It's a claim that needs a big, fat asterisk after it, but Chrysler's Jim Press is cheerily touting a $1.1 billion dollar gross profit. The number, which wasn't pulled out of a posterior orifice but has yet to be adjusted, is known as the EBIDA, or earnings before interest, depreciation, and amortization. Well, shoot, if you take all of the albatrosses off the necks of the automakers, they're all cranking along with nice gross profit numbers. Too bad that Chrysler's gross profit will turn into a disgusting loss once the accounting is done. It's good news that Chrysler's still making some money, even if a gross profit will turn into a net loss, and Press seems to indicate that Chrysler is aimed at right-sizing itself for future success. Moving vehicles is increasingly becoming a challenge as we suffer a hangover from the boom years of easy credit, and total volume is bound to be off by millions compared to just a few short years ago. Chrysler's product line doesn't strike us as well situated to eventually earn a net profit, saddled as it is with subpar interior materials, powertrains that want for refinement and output (in everything that's not V8- or Hemi-powered, that is), and uninspired design, but if Cerberus hangs in there instead of making everyone's strip and flip fears come true, the automaker may be able to get its act together for its product line after 2010.
Lending further credence to earlier rumors of platform sharing between Chrysler and Nissan, The Wall Street Journal reports that Chrysler is in talks to base its next mid-size sedan on the next-gen Altima platform. Chrysler's "Project D" focuses on finding or designing a suitable replacement for the current Sebring and Dodge Avenger, models which have fallen on their faces with consumers. Other rumors point to Fiat being the chosen platform-supplier. After all is said and done, Chrysler could have a line-up which consists of a small car from Chinese automaker Chery, another small car from Nissan, a mid-size sedan from Nissan and a line of full-size sedans, pickups and SUVs of its own design. While Chrysler's main goal is to become profitable once again, there is certainly some danger in becoming a re-brander of cars from other companies, especially in the hotly-contested mid-size sedan market.
A quick look at July sales figures shows that Chrysler saw a massive 34% drop in its Daily Sales Rate vs. July 2007, but the bottom line could have looked worse. Chrysler's recent announcement that its financing arm would exit the leasing business by July 31 had lead to a rush of customers visiting local Chrysler, Dodge and Jeep dealerships. Some dealers sold four times as many vehicles as usual for the last couple days of the month, giving the stores some relief from an otherwise bleak July. Now dealers are worried that the increased sales volume could lead to a still more bleak August, since many customers pulled forward their purchase decision.
Some dealers are trying to find third-party banks willing to get in on the leasing game, but a tight credit market and massive losses at automaker credit arms have made leasing look very unattractive as lease price begin to rise. Chrysler is hoping a fresh round of incentives will help cushion the blow, as zero percent financing and plenty of cash on the hood is the order of the day for now. Chrysler historically leased about 20% of the vehicles it sold, so if a whole new round of juicier incentives doesn't entice customers to "Shop til you Drive", August may look even worse than July
It's up and down, but nowhere near out for Chrysler, LLC. The Big Three's smallest sibling says that it's ahead of internal estimates and has posted earnings in excess of one billion for the first half of '08. True, the company also posted a $510 million loss in Q1 according to minority shareholder Daimler. And since Chrysler is privately held, it doesn't need to tell anyone whether these earnings put it in the red or black.
But whatever's on the books was good enough to convince lenders to grant Chrysler's financial arm a $24 billion line of credit. Said a Chrysler spokesman, the money will be used to "support our dealers and their retail customers." The pentastar just got out of the leasing business, so the influx of credit will keep the financial arm doing what it needs to do as all those remaining lease vehicles come back with empty tanks and bottomed-out residuals. And believe it or not, those are all good things.
Later this month Chrysler will finally launch the Chrysler Aspen and Dodge Durango hybrids. These are the first non-GM products of the 2-Mode hybrid partnership that also includes GM, Daimler and BMW. Chrysler hopes that the hybrid models can revive its big SUV sales, but if GM's experience with the Tahoe and Yukon Hybrids is any indication, there may be cause for concern. With that in mind, Chrysler has priced its hybrids $8,000 lower than the comparable GM models in that hopes that doing so will kick-start sales. Back in June, AutoblogGreen drove the Chrysler Aspen hybrid from Portland, Maine to Boston, Mass. Head over to ABG to read all about how it fared and how much the hybrid system boosts the truck's mileage. Hint: it did better than expected.
