AUTOMOBILE INDUSTRY Chrysler boosts efforts to compete

Chrysler will release 25 new or redesigned models over the next 36 months.
DETROIT (AP) -- To explain DaimlerChrysler AG's slumping sales and declining U.S. market share, many analysts and dealers point to the company's cars and trucks.
The problem, they say, is that Chrysler hasn't had enough vehicles that grab a buyer's attention. And that's the primary reason why, as Detroit's No. 3 automaker marks the fifth anniversary of its trans-Atlantic merger with Daimler-Benz, the Chrysler Group is the global automaker's most troubled division.
For the first three quarters of 2003, Chrysler's U.S. vehicles sales were off 14 percent from the same period in 1998, including a 35 percent drop in car sales. Chrysler's U.S. market share has fallen from 16.1 percent two months before the merger closed to roughly 13 percent today. In August, the German-American automaker was outsold by Toyota Motor Corp. for the first time in a single month in the United States.
"It all comes down to product," said Alan Helfman, general manager of River Oaks Chrysler Jeep in Houston, one of the nation's largest Chrysler dealers. "They've given us some but not enough. People want the newest and latest."
Analysts say Chrysler is paying the price for an aging vehicle lineup, poor product planning that dates back five to seven years and an influx of competitors -- new vehicles from Asian and European companies arriving in U.S. showrooms.
Cost-cutting
Sparring with rivals General Motors Corp. and Ford Motor Co. in a fierce domestic pricing war also has eroded Chrysler's profits, although the automaker has offset some of the decline by heavy cost cutting.
Chrysler says it's lowered material costs by 15 percent and eliminated 30,000 jobs since launching a three-year turnaround plan in February 2001, a few months after DaimlerChrysler chose trusted lieutenant Dieter Zetsche to lead the U.S. division as president and chief executive.
Now the pressure is on Zetsche to deliver a stream of new products to boost sales and earnings. Chrysler lost $1.1 billion in the second quarter and is on the spot to reach a break-even profit target this year. The company earned $639 million last year after losing $4.7 billion in 2001.
Zetsche has said Chrysler will introduce 10 new or redesigned vehicles by the end of next year and 25 over the next 36 months. The first is the launch of the redesigned and larger Dodge Durango SUV, which the company hopes will reclaim business in the profitable light truck segment.
Expected next year will be the Chrysler 300C sedan, the Dodge Magnum wagon and a redesigned Jeep Grand Cherokee.
New product lineup
Chrysler has little margin for error with the new cars and trucks. Analyst Art Spinella said the company already faces one of the industry's lowest closing ratios, which reflects the percentage of customers who visit a dealership either once or twice and then buy a vehicle.
Spinella, president of Bandon, Ore.-based CNW Marketing Research, said Chrysler's closing figure was 22 percent through September. That's far lower than Honda (46 percent), Toyota (41 percent), GM (35 percent) and Ford (31 percent). CNW calculates the figures with the help of field representatives in 28 markets.
"It's usually a reflection of both the product lineup and dealership environment," Spinella said. "On the product side, it could be price or the product itself."
In a speech in Boston last month, Zetsche said he was confident Chrysler's new lineup would transform the division and make it more competitive.
"Our next generation of cars, trucks and sport utility vehicles are the products that will shape our future," he said.
Enduring skepticism
But skeptics remain. Standard & amp; Poor's Ratings Services lowered its long-term ratings on DaimlerChrysler AG debt Oct. 21, citing "the increasingly clouded prospects of the Chrysler Group."
"Difficult competitive conditions, plus costs associated with the large number of new products ... suggests Chrysler will be challenged to achieve meaningful earnings improvement in 2004," S & amp;P analyst Maria Bissinger said.
Another challenge is Chrysler's attempt with the 300C sedan and Magnum wagon to move upscale and a bit beefier. The 300C and Magnum are both rear-wheel-drive models, which tend to be larger and heavier than front-wheel drives. They're expected to be pricier, too.
But "if you think about the average Chrysler buyer, they're not going into the dealership planning to spend in the upper $30,000s to $40,000," said Mike Wall, an analyst with CSM Worldwide in Farmington Hills.
To be successful, Wall said, Chrysler needs a good mix of cars, including a reasonably priced midsize sedan.