Chrysler has full access to all Fiat designs and technologies. Around 270,000 cars will be made by Chrysler for Fiat to sell under its various brands. Fiat is giving Chrysler responsibility for all its large vehicles “over C size.” The two companies together cover every market segment. (The Hemi is missing from the chart because Fiat will not use it; they already have a V8 family for Ferrari and Maserati.)
Jan. 2012 updates: Fiat C635 is used on Dart. Fiat 1.4 turbo on Dart. Chrysler WGE has MultiAir on 2.4 only. Two-mode transmission only on test/fleet trucks. Pentastar may not get MultiAir.
Chrysler Engineering was expanded dramatically, with contract workers doubled (rumor has it Daimler is one contractor), a 7% increase in direct employees, and a doubling of purchased engineering services, all in 2010; since the Plan announcement, Chrysler hired a thousand more engineers. Chrysler is the combined companies’ center for hybrid and large displacement engines. Fiat, which partners with Cummins, is the center for diesels.
Fiat technologies, including smaller turbo engines, MultiAir, start/stop systems, and direct injection will be added rapidly. The four-cylinder World Engines will gain MultiAir and direct injection [yielding TigerShark with over 200 horsepower], as will the Pentastar V6 [the engine to be used by Alfa has both]. [2012 update: still awaiting direct injection; Pentastar retains dual cam phasing.]
Multi-Air provides shot-by-shot control of air, providing a fast response with continuously variable valve lift. It is an add-on package to base engines, for low impact to existing production lines.
Turbocharged versions of the Pentastar V6 will be launched — single and twin turbos [timetable unclear]. A new 6.4 liter Hemi will join the 5.7 liter Hemi (450 hp on the chart, 470 actual when launched in December 2010). Chrysler predicted a drop in V6 engines with four-cylinder and diesel share rising. Cummins diesels are staying and the V6 and V8 lighter-duty diesels are still planned to join the Cummins B engine [this might not happen].
Fiat’s dual-clutch transmission will be used by Chrysler. Start-stop (engine shutoff at idle) will be applied to the Jeep Wrangler diesel starting Q4 2010 (the diesel is sold in many parts of the world, but is not planned for the United States) and will be moved to other engines afterwards. [This appears to have been delayed]
Electric vehicles will be centered at Chrysler, with a hybrid minivan in calendar-year 2011 [test fleet], and full electric in 2012 (“light commercial” vehicle). The “unmarketable” Dodge Circuit is dead and other plans have been scaled back; Envi was folded into the standard vehicle development process.
The four speed automatic will be phased out [as of the 2011-2012 model years it was used only in bare-bones J-cars], the six-speed will be improved, and the Fiat C635 dual clutch will be phased in, starting on the midsized cars at the end of 2010 [it has been delayed into model year 2013], and cutting fuel use by 10%. New ZF axles are made in Marysville starting in 2010. Eight-speed automatics are used in LX cars, and more will be used when Chrysler starts producing them internally. Nine speed ZF automatics are coming for front wheel drive.
Product planning starts with identifying market trends and opportunities, aligning them with the four brands, determined optimal use for each platform, ensured they could stay within the capital plan, and providing market support at all steps of the product lifecycle. Vehicles based on Fiats will be engineered by Chrysler people to meet Chrysler needs. Some vehicles will be built by Fiat.
Product spending is to average $4.5 billion per year with $23 billion overall (Capex of $15 billion).
56% of sales made in 2014 are projected to be based on Fiat’s platforms. The engine mix is expected to be 14% diesel (up from 9% now), 38% four-cylinder, 37% six-cylinder, and 11% 8-cylinder (down from 18%). The large and full size market is expected to fall from 55% to 42% by 2014.
Compass and Patriot have new exteriors for 2010 [confirmed], while Wrangler will “retain its rightful spot as the icon for this legendary brand.” Exterior styling will be modified and a dramatic new interior will be put in; Pentastar V6 arrives in model-year 2012 [it did]. 2011 is Jeep’s 70th anniversary and special editions will be made for each model. There will be new derivatives and special models based on the Wrangler.
In 2013 Patriot, Compass, and Liberty will be replaced by vehicles “developed from Fiat platforms” which we are promised will still have the Jeep DNA — small SUV, C-size SUV, Liberty replacement. [Allpar analysts are not optimistic about these vehicles living up to past Jeep off-road standards.]