Chrysler's departure from the leasing game certainly isn't going to help dealers move stale product off their lots, so the automaker has announced a new sales program unimaginatively named the "Shop 'Til You Drive Sales Event." What'll it take to get you into a new Chrysler, Dodge or Jeep vehicle?
Well, aside from $2,000 cash back on "select retail purchases," Chrysler is offering an August-only, 72-month, zero-percent APR financing deal on many of its slow-selling models that aims to make monthly payments approximately the same as a 36-month lease.
Additionally, pricing on Dodge, Chrysler and Jeep vehicles has been slashed, with the Ram dropping 40-percent of its MSRP, Aspen hacked by up to 25 percent, Town & Country minivans cut by 24 percent and Grand Cherokees dropping 28 percent.
Chrysler will also try to get lessees back into dealerships by offering special "loyalty incentives" that will be applied to a new retail purchase, along with waiving the $425 lease disposition fee.
Besides the introduction of the Dodge Challenger, there has been very little good news coming out of Chrysler lately. Sales are down 22% for the year due to a lineup that's still heavy on trucks and SUVs, but there may be some help on the way as soon as 2009. Chrysler CEO Bob Nardelli has hinted that a fuel efficient new vehicle(s) could debut next year, and platform sharing with other automakers would be behind the quick turn-around. Nardelli says the Auburn Hills-based automaker has re-prioritized its capital in an effort to quickly get to market the fuel-efficient vehicles that the market demands. Debuting even a single vehicle that's more fuel-efficient than anything else in the Chrysler lineup would likely have a big effect in light of the fact that its brands offer some of the least fuel-efficient lineups in the industry.
Nardelli didn't give any details as to which vehicle could arrive ahead of schedule, but speculation is that the Dodge Hornet is on the short list. The handsome Hornet (if it looks like the concept) will be based on the Nissan Versa small car platform, and was originally slated to arrive in Dodge guise in 2010. Chrysler is also rumored to be working on alliances with Tata, Fiat, and Chery, and each automaker has plenty of small, efficient vehicles at its disposal. None of those automakers has a presence in the U.S., though, so a quick turnaround on a platform that hasn't been properly crash tested doesn't seem likely.
Following in the footsteps of cross-town rival Ford, which did the deed back in June of this year, Chrysler has just announced that it will no longer be paying for the tuitions of white-collar non-union workers. The automaker will continue to pay for classes that its workers are currently enrolled in, but after that, the assistance will be gone. Also, if a worker has already had a specific class approved, Chrysler will still foot the bill. Although the automaker says it hopes to reinstate tuition reimbursement in the future, it'll likely take a major change in consumer's buying habits before that time comes. Detroit-area Universities are expected to take the brunt of the impact on the higher-learning cuts, as the majority of the seats in the post-graduate courses are filled with workers from the Detroit 3.
Motor Trend is reporting that Chrysler is considering a few different options now for its 2012 midsize offerings. The first option is to stick with Project D, which is gobbling up engineering and design resources. Option two is to use either Fiat's premium midsize platform or the Nissan Altima platform, and design and engineer the rest of the vehicle from scratch. Chrysler can also decide to badge-engineer one of the vehicles, which would be a far cry from the original plan to have many vehicles spawned off one platform.
Since Fiat currently doesn't have any infrastructure in the U.S. and Nissan already has ties with Chrysler (Dodge will be building the next Nissan Titan and Nissan will be building the Hornet out of Versa parts), the Japanese automaker makes more sense.
The key to Chrysler LLC remaining as one of the Detroit automakers could turn out to be the rest of the world. Reuters reports that Chrysler has been chatting up both Tata Motors and Fiat as a means of survival. A deal with Tata might see the evergreen Jeep Wrangler being proffered in India by Tata, as well as the possibility of an electric vehicle partnership. The EV deal might be centered around an electron-motivated version of Tata's Ace, and those talks are running concurrently with whatever possible Jeep discussions are underway.
A little further west of Tata, in Italy, Fiat is reportedly considering leasing some of Chrysler's manufacturing capacity. A deal that puts business in Chrysler plants would certainly help rustle up some cash, while it would be mutually beneficial for Fiat as it contemplates a return to the North American market. Nobody is commenting officially, but we're likely to continue to see creative deals abound as everyone tries to keep their heads above water.
