[billfrombuckhead]

How much more expensive is having Chrysler and Dodge? I can see Pontiac, Saturn, Oldsmobile redundancy expenses hurting GM with separate dealership networks selling essentially the same cars. I don't think Ford dropping Mercury did them much good in terms of total sales and certainly crippled that Lincoln dealer network. Not having Mercury might have got the Ford division a few more sales but I bet they lost overall. The Buick/GMC duals seem to be working but could still stand some improvements in product and marketing.

Since Dodge and Chrysler are under the same roof 99% of the time what's the big deal with having both? Why can't it go on sort of like it is? Keep Dodge as base/fleet models with an available macho sporty upgrade aimed at thirtysomethings and have Chrysler as near luxury aimed at fortysomethings. I think all the upcoming minivans and crossovers should all come in 2 flavors for North America. Why can't we have a 2 wheel drive family oriented Durango and all wheel drive luxury oriented Wagoneer? I think Chrysler's brands can be blessing if managed right instead of a liability. Let Chrysler division pretty much get out of the fleet business and let Dodge have most of it to protect Chrysler division resale value. This still leaves plenty of room for Fiat to compete with MINI and other B economy class cars and Alfa to compete with the Germans and Infiniti. Why can't manufacturer divisions be used as powerful trim levels. Why does Chrysler have to copy what the rest of the industry thinks is right and especially what Wall Street thinks is right whenever those banksters are usually wrong anyway? Export version are going to be tweaked anyway into Lancias or whatever for each market.

That's my idea about "focus" and hopefully some people are arguing for this in Auburn Hills after the merger. Gilles maybe?

 

[MoparNorm]

Actually, unless Marchionne plans to build Alfa's and Lancia's on Chrysler platforms, in the US, it's more cost effective to have both Dodge and Chrysler and Jeep and Dodge sharing platforms for economy of scale.
That doesn't mean shared architecture, just shared platforms. Such as 300, Charger, Challenger and 200, Journey and Dart, KL and/or Compatriot.

 

[Erik Latranyi]

Do we really need another thread about what people "hope" for the future?

This horse is well-beated in the other threads.

 

[Mike V.]

Thank you Erik

 

[Dave Z]

Chrysler does plan to build Alfas in the US, but not at Dodge price points.

 

[eastcoaster]

Do we really need another thread about what people "hope" for the future?

This horse is well-beated in the other threads.

I think we all might be mis-interpreting Bill's actual question (at least I hope so...).

I *think* the real question is the titile of this thread. What IS the incremental cost to maintaining different brands within the same dealer channel? Does it *really* add a lot of cost to have additional brands, if the same dealer is selling them in the same showroom? Especially if the vehicles are not identical to each other? Which vehicles those are inside each brand (whether they be Bill's wish list or someone else's), is sort of irrelevent, IMO.

I'd love to see someone take a thoughtful stab at THAT question. I don't recall us having a good debate about incremental brand costs, although I agree with you that we've debated wishlists a ton, and don't really need to do so here. Most discussions on Allpar that I've managed to read about incremental brand costs seem to devolve into a discussion about the days when there were more dealer channels.

Thanks,
Mark

 

[billfrombuckhead]

I think we all might be mis-interpreting Bill's actual question (at least I hope so...).

I *think* the real question is the titile of this thread. What IS the incremental cost to maintaining different brands within the same dealer channel? Does it *really* add a lot of cost to have additional brands, if the same dealer is selling them in the same showroom? Especially if the vehicles are not identical to each other? Which vehicles those are inside each brand (whether they be Bill's wish list or someone else's), is sort of irrelevent, IMO.

I'd love to see someone take a thoughtful stab at THAT question. I don't recall us having a good debate about incremental brand costs, although I agree with you that we've debated wishlists a ton, and don't really need to do so here. Most discussions on Allpar that I've managed to read about incremental brand costs seem to devolve into a discussion about the days when there were more dealer channels.

Thanks,
Mark

My gut feeling is that there would very little or no savings dropping Dodge in the short run but that dropping Dodge would sound good to Wall Street banksters.The reason I think this is that Chrysler already has all the carlines under one roof and so there would be no savings from eliminating a costly dealer channel. I also think dropping Dodge could hurt Chrysler in the long run.I thinkthe distinction between Dodge and Chrysler could be a good thing if managed well. Now if gas prices go really high that would hurt Dodge more than most brands

 

[Dave Z]

If it was three years ago, I'd say they should drop Chrysler, because of all the connotations of bankruptcy and failure. But their marketing was astonishingly effective in rehabilitating the company.