Jeep is aiming to double its global sales from 2008 numbers, and leader Mike Manley wants to take it “back to its rightful place of being the global SUV brand.” Jeep was the largest SUV brand in the world through 1990 and in 2009 was #6. Their largest group of owners is “Dreamers,” time constrained by family and work, but wanting authentic gear for the time they’ll be able to “do more and dream less.” The new campaign is “i live. i ride. i am. Jeep.” [This was dropped in exchange for "We are what we make.] The plan is to re-establish the brand with a new look, feel, and attitude; renew the customer-brand connection with lifestyle engagement; and deliver a clear call to sales action.
The shift from truck to car based SUVs is growing. All Jeeps must have certain aspects (grille, short overhang, trapezoid wheel-arches, functional interior, open-air concepts, visibility, durable materails, handling in bad weather, advanced four wheel drive, and towing capacity.) Jeep Wrangler must also have excellent off-road characteristics but it appears that off-roadworthiness will not be demanded of all Jeeps.
PT Cruiser is dropped after 2010 [it was dropped in mid-2010]. Sebring and Town & Country are almost completely redone in 2010 with significant upgrades and exterior changes, with new powertrains, just like Avenger and Caravan. 300C will have substantial powertrain and interior upgrades with a new interior. Sebring will have better handling, ride, and driving dynamics [Sebring was renamed to 200].
Coming in Q1 2010: 300 Sport edition [300S], Town & Country Fashion Edition [this was not done], PT Cruiser Final Edition [done], Sebring Ocean Edition [not done].
Chrysler is to get a new compact in 2012 (Fiat based), a new D-segment sedan and CUV in 2013 (based on widened Fiat dimensions), and a new B-car in 2013 or earlier, imported directly from Fiat. 2014 will see a brand new Town & Country. [Chrysler’s new compact is 100C. B-car might have been cancelled.]
CEO Olivier Francois. “Why would a Frenchman who works for an Italian company work for an American company in Michigan?” (His question.) Sometimes distance gives perspective. “The pathway is passion. ... to make hearts race with every glance. It is an American sensation.” (He went on for a while like this.) “A visit to the Chrysler museum is such an experience.”
Lancia had a 4% market in Italy with six nameplates, in 2009 it stood at 4.8% with four nameplates. Lancia focused on product, marketing, and network. In the US, Chrysler has five nameplates with total 1.8% share, and is looking for 3.4% share with more nameplates by 2014. “It’s about 84 years of history.” New ads: “It’s time to reignite the American dream. Let’s make cars people want to make out it. Cars people want to have their photos taken in. It’s time, once again, for America to arrive in style.” [Lancia details]
Of note, Lancia, in late 2010, redesigned their grille to look much more like the Chrysler grille, which should help in getting the two sets of cars to mesh in foreign lands. It appears to still be narrower. Spy shots of the Lancia “Y” car reveals that it has taken on a PT Cruiser-like shape from some angles. Lancia will take over Chrysler cars in Europe, including the Voyager.
Chrysler’s ambition is to be distinctive at all these levels. The new attributes must be established. Refined, balanced performance, provocative styling, intuitive innovation, craftsmanship, pride/value, efficiency — responsibility as well as mileage. We need to expand the portfolio, improve quality, create exciting designs.
Chrysler’s ambition is being different, remembered, and aspirational, not mimicking another automaker; and having an integrated image across the board, products, merchandising, showrooms, auto shows, advertising, catalogs, web sites. Everything must reflect aspiration. Brochures should be aspirational and elegant. 40 million visits so far to chrysler.com — “Paradise or Hell for our brand image?” — no brand image on the existing site; a new site will set a new tone for the brand. New showrooms, car show displays, product, advertising are on their way. New catalogs are done. “We have done this in one month but the bigger work is to be done.”
Mainstream shows and events are expensive but have low visibility. It is time to find new methods. It is time to present new vehicles like models on a runway, not a highway. There's also a new logo. Brand equity must be increased. Chrysler will stand one notch above everyone else. Chrysler will however also have B, C, and D segment cars as well as the CUV.
