Chrysler to Split Dodge into Truck and Car Groups

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Chrysler Group LLC (Auburn Hills, Michigan) has faced strong adversity this year, beginning with the credit crisis and ending with the automaker being forced into bankruptcy proceedings. However, Chrysler managed to survive both and, despite sales that are down 39% for the first nine months of 2009, is positioning itself to get back on track in the near future. The latest move, announced Monday, is to split the Dodge brand into truck and car groups under separate leadership.

The goal is to allow each Dodge group to operate independently and pursue individual goals without being tied to one another, as they have been in the past. However, with Fiat SpA (OTC:FIATY) (Torino, Italy), Chrysler's new majority owner, attempting to bring Fiat's smaller, more fuel-efficient vehicles to the U.S. to be assembled at Chrysler's plants, where do trucks belong in the Chrysler's future?

Chrysler cannot afford to drop truck manufacturing altogether, as truck sales make up a big portion of the company's bottom line, although not as much as General Motors Corporation (Detroit, Michigan) or Ford Motor Company (NYSE:F) (Dearborn, Michigan). But if Chrysler is making the switch to smaller vehicles in an attempt reintroduce Fiat to the U.S. market and boost sales, can it justify maintaining Dodge truck production with sales unlikely to return to acceptable levels, given the current attitudes of the buying public?

The other key question for Chrysler is what to do with the Jeep brand. Jeep has been a shining star for Chrysler. Even as both Chrysler and Dodge sales plummeted during 2009's horrible sales months, Jeep remained strong. There was even talk about selling the Jeep brand, before Chrysler was forced into bankruptcy proceedings by the federal government, to generate some much-needed cash for the struggling automaker.

The sale never made it past the talking stage, but with Chrysler making an all-out effort to bring Fiat back to the States, is there room for Jeep? Jeep does not exactly produce fuel-efficient or small vehicles and, like the Dodge truck group, could be vulnerable in the coming months if sales do not pick up.

Chrysler missed the bus on the "cash-for-clunkers" program simply by guessing wrong and not having enough small vehicles on lots to take advantage of the program when it was in effect. Chrysler has a major problem because the company is not known for small vehicles. The ones it produces are not in demand among vehicle buyers and have suffered accordingly.

For Chrysler to complete its recovery, it must get Fiat models designed and produced in the U.S. rapidly, reexamine the existing lineup, and make some hard choices on which models the company should keep and which should be eliminated. This certainly will lead to changes, possibly even closures, at some Chrysler plants. Chrysler soon must make some kind of decision on where they will be producing the Fiat models, and then must get suppliers lined up to produce the parts necessary if it is going to introduce them by next year.

Time is running out for the smallest of the "Big Three" American automakers. Chrysler has to make rapid, decisive moves to survive the next 18 months, and needs to decide which models it will trim, where it will assemble the Fiat models, and how it will market both Fiat and itself in the coming months to boost weak sales. In addition, any plant at which it decides to produce the Fiat models will need to be retooled to perform the assembly, and that takes some time and capital investment. Chrysler will need to make these moves by early 2010, at the latest, if they are going to still be making vehicles by 2011.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.