 

[Erik Latranyi]

The cost of a brand and the cost of another vehicle are two different things.

Two vehicles sharing the same platform (a set of dimensions) but unique architectures, can be very cost effective, splitting the required 100,000 units to break even between two models, versus one (provided they are assembled in the same plant).

But, keep in mind that the architecture (the parts on that platform) can vary greatly. Just look at the complexity of the Jeep Cherokee architecture that was built on the CUSW+ platform. But, if you consider 300, Charger & Challenger all share the same platform (and enough commonality in architecture) that they are fairly cost effective.

But, the more architecture they share, the more it looks like badge engineering rather than plaform sharing.

Now, the cost of a division is another matter. Yes, they share the same dealer showroom, but that is not a huge cost to the corporation as even if you eliminate a division, the floor space will get used and supported.

The big costs come in duplicate engineering, styling, marketing, promotion, etc. The legal fees to file and protect every trademark for that division as well as answer lawsuits is fairly high.

The costs of compliance with the federal and state gov'ts (they don't care that a 300 and Charger are similiar, you must crash-test both). Same for fuel economy. Offer a different engine, crash test again. Offer another transmission, crash test again. Then, repeat fuel economy for each.

As you can see, the multiplier costs for another division are in the hundreds of millions to billions.

Eliminate that division, save the costs.

Eliminate one after the IPO (when you need a stock price boost) and you look like a fiscal genius.

 

[eastcoaster]

The cost of a brand and the cost of another vehicle are two different things.

Two vehicles sharing the same platform (a set of dimensions) but unique architectures, can be very cost effective, splitting the required 100,000 units to break even between two models, versus one (provided they are assembled in the same plant).

But, keep in mind that the architecture (the parts on that platform) can vary greatly. Just look at the complexity of the Jeep Cherokee architecture that was built on the CUSW+ platform. But, if you consider 300, Charger & Challenger all share the same platform (and enough commonality in architecture) that they are fairly cost effective.

But, the more architecture they share, the more it looks like badge engineering rather than plaform sharing.

Now, the cost of a division is another matter. Yes, they share the same dealer showroom, but that is not a huge cost to the corporation as even if you eliminate a division, the floor space will get used and supported.

The big costs come in duplicate engineering, styling, marketing, promotion, etc. The legal fees to file and protect every trademark for that division as well as answer lawsuits is fairly high.

The costs of compliance with the federal and state gov'ts (they don't care that a 300 and Charger are similiar, you must crash-test both). Same for fuel economy. Offer a different engine, crash test again. Offer another transmission, crash test again. Then, repeat fuel economy for each.

As you can see, the multiplier costs for another division are in the hundreds of millions to billions.

Eliminate that division, save the costs.

Eliminate one after the IPO (when you need a stock price boost) and you look like a fiscal genius.

Erik, thanks for your thoughtful answer, although it leaves me wanting more (of course!). Let me ask a question--I'm not sure I've got it cast correctly, but I'll try...

You say that a platform needs 100K in volume. Fine. I'm assuming that even with 100K, it still DOES matter whether it is one architecture or two or three, etc, due to all the other costs you listed (regulatory, engineering, etc). So...the question is, how MUCH does that 100K vary? In other words, let's pretend that the 100K is for the Cherokee (alone). If you add the Chrysler 200 to the mix, does that 100K in volume go to 110K, or does it go to 150K? I'm pretty sure it doesn't go all the way to 200K, because at that point, there'd be no shared benefit at all. I picked this example, because I fairly certain that non-enthusiasts will not ultimately realize that a Chrysler 200 and a Cherokee might share the same platform. Those products would appear to be very differentiated to the untrained eye.

As you suggested, for the sake of simplicity, I'd prefer we assume that everything's produced in the same plant (I know that's not going to be the case, at least initially with the 200 and Cherokee, but I'm not really asking about plant costs here, I'm interested in architecture costs).

Unlike the upcoming 200 and Cherokee, the Durango/JGC look quite similar. I imagine some non-enthusiasts can see the similarities when they see them side by side on the dealer lot. How much extra volume is required for the extra platform in that kind of situation?

I realize that the question is more difficult than simply a % volume difference. I'm guessing that the "problem" with the Durango (if there is a problem) isn't actually its volume, which is what--50K/year currently? Rather, I'm guessing that the "problem" is that it might be commanding lower selling prices than equivalent Jeeps would command. So, the reason to build a JGW instead of a Durango might appear to be an attempt to drive up the selling price, rather than to drive up the volume sold. I'm not sure how to quantify it into the "how much extra volume do you need to make an extra architecture profitable" question. But I'd love to see someone try.