The new TV ads say, “My name is Ram” and repeats “My tank is full” numerous times. The presentation called up the Dodge Brothers as part of the “proud bloodline of Ram.” They showed the “big rig” 1993 models. The Ram brand will indeed separate from Dodge beyond “Dodge Ram.” [Done though officially Ram is part of Dodge.]
The company expects sales to go to 415,000 units in 2014 from 280,000 in 2010, with a possible expansion to heavy trucks (18-wheelers) and the use of both small and large Fiat commercial vans in 2012 [Doblo and Ducato both on track for production as 2013 models]. A unibody midsized light-duty truck is under consideration for 2011 launch, replacing the Dakota (possibly with the same name). The heavy duty pickup, light duty pickup, and chassis cab are all scheduled for a 2012 refresh.
The large commercial van will be based on a Fiat design but made by Ram with their engineering (based on the chart legend). Each truck series will get new powertrain, technology, and capability upgrades in 2012 along with the possibility of a light duty diesel for Ram 1500. The unibody pickup was designed to be a true game-changer; “stay tuned.” [The main change for 2012 may be the Pentastar V6 with eight-speed automatic.]
The plan is for a complete repackaging of all Dodge cars, with new options mixes, by the end of the fourth quarter of 2009 [done]. A complete overhaul of branding, marketing, positioning, and point of sale is to be completed by the end second quarter of 2010 [not quite there]. The car and truck brands are being separated to “amplify the youthfulness of the Dodge brand.”
Trim lines will be changed to match lifestyles, with groupings such as sweet/simple; fun/practical; uptown/luxury; thrill-seeker; cool/extrovert; and SRT, ultimate-performance. SRT will continue as the “ultimate performance sport” level. [Done]
Coming up in Q4 2010 will be revised Avenger, Journey, and Caravan [all in production in December]. All get a new interior and [V6] engine, refreshed exterior, and repackaging; lower noise and harshness levels, higher performance and gas mileage. Caravan will get best in class ride and handling, comfort, features, performance, and fuel economy. Charger will be all new and dramatically styled, with a class-leading interior, and best-in-class performance and gas mileage. [This all appears to be the case]
Current Dodge cars will undergo a "fix the fundamentals" program, retuning the driving experiencing and adding technology for more efficiency and performance. [Suspensions were retuned to great effect.] Dodge will get a C-segment sedan [Dart], finally replacing the Neon; a B-segment hatchback, a new mid-sized sedan, and a seven-passenger crossover by 2015. The B-car would be from Fiat; the C (Neon-sized) and D (Avenger-sized) will be Fiats; the crossover will be a Chrysler design.
Caliber ends in 2012, and a new-platform compact sedan takes over in 2012; Avenger stops in 2013, replaced by a same-name new-paltform mid-size [rumor now has a midsize Dodge dropped]; a new small hatchback from Fiat starts in 2013; Journey gets redesigned in 2010 and continues through 2014; Nitro goes away; Viper stops after another 500 units, then might restart in 2012 [confirmed for 2013 with a V10]. Challenger gets refreshed for 2011 and continues at least through 2014. Grand Caravan gets redesigned in 2014, refreshed in 2010. Full sized CUV starts 2010 [2012 Durango].
The company plans to make Dodge more refined, but retain its appeal to younger people.
Three Fiat branded products will be sold, all Fiat 500 models - Abarth, Cabrio, and 500. This is in line with rumor and speculation. Around 70,000 Alfas are expected to be sold in the US per year, coming from Chrysler factories and benefitting both companies. Marchionne said if he felt Alfa was hurting Chrysler, he would not let them sell in the US. Fiat 500 will start selling in January 2011.
Dealer network productivity is to be increased, with redefined dealer standards [in progress; new showroom and sign standards published]. Chrysler went from 21% of dealers to 12% in the US, losing 2,831 dealers in the last 19 years. Genesis is continuing, full implementation due for 2011. Chrysler has around 440 sales per dealer in metro areas; the goal is for them to go up over 700. Tight credit is a serious problem. New dealer financing will replace Chrysler Financial by December [done].
