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Chrysler comes back strong in May

by Bill Cawthon on

Last May, Chrysler LLC was in bankruptcy; factories were shut down and there was still question as to whether the deal with Fiat could be done. The country was in the grip of a near depression and jobs were being shed by the thousands per day. When the numbers were tallied in early June, Chrysler sales had fallen off a cliff, down 49.9% to 79,010 cars and trucks. Even with the Fiat deal, the betting was against Chrysler lasting more than a few years. There was no new product in the pipeline; the development assurances from Robert Nardelli, Jim Press and others were shown to be no more real than the man behind the curtain in the Wizard of Oz. There weren’t enough human resources left on Chrysler’s payroll to develop anything more than a reskin and, according to Nardelli’s own statements, every improvement in materials was balanced by cutting corners somewhere else.

Three years ago, in mid-May 2007, Cerberus Capital Management announced it would buy Chrysler from then DaimlerChrysler. The deal was completed in August 2007. In the nearly two years of Cerberus’ mismanagement, Chrysler sales declined a total of 60.4 percent, falling from 199,393 in May 2007 to the abysmal figure recorded a year ago. Taken individually, May 2008 and May 2009 marked the largest sales changes for Chrysler in the 21st Century. From Chrysler’s peak sales year in the new century, 2004, the fall was even worse, 64.1 percent. It’s hard to reflect fondly upon the years Daimler bungled the “merger of equals” but at least sales were far better.

This short history lesson helps put last month’s performance in perspective. The 32.9% sales increase is the biggest positive move in Chrysler sales in ten years. Chrysler Group is now ahead of the first five months of 2009 and if you play the GM game of emphasizing “core” models that will remain in production, Chrysler sales would be up 37.5 percent.

While it may not seem like much, the fact the Ram moved into the plus column for the month of May is significant. For the second month in a row, the growth in sales of full-size pickups has been faster than the growth of the rest of the light vehicle market. Word is that contractors, tradesmen and small fleet operators are beginning to replace vehicles again and pickups are still among the most profitable vehicles Detroit makes.

Moderate fuel prices also play well for crossovers and minivans. Sales of the Town & Country climbed 68% while the Caravan enjoyed a 66% gain Sales of the Honda Odyssey were down 20% but sales of the Toyota Sienna shot up 50%. Even if the Odyssey had matched its year-ago numbers, it still wouldn’t have beaten the Town & Country. While minivans aren’t the factor they were in the past, it’s worth noting that sales of all the leading models except the Kia Sedona are ahead of where they were in the first five months of 2009.

While most may have gone to rental fleets, it’s good to see Chrysler and Dodge passenger cars hitting some good numbers. There shouldn’t be any embarrassment about rental sales, especially now. Even GM, which boosted its incentives to gain more retail sales and made a big deal about trimming rental sales, got a third of its total May business from fleets. Retail sales were up just six percent. Meanwhile, Dodge, with car sales skyrocketing 121 percent, saw a brand sales gain of 73%, the highest of any automotive brand in May.

Just as important as good numbers is the growing acceptance in the financial and analyst community that CEO Sergio Marchionne might just have the skill and resources, human and financial, to pull off the turnaround that many dismissed a year ago. Marchionne has kept his cards close to his black sweater but the ones he has shown have real dates and events on them. He is hiring the people needed to implement his vision and seems to be doing exactly what Daimler-Benz should have done years ago and Cerberus could never understand needing to do.

Are there clouds on the horizon? Sure! But they are not for Chrysler alone. Credit is still difficult to get and Chrysler is the Detroit automaker that has been most dependent on credit-challenged customers. Of more concern is the pool of available consumers capable of buying a new car. In a farewell speech, former UAW president Ron Gettlefinger reminded the audience that the thousands of union workers laid off or bought out made enough money to buy the cars they built but their replacements, being brought in at half the standard UAW wage, won’t. Perhaps they will be able to buy a new car, but it won’t be an American-built car; it will be Japanese or Korean or built in Mexico. The last recovery, from the dot-com bust, was a jobless recovery with little income growth for workers. What signs of recovery from the near-depression we’ve been in point to more of the same and possibly even income contraction as tens of thousands of Americans settle for lower-paying employment. The new reality may be that 13-14 million sales is a good year.

For now, though, it’s enough to revel in some solidly good numbers from Chrysler and to hope for more in the months to come.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for just-auto.com, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.

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