Chrysler Pauses to Mark an Unlikely Comeback

The smallest of the American automakers kicked off the annual Detroit auto show on Monday with new versions of two Jeep models, the Grand Cherokee and Compass, that have helped turn the company around since its government bailout and bankruptcy in 2009.

Chrysler outperformed the industry last year with a 20.6 percent increase in domestic sales in a market that grew by 13.4 percent. By comparison, sales increased just 3.7 percent at General Motors and 4.7 percent at Ford.

Sergio Marchionne, the chief executive of both Chrysler and its Italian parent Fiat, said Monday he expected Chrysler’s upward sales trend to continue this year, particularly in pickup trucks and SUVs.

“I think there’s a general feeling that the U.S. market is in healthy shape,” Mr. Marchionne said in a meeting with reporters. “And we’re certainly going to improve in the market.”

Last year was a stellar one for Chrysler. Its bread-and-butter products like the Grand Cherokee and the Ram pickup had big gains, and new cars like the Dodge Dart began to mitigate the company’s traditional reliance on larger vehicles.

Now Mr. Marchionne is laying plans to build a new, entry-level Jeep at an underutilized Fiat plant in Italy – evidence of how the American company is shepherding its European parent company through difficult times.

Sales of Chrysler products now account for more than 60 percent of the total vehicles sold under the Fiat corporate umbrella, which also includes brands like Alfa Romeo and Maserati.

When Mr. Marchionne negotiated Fiat’s acquisition of Chrysler during its federal bailout, industry executives were skeptical that the American company could thrive after the failures of its previous owners, the German carmaker Daimler and the private-equity firm Cerberus.

Now, however, “it’s not Fiat saving Chrysler, it’s Chrysler saving Fiat,” said David Cole, a founder of the Center for Automotive Research in Ann Arbor, Mich.

Mr. Marchionne said a key part of Chrysler’s growth will come from its iconic Jeep brand, which has updated its rugged image with better fuel efficiency and improved quality.

The company showed off the first diesel-engine version of the Grand Cherokee on Monday, which officials said could get 30 miles per gallon in highway driving.

A new version of the Jeep Liberty is scheduled to be introduced later this year, Mr. Marchionne said, as is the compact Jeep that will be built alongside a Fiat model in the Italian plant.

The plan helps solve Fiat’s glaring overcapacity issues in Europe, where vehicle sales have dropped to their lowest level in years. It also represents an aggressive step to grow the Jeep brand outside the United States.

“The brand needs an entry-level Jeep” that people can get at a lower price point, Mr. Marchionne said.

Chrysler was also close to finalizing plans to build Jeeps in China, he said.

Mr. Marchionne said it was important for Chrysler to expand its product lineup to help Fiat weather the European sales crisis, which is affecting most auto companies there.

He estimated that mass-market carmakers in Europe lost a combined 5 billion euros last year, mostly because demand fell well short of supply.

Automakers have so far announced a handful of plant closings to address the overcapacity issue. But Mr. Marchionne has consistently argued for a broader reduction in the number of factories throughout Europe.

“The gap is too large,” he said. “You can’t close a 5 billion euro gap in operating profit by tweaking the machine.”

Mr. Marchionne said that he was driving Chrysler to make up the difference in profits as Fiat falters and as comeback plans for Alfa Romeo take shape.

“We are living with the consequences of a collective inability to resolve the issue,” he said. “But this is not for the fainthearted.”

He said that overcoming the “threat of complacency” is Chrysler’s biggest issue. After the Ram pickup won the truck of the year award at the Detroit show, Mr. Marchionne cut short the celebratory mood at the company’s exhibit.

“Celebration is fine, I’m delighted,” he said. “But it’s over.”

Article source: http://www.nytimes.com/2013/01/15/business/chrysler-pauses-to-mark-an-unlikely-comeback.html?partner=rss&emc=rss