A couple other things:

I think the "extra" marketing and promotion costs of an incremental brand are probably not as high as people think. If you got rid of Dodge, and massaged the Dart into a Chrysler 100/Valiant, I still think you'd need to advertise is as much or more as the Dart. Especially if you are replacing a vehicle with a long history in the market with one that is new to the market...

Crash testing savings might save SOME. But not unless you actually eliminate whole products, in addition to brands. If you are still going to have a Chrysler 100/Valiant instead of a Dart, then you are still going to have to do the same amount of crash testing, unless you were duplicating product (like the T&C vs. Caravan) and already had both a 100/Valiant and a Dart (in that situation, you risk eliminating volume when you eliminate a model). I think that ChryFi is getting rid of most of the duplication, regardless of whether they keep the divisions or not, and building a really full line of models overall. Which gets back to Bill's original question...are you actually saving anything significant by getting rid of brands?

I'm looking forward to seeing if/how someone picks this apart!

Thanks,
Mark

 

[Erik Latranyi]

Erik, thanks for your thoughtful answer, although it leaves me wanting more (of course!). Let me ask a question--I'm not sure I've got it cast correctly, but I'll try...

You say that a platform needs 100K in volume. Fine. I'm assuming that even with 100K, it still DOES matter whether it is one architecture or two or three, etc, due to all the other costs you listed (regulatory, engineering, etc). So...the question is, how MUCH does that 100K vary? In other words, let's pretend that the 100K is for the Cherokee (alone). If you add the Chrysler 200 to the mix, does that 100K in volume go to 110K, or does it go to 150K? I'm pretty sure it doesn't go all the way to 200K, because at that point, there'd be no shared benefit at all. I picked this example, because I fairly certain that non-enthusiasts will not ultimately realize that a Chrysler 200 and a Cherokee might share the same platform. Those products would appear to be very differentiated to the untrained eye.

The 100K number is several years old and was an approximation. Don't forget, margins on sales have a BIG impact on that number.

Cherokee is assembled at its own plant, so it must reach the 100K mark to break even on its own. Maybe a litle less due to the shared platform, but you now have duplicated manufacturing (robots, heat, paint, etc).

Where flex shines is the ability to shift product from one plant to another without a significant changeover. I suspect this is where Marchionne loves flex, because he can build product in Italy, Eastern Europe, China and/or North America, shifting volume where costs are lowest. A popular vehicle is no longer held hostage by the union in that assembly plant.

Flex gets better and better all the time. Remember the last generation Cherokee and Commander? Both built on the same line using the same platform. A major achievement for flex manufcfuring.

As you suggested, for the sake of simplicity, I'd prefer we assume that everything's produced in the same plant (I know that's not going to be the case, at least initially with the 200 and Cherokee, but I'm not really asking about plant costs here, I'm interested in architecture costs).

Architecture costs vary greatly. With Magneti Marelli in the picture, they have some control over the architecture costs. But it comes down to how much do you pay for leather seats as there are infinite grades possible.

Unlike the upcoming 200 and Cherokee, the Durango/JGC look quite similar. I imagine some non-enthusiasts can see the similarities when they see them side by side on the dealer lot. How much extra volume is required for the extra platform in that kind of situation?

The Grand Cherokee and Durango share a platform. The 100K rule applies. The decision to style them with some similarities is choice, not need. As I indicated above, Grand Cherokee and Commander shared a platform but, other than internally, you could not see many exterior visual similarities.

I realize that the question is more difficult than simply a % volume difference. I'm guessing that the "problem" with the Durango (if there is a problem) isn't actually its volume, which is what--50K/year currently? Rather, I'm guessing that the "problem" is that it might be commanding lower selling prices than equivalent Jeeps would command. So, the reason to build a JGW instead of a Durango might appear to be an attempt to drive up the selling price, rather than to drive up the volume sold. I'm not sure how to quantify it into the "how much extra volume do you need to make an extra architecture profitable" question. But I'd love to see someone try.

My understanding is that the Durango is expensive to manufacture, but sells in low volume. If the profit per unit is less than Grand Cherokee, it makes sense to build more Grand Cherokees and fewer Durangoes. Since Grand Cherokee is selling so well, the 100K volume is covered, that is why a high-profit, low-volume vehicle like a Grand Wagoneer makes sense over a Durango. If you re going to use capacity, use it to make the highest profit-margin product possible.