Only 36% of dealers have a return on sales greater than 1.5%; they expect this to increase to 60% by 2014 [return has already shot up]. Dealer support is being expanded to include financial skills. Planned growth of commercial vehicle sales will require overcoming strong competition and changing service hours to meet business owners’ needs. In general, dealers need to overcome problems of high land cost, and customer convenience (old or suboptimal locations).
A green facility initiative is planned to both increase environmental friendliness, and to cut costs.
A North American version of the Fiat 500 is expected to increase foot traffic and new customers. It will mainly be sold in key metro areas with specific interior showroom branded salons, and a high degree of customization through accessories. The 500 will have dedicated sales and service staff.
Since June 10, dealers have committed over $250 million in capital investment, with 20 new buildings, 200 major renovations.
Fiat has a set of dealership standards and methods which was rolled out to Chrysler dealerships. 61 training sessions were held in 55 days for over 5,200 people already. The standards cover customer cdare, sales, post-sales, and management, and are being phased in through 2012, with continuous improvement required. While Chrysler had implemented similar moves in 1997, they were dropped after the Daimler acquisition. A team of 150 people is committed to increasing dealership performance, including in service. Over $120 million is being invested in 2010 — $500 million over five years.
CEO Pietro Gorlier: Mopar continues to look into wholesale retail, independent repair shops, and collision parts with a price matching program. Mopar has been adding techs and service advisors, and developing an “express lane” system for immediate service on their car, as well as adding a market-driven smart pricing program. Accessories are now being designed during vehicle development, engineered to ease installation, with availability at vehicle launch.
The goal is for 80% of dealers to have weekend and extended hours for service. A new wiTech (wireless) diagnostic system is being added, with new wiring diagram applications (the first dynamic wiring information system, a design driven by technicians and using vehicle-specific on-demand information). The parts network reorganization should save 13% of trips. A wave of actions started in June 2009 to improve parts distribution logistics.
Plan: target industry benchmarks, enforce dealer standards; by 2012, become best-practice so customers view the service organization as an asset [rather than a liability].
Quality of customer care drivers: brand-customer interface (product, customer care center); dealer-customer interface (sales, service, parts/accessory experiences). Rigorous key performance indicator process needed to drive success, excellence can only be achieved when everything exceeds customer expectations. There must be proactive customer support and a closed-loop approach with follow through. (This echoes the old Five Star program as it was originally designed.)
A U.S. toll free number will be created for each brand, Chrysler, Dodge, Jeep, and Ram, to customize the owner experience - 800 CHRYSLER, 877-I-AM_Jeep, 800-4aDodge, and 877-RAM-5720.
(These changes are already being implemented and numerous before/after photos were shown.) Safety will be improved with metrics considering “near misses” as well as serious injuries. “World Class Manufacturing” is designed to cut costs and increase quality [this is generally working; quality has shot up in plants for which we have information]. Workstations will be redesigned to improve ergonomics and prevent injuries, back problems, and other issues. More just-in-time delivery systems will be used, with material delivered to the point of use and less operator walk time.
Machines are being cleaned and restored to their original state, allowing for easy inspections of their status (e.g. seeing leaks), and work conditions, including lighting and flooring, are being improved. Chrysler once again involves workers in planning.
Supply chain optimization is being discussed by Dan Knott, head of purchasing, but the same words have been used before. Chrysler is slated to buy $28 billion of components in 2010, Fiat $40 billion. The number of unique suppliers is now 48%; by 2014 that will be 35% or less (estimated). A new structure is being set up which reflects Fiat’s, replacing functional areas [e.g. Chassis] with vendor-oriented areas [e.g. Metallic]. There will be weekly synergy meetings, aligned teams, and shared strategies for commodities and major suppliers. Parts will be commoditized where possible. There will be regular top-level supplier meetings, an expanded supplier advisory council, regular communication, accelerated processes for supplier claims, and a new group to optimize inventory.
Supplier quality is now part of the Purchasing organization, with 80 new experts (a 45% increase) by 2010, increased engagement with suppliers, and better validation of supplier products and processes.
Supplier costs savings are being returned. The old Chrysler plan (SCORE) of splitting cost savings from supplier ideas is being brought back, with Chrysler and supplier each getting 50% of the savings. This resulted in billions of dollars in savings when implemented in the 1990s.
