Chrysler has "screwed up" that car, it will be a PR disaster that the company might not survive. Besides, with Fiat 500s piling up on dealer lots (82 days supply as of 3/1, down from 132 days supply on 2/1) despite $500 rebates or 0% financing, it seems that Fiat/Chrysler has already used up the one "screw up" that Marchionne says it can afford. Speaking of the Dart, Marchionne claims that the crucial compact is "mechanically outstanding" and has "nothing to apologize for"… and yet, it appears that it's already facing some challenges. Earlier this month, Marchionne said he was bumping the Dart's rollout from April 1 to "avoid being jinxed" by April Fool's day (Allpar notes that the April 1 launch was a "delay" from the planned January launch). That excuse is flimsy on face value, but the fact that Mopar will only build 2,000 Darts in May and that full dealer availability won't finalize until June shows that there are probably bigger problems under the surface than mere superstition. And Dodge boss Reid Bigland seems to already be turning down the wick on expectations, saying the delay is "not a concern. Given the size of the segment throughout North America and the enthusiasm for the Dart, we think it's going to go OK." What Bigland leaves out is that, although the segment is large, the competition among compact sedans is fierce. And the Dart is likely not as well-positioned as CBS implies when it claims its "base price just under $16,000 with 40 miles to the gallon." The EPA doesn't have fuel economy numbers for the Dart, but with an efficient 1.4 Turbo engine listed as an option, it seems highly unlikely that a 40 MPG highway version of the Dart will be available at the base price (at least until a 9-speed transmission becomes available next year). Oh, and the government's condition that Fiat build a 40 MPG Chrysler only requires 40 MPG combined unadjusted, a benchmark that is far less than 40 MPG EPA, and barely competitive with compact sedans already on the market. And with only 120,000 or so units of production planned at Belvidere, and exports planned from there to 40 different markets, it seems that Chrysler isn't banking on competitive sales figures (Focus and Cruze have been selling over 20k units per month). But if you dig deeper, you find that the mainstream media's breathless boosterism is sharply contradicted in the online press, where rumors of trouble in Auburn Hills are starting to pile up. Over at Autoextremist, the auto industry insider's outsider is posting emails from sources like "Anonymous in Auburn Hills," which indicate that there are either a few truly bad apples at Chrysler or (as the Autoextremist himself concludes) the Fiat-Chrysler marriage is facing serious issues. "Anonymous" writes All you need to do is work at CTC [Chrysler Technical Center] and you will see just how correct AE [Autoextremist] is on this Fiat issue. In that building resides a morass of poor decisions, poor planning, poor time management, and ass backwards 80′s era engineering think… …They want to build good cars but can't make a decision to save their live. My God, they can't even get their CAD system figured out! I mean who is stupid enough to introduce a new CAD system on a whim?? did they not think you need time to integrate all of the other computer related systems? It is a joke of epic proportions. Another AE reader adds: Arrogant. Irrational. Belligerent. Such a perfect description of Fiat management, [Autoextremist] must be moonlighting within the walls of CTC somewhere… …Fiat practices finger-snap management as its true core philosophy. Cut product development time in half! How? Just cut it in half, easy! What testing should be eliminated? What efficiencies should/will allow this? No answer. Build a new production line but with half the capital funding! How? Easy, just spend half as much! You get the picture. In an industry that so closely controls its PR, this burst of leaks is evidence enough that some serious dissatisfaction is brewing at Fiat/Chrysler. Add the Dart's delay to this, and the emerging picture at Chrysler is not of a company bound for great things. More troubling still is the counterpoint between these worrying signs and the dizzying ambition of Fiat/Chrysler's new product development plans. The Dart is built on a widened version of Fiat's C-EVO platform, but according to Allpar, that platform will be stretched further and converted to rear-drive to accommodate the forthcoming midsized Alfa Giulia and Dodge Avenger replacement. Oh, and the LX platform also has a front/rear-drive replacement under development as well, the E-EVO, which will underpin everything from minivans to an Alfa sports sedan. According to an Allpar source, This new D architecture is a joint project, but it's being developed in Detroit with Fiat engineers who have been flown over to be embedded permanently in the project. … This decision (having a RWD D-segment architecture) was a costly proposition, and they took a good two years of tinkering between finance and marketing before they finally reached the decision to go ahead with this. … E-Evo was discarded [for this purpose] last year, when it became obvious that if you shorten it too much you can't produce an aerodynamic, sexy looking D-segment car, on that huge beast. So, an apparently-dysfunctional, trans-Atlantic team is developing expensive, complex D- and an E-segment platforms that are convertible between front-drive, rear-drive and all-wheel-drive, and will underpin mass-market offerings as well as premium cars. If this sounds oddly familiar, it should: it's like a worst-of mashup of the cross-cultural issues of the DCX days and the engineering overreach of the early LH platform development (which Bob Lutz describes as having been "trapped in the classical 'more is more' planning maze"). And at the root of this mind-boggling complexity is yet another unsolved issue: Fiat/Chrysler's bloated brand portfolio, which demands this ultimate (and expensive) platform flexibility. Meanwhile, the context for all this is even worse, as Fiat faces a crushing downturn in the European market, made worse by the fact that Fiat is dependent on the Mediterranean markets that are being hit the hardest. Fiat lost half a billion dollars last year, its stock is on a 12-month downward spiral, it has frozen European investments, and it is grappling with numerous union issues (including a hauler strike that could cost it 10% market share in Italy). And with essentially no presence in China to offset European contraction, Marchionne's solution is another alliance with yet another struggling automaker, like Mazda or Suzuki. But the "tying two rocks together to see if they float" plan clearly isn't a path forward, and more merging will only wreak further havoc on Fiat/Chrysler's troubled culture. Meanwhile, Fiat is only just starting [sub] its third attempt at a Chinese production JV (building Fiat-branded Darts), and it's moving into Russia just as that market's growth slows. With huge losses likely to come out of Europe, and giant outlays likely on both Chinese and Russian expansion as well as investments in complex, multi-purpose platforms, Fiat-Chrysler has a seriously tough row to hoe over the next year or so. Successes will have to come from its stronghold in Brazil, which is seeing disappointing sales numbers so far this year, or from the US. With only the Dart coming down the pike, one hopes that its delays yielded serious results and that it makes an unequivocal case for Chrysler's Fiat-led future. Otherwise, we could easily find ourselves here a year from now, wondering once again if Fiat/Chrysler is going to make it through another 12 months. from The Truth About Cars http://www.thetruthaboutcars.com

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