A couple other things:

I think the "extra" marketing and promotion costs of an incremental brand are probably not as high as people think. If you got rid of Dodge, and massaged the Dart into a Chrysler 100/Valiant, I still think you'd need to advertise is as much or more as the Dart. Especially if you are replacing a vehicle with a long history in the market with one that is new to the market...

You are correct, but forget that Dodge has its own marketing people who are duplicated at Chrysler. Yes, the overall Chrysler Marketing runs the show, but if you eliminate Dodge, you can eliminate duplicate employees and do more with less.

Crash testing savings might save SOME. But not unless you actually eliminate whole products, in addition to brands. If you are still going to have a Chrysler 100/Valiant instead of a Dart, then you are still going to have to do the same amount of crash testing, unless you were duplicating product (like the T&C vs. Caravan) and already had both a 100/Valiant and a Dart (in that situation, you risk eliminating volume when you eliminate a model). I think that ChryFi is getting rid of most of the duplication, regardless of whether they keep the divisions or not, and building a really full line of models overall. Which gets back to Bill's original question...are you actually saving anything significant by getting rid of brands?

They are eliminating whole products. 200 will not have Avenger. Town & Country will not have Caravan. Again, if the 200 can sell 100K units alone, you don't need Avenger to help cover the platform costs. One less car to crash.

This is why many think we will not see an Avenger replacement, despite the rumors.

I'm looking forward to seeing if/how someone picks this apart!

Thanks,
Mark

 

[billfrombuckhead]

In defense of keeping Dodge and Chrysler. I think having too many trim levels is disastrous. I think this is part of the problem with the Dart's launch having 5 trim levels with an $12,000 spread is harder on credibility than well managed brand engineering.. If one is going to spend $10,000 more one should at least get a more prestigious brand that isn't sold as a rental car. It might be simpler for customers and more effective to have Dodge aimed at younger buyers with 2 trim levels and Chrysler aimed at more middle aged buyers with 2 trim levels vs Chrysler with 4 trim levels for all demographics.

 

[jerseyjoe]

If Chrysler has to move upscale as some people insist then there is a need for Dodge or else Kia and Hyundai will become #s 4 and 5. Imagine Police vehicles with leather air conditioned seats!!

 

[Dan Minick]

There are so many 'known unknowns' and 'unknown unknowns' (thx Rummy!) that I don't think anyone can answer the question with any sort of confidence.
-Brand momentum: Very hard to define and pin down, but if you have all your 'eggs' in one brand, there is what one calls brand momentum, rather than splitting sales/marketing/etc amongst different brands. Does the net total of one brand equal the sum of various brands if one went to just one? In some cases yes, some cases no.

-Brand momentum is also what Acura, Lincoln, and others have tried to do in de-emphasizing the model name, and trying to ratchet up the brand name by going to alpha-numeric designations. Again, sometimes it works, sometimes not.

-There is a significant number of the population out there that is STILL unaware that Jeep is connected to Chrysler or Dodge, or let alone even Fiat. Having all dealers carry all brands helps this, but my own opinion is that there needs to be some more corporate advertising that bundles the brands together, so that goodwill and feelings from one brand will rub off on the other. (not sure I explained that very well). We all here know and assume that everyone knows that CDJ is all the same group, but really, the general public doesn't know that like we think they should. Chevy is Chevy from Sonic to Corvette to Silverado, and Ford is Ford from Fseries to Mustang. But Dodge.. isn't that part of GM? (seriously, i had a friend ask me that)

-in the end, I think SM & company has their eye on what VW has done with brands & brand building. Can Fiat-Chrysler achieve that? Time will tell. VW didn't get to where they are today overnight. (regardless whether you love or hate VW group, one has to admit they are financial & marketing geniuses at achieving brand equity & growth).

 

[JavelinAMX]

There are so many 'known unknowns' and 'unknown unknowns' (thx Rummy!) that I don't think anyone can answer the question with any sort of confidence.
-Brand momentum: Very hard to define and pin down, but if you have all your 'eggs' in one brand, there is what one calls brand momentum, rather than splitting sales/marketing/etc amongst different brands. Does the net total of one brand equal the sum of various brands if one went to just one? In some cases yes, some cases no.

-Brand momentum is also what Acura, Lincoln, and others have tried to do in de-emphasizing the model name, and trying to ratchet up the brand name by going to alpha-numeric designations. Again, sometimes it works, sometimes not.