Future projects will use more resources up front, fewer at the end, and will bring vehicles to market within 16 months. A new benchmarking process has 320 functional measurements and benchmarks the best competition — similar to the pre-Daimler process but more detailed. Results will be confirmed by a new quality group representing the customer rather by the involved engineers. Time to market will be cut as the S0 build phase is replaaced by virtual tools. More parallel activities will cut time, (again, shades of Chrysler 1990s). A disciplined design freeze should reduce time to market, as will early supplier involvement — a hallmark of Chrysler’s own renaissance of the 1990s.
Sharing. Increased sharing will cut cost and development time. Primary sharing will be in modules/systems, followed by powertrain (with V6 engines from Chrysler and four-cylinders from Fiat), and then by components; Fiat brands will use Chrysler V6 engines and possibly other parts. 20-30% of vehicle cost will be in model/brand differentiated components.
Chrysler’s new Powernet electrical architecture will be used for E-class vehicles, Fiat’s for C/D vehicles.
CATIA. Chrysler will start using a proprietary automated computer technology for structure optimization (it is currently using CATIA). Alternate materials such as high-strength steel, aluminum, and magnesium will be used for weight reduction.
Doug Betts said that Chrysler was not effectively organized, and that new launches had below average quality. Action was taken starting in late 2007. Changing corporate monthly meetings from boardroom to hands-on style started in March 2008 to show leaders the issues. Merging all quality functions into one organization was completed early this year. Internal metrics and targets were changed to more accurate figures, as of January 2008; cross-functional warranty reduction teams were set up by January 2008. Reliability fell in model-year 2007 but has recovered. JD Power SSI/CSI based surveys has been replaced with the Customer Promoter Survey which is faster and has more clarity (as of January 2009).
Cross functional teams were deployed for this vehicle in January 2008. Reliability shot up shortly afterwards.
Quality initiatives include redesigning service parts to fix original issues, thereby reducing repeat repairs; making parts more readily available, having more tools at the dealerships, and having technqiues to fix every problem, with new metrics; and improved human interactions at the dealer, with care standards, a score system, and better customer feedback.
Vehicle quality has been addressed with more rigorous testing starting with the 2009 Ram which has garnered better results from Consumer Reports; through better benchmarking and higher internal standards; and through investigation of the determinors of perceived quality. Quality design simulations are being done before physical models, with the ability to simulate real vehicles and lighting, allowing for the identification of perception issues (such as exposed hardware in the wheel-wells) before a prototype is built.
Expectations are for units sold to more than double from 1.3 million in 2009 to 2.8 million in 2014. All brands are seen as growing, particularly Jeep and Chrysler (which are projected to double their sales). US market share is expected to go from less than 9% in 2009 to over 13% in 2014. Dodge is focused on repositioning rather than growth. Retail expense per unit will double to support the repositioning of the brands.
All loans are to be paid by the end of 2014. Product spending is to average $4.5 billion per year with $23 billion overall (Capex of $15 billion). There would still be $2 billion of DoE debt at the end of 2014. $2.3 billion in loans have not been drawn. Shipments are to be adjusted by 600,000 vehicles per year partly by restocking dealers and partly by resuming fleet sales.
The cash low point is in 2011 due to product spending and lower U.S. volumes. An IPO will be decided by the Board and Members but is unlikely to occur before 2011.
International sales are to grow and dependence on U.S. fleet sales are to be cut from 15% to 12% even as commercial truck sales rise. Reliance on large vehicles is to fall with micro and small vehicles being added.
Most international outlets are joined with Daimler but will be integrated into Fiat in Latin America and Europe to provide full support. In Asia, Chrysler has been more self sufficient and will provide its distribution structure to Fiat. [The transition from Daimler to Fiat has mainly occured.]
Jeep will expand internationally with five global models. There will be B and C segment hatchbacks, minivans, and CUVs for Dodge and Chrysler, which will dovetail with Jeep vehicles. The goal is for 500,000 sales/year, up from 144,000. All of the Chrysler global product portfolio will be refreshed by 2012, with half derived from Fiat platforms by 2014.
Lancia and Chrysler have similar problems, including incomplete portfolios, limited distribution, low brand recognition. The alliance can selectively used either the Lancia or Chrysler brand in any given market for a better focus — with a full market portfolio in each market. [In reality nearly all European markets are sticking with Lancia, which has less name recognition but a more positive reputation where people do know it. The United Kingdom may remain Chrysler.]
The Dodge and Ram brands will continue in appropriate markets as regional or niche brands. Chrysler models will be offered to Fiat for distribution under Fiat brands to give Chrysler access to more volume. Chrysler Australia will move to Iveco.
2007 was Dodge’s best international year ever with 240,000 units and 2008 was doing well before the market collapse. 30% of volume for 2008 was Dodge, 29% Chrysler, 42% Jeep. Profitability has been an issue with Dodge and Chrysler has had profits squeezed by competition. Latin America is the largest share, then Europe, then Asia. “Three brands, but little volume.” Market share is little over 1%. Fiat has a strong distribution structure with 3 million vehicles in Latin America vs Chrysler's 45,000 and they have a full infrastructure. In Europe, Fiat has over 10 times the volume. In Asia, the businesses are similarly sized but Fiat has more partners.
Chrysler does not compete in the A, B, or C segments where half of international trade is. It does compete well as a niche manufacturer but there are problems going forward even with this model.
Reid Bigland, CEO of Chrysler Canada, said Chrysler has three plants in Canada (Windsor, Brampton, Etobicoke), three regional sales offices, three parts facilities, and one headquarters. Around 13% of Chrysler sales are in Canada, and around 30% of Chrysler vehicles come from Canada. (Allpar note: Chrysler has a much higher market share than in the US.) Chrysler Canada’s market share was around 13% for numerous years (17% in 1999 and 2000). In 2007 Chrysler gained more market share than any competitors, and had two of the top five best sellers in the country.
Canadian sales are dominated by small and compact vehicles (39%), pickups (17%), and people movers (14%). Midsized sedans are just 11%. 83% of vehicles sold in Canada have four cylinders.
Chrysler still has a 70% market share in Canadian minivans, got a 2009 J.D. Power most dependable award (three-year reliability), has best gas mileage; best selling minivan in Canada throughout its life. Journey remains the best selling crossover (out of 39 vehicles). It’s the top pick for IIHS.
In Canada, Chrysler has 440 dealers, all selling vehicles from each brand; 88% are profitable, with a 25% return on investment (figures are September 2009 YTD.) Five new dealerships were announced or opened in the past 30 days and existing dealers can invest in their facilities. Canada has gone from around 490 dealers in 2004 to 440 in 2009. The goal is to return to 13.8% market share.
Joseph Chamasrour, CEO of Chrysler Mexico: 150 dealers, all selling all Chrysler brands... and Mitsubishi, since Chrysler is the distributor in Mexico for Mitsubishi. Customers are satisfied with the brands according to J.D. Power (except Chrysler brand which is #14 of 17 manufacturers). Mitsu satisfaction is #5, Jeep #6, Dodge #7. Most dealers are profitable. Over 95% of the vehicles sold are Jeep and Dodge (excluding Mitsu.) [Chrysler sells rebadged Hyundais as well.]
Chrysler has retained ground in the Mexican market while Volkswagen, Nissan, Ford, and GM have all fallen. Free trade agreements opened Mexico to numerous new brands - there are now 333 nameplates in Mexico, up from 240, and 52 brands, up from 41 in 2003. Chrysler market share has swung up and down from 9% to 11.8% through 2009.
The Mexican market is 55% pasenger cars, 15% SUVs, 20% trucks, 10% minivans/sport tourers. Chrysler was #4 in 2006, #1 in 2007, #2 in 2008, and so far is #2 in 2009 despite a three month factory shutdown. Dodge has had five years of growth in truck market share with a #1 award for Dakota by J.D. Power in 2009; and current share of 27.5%, #2 in the market (up from 12% in 2004). Passenger cars are a key challenge with share dropping from 8% in 2006 to 5% YTD in 2009 - a steady decline.
Journey is #1 in its segment. Chrysler has a 33.6% share of the minivan/sport tourer segment this year up from 28.4% last year. Journey has double the sales of its nearest competitor.
You can see and hear the full
presentation at the Chrysler web site.
Also see Fiat Cars • Chrysler-Fiat Alliance • upcoming Chrysler vehicles • 2012 • 2013
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