-There is a significant number of the population out there that is STILL unaware that Jeep is connected to Chrysler or Dodge, or let alone even Fiat. Having all dealers carry all brands helps this, but my own opinion is that there needs to be some more corporate advertising that bundles the brands together, so that goodwill and feelings from one brand will rub off on the other. (not sure I explained that very well). We all here know and assume that everyone knows that CDJ is all the same group, but really, the general public doesn't know that like we think they should. Chevy is Chevy from Sonic to Corvette to Silverado, and Ford is Ford from Fseries to Mustang. But Dodge.. isn't that part of GM? (seriously, i had a friend ask me that)

-in the end, I think SM & company has their eye on what VW has done with brands & brand building. Can Fiat-Chrysler achieve that? Time will tell. VW didn't get to where they are today overnight. (regardless whether you love or hate VW group, one has to admit they are financial & marketing geniuses at achieving brand equity & growth).

Well said.

Yet, I'm one who believes that controlling or influencing potential buyer perceptions is the most important element in the equation - at least right now. Not real sure that's been happening (especially for the latest new product). Ram marketing has been quite good; but other brands and lines, perhaps have been somewhat anemic. Ultimately, finding and deploying capable marketing seems key. I realize it's not like going to the grocery store and picking a brand and flavor of coffee and going to the check-out stand; and voila - success. But they have to find a meaningful message for each of the models which will get some air-time . I'm just not convinced of some of the campaigns that I've seen/heard have gotten that aspect on target.

 

[billfrombuckhead]

I think the Cadillac ATS might have saved Dodge by showing the importance of rear wheel drive. I think Cadillac's success with rear wheel drive and the Guilietta's weakness with front wheel drive against the Germans makes it imperative that the D class Alfa Romeo Guilia is rear wheel drive and to get any kind of production scale, Chrysler will have to participate big time and that means Dodge. If they can sell 40k Alfa D's worldwide, 60k Dodge D class sedans and 25K SRT Barracudas in North America, then they're in the black.

 

[jerseyjoe]

The other way to success is to buy another company and kill it. I don't think that would help Fiat in or outside the US. I believe that Mercedes perceived Chrysler (Front Wheel Drive and all) as a real threat and after building half finished cars some less than half did not want to be associated with failure. I think if their management had their stuff together they would have had a clean kill.

There are 80+ brands under Coca-cola. I think they are successful.
http://www.coca-colacompany.com/brands/all/


Most people associate FWD with good fuel economy judging the popularity of the successful brands. RWD cars cost more also.

 

[arb48]

Perhaps another consideration regarding brand elimination or consolidation would be the estimates for the remaining/surviving brand(s) to retain the downstream business. There are hard data to brought to that table. As I recall, the elimination of Plymouth in 2001 scored one of the worst track records of the surviving brands capacity (Dodge or Chrysler) to retain the Plymouth customer business, and that was long before the dealer consolidations much later.

 

[freshforged]

Good point on the detriments of price spread in a single model. This is why I hope Dodge keeps the Durango around (even if they eliminate the higher end models). Its also why I think there is room for a Chrysler 100 that can sit above the Dodge and offer a stylistically different approach than the Fiat 500* family.

In defense of keeping Dodge and Chrysler. I think having too many trim levels is disastrous. I think this is part of the problem with the Dart's launch having 5 trim levels with an $12,000 spread is harder on credibility than well managed brand engineering.. If one is going to spend $10,000 more one should at least get a more prestigious brand that isn't sold as a rental car. It might be simpler for customers and more effective to have Dodge aimed at younger buyers with 2 trim levels and Chrysler aimed at more middle aged buyers with 2 trim levels vs Chrysler with 4 trim levels for all demographics.

 

[Dave Z]

I think the Cadillac ATS might have saved Dodge by showing the importance of rear wheel drive.

Yeah, because Chrysler hadn't made rear wheel drive cars since 1989. Except for the 300, 300C, Charger, Challenger, and Magnum.

Seriously, once they decided to revive and reposition Alfa, a rear drive midsize car was almost guaranteed. Sergio said there would be a rear drive midsize car sold by Alfa and Dodge and that the ability to sell it as a Dodge was what made the Alfa possible. Without Chrysler, I don't think Alfa Romeo would be in the process of serious resurrection right now.

The thing about "talk of Avenger coming back is nonsense" is only true if you mean front wheel drive Avenger. I am pretty sure Current Avenger will be replaced by Rear Drive Midsize Dodge Car. Whether it's called Avenger or not, that's the slot it's going into, with the driving wheels in back instead of in front.

Listening to some of these talks tells me a lot about why Subaru only sold AWD for so long.

Brands are very expensive but you'll notice VW is not dropping any and made overtures to gain yet another one. VW, Seat, Skoda, Audi, etc.