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August 2014 Newsletter

Chrysler’s Success is No Fluke; It’s Built for the Future

 

The U.S. auto industry exceeded even the most optimistic expectations in February. Manufacturers collectively posted their strongest sales since 2008 as a mix of pent-up demand, rising consumer confidence – and increased loan availability – sent buyers racing back to showrooms at levels not seen since the start of the Great Recession.

Few automakers had more to crow about than Chrysler. The automaker posted an overall 40 percent increase for the month – marking its 23rd consecutive monthly increase in demand and its strongest point since emerging from Chapter 11 bankruptcy protection in 2009.

“Chrysler has some of the strongest products ever in the history of the company,” said Jesse Toprak, VP of market intelligence at TrueCar.com. “They’ve made some strong vehicles like the Chrysler 200 and 300, along with most Jeep products, but the Dodge Dart could really help the company compete with fuel-efficient vehicles once it launches, as gas prices continue to rise.”

All of the Detroit automaker’s brands saw a sales increase in February, including not only Chrysler, Dodge, Jeep and Ram, but also struggling Fiat, the reborn marque of the U.S. automaker’s Italian partner.

Fiat made its return to the U.S. in early 2011 after a three-decade absence but found the going a lot tougher than anticipated, sales for the year coming in at barely half of its original, 50,000-unit forecast.

“Clearly, a year ago, it was difficult to get a clear sense of where the brand would go,” Olivier Francois, Fiat’s global chief executive, said during a recent interview.  “We just didn’t know.”

In January, Fiat/Chrysler CEO Sergio Marchionne shifted to a more conservative strategy, downgrading by half his sales forecast for the Fiat brand for 2012.  But company officials are now optimistic that the February figures – with a 21 percent gain, their best since the brand’s re-launch – could put Fiat back on course.

The maker is now launching a higher performance version of its little 500 model, dubbed the Abarth, that is already generating strong buzz.

Of course, even the base Fiat 500 is well-positioned to take advantage of shifting market trends.  Small cars accounted for 23 percent of the overall U.S. market in February, up from 17.9 percent in December, reported tracking firm Edmunds.com.

“Our product portfolio now contains some of the most fuel-efficient vehicles in our company’s history driving our sales up 40 percent in February,” said Reid Bigland, head of Chrysler’s U.S. Sales and the CEO of its Dodge brand. “A few years ago higher fuel prices were a major threat to our total vehicle sales whereas today those higher prices have become far less of an issue. We now have 13 vehicles with an EPA-rated highway fuel economy of 25 miles per gallon or higher, and six of those vehicles get 31 mpg or higher.”

But Chrysler could be well-positioned if, as many expect, fuel prices reach record levels mid-year.  The maker is rushing to launch its new Dodge Dart, a new compact sedan borrowing the name of an old model that was once among Chrysler’s strongest sellers.  One version of the Dart will use Fiat’s high-mileage Multi-Air engine, which generated an estimated 40 mpg combined, according to EPA testing.  That figure will likely be lower in production, however, due to the way the government recalculates its initial test results.

Nonetheless, the Dart could become a major factor in maintaining Chrysler’s momentum this year – something that will become increasingly difficult as it compares itself again stronger sales in late 2011.

On a positive note, despite having to spend so much on rebates and other incentives, Chrysler saw a sharp surge in its average transaction price, or ATP, the amount the typical buyer actually spends once everything is factored into the equation.  The total came to $29,458 per vehicle, up 1.0% from January and a full 5.7 percent from a year ago.

That upturn suggests that in this resurgent car market there’s still plenty of room for the  bigger, less fuel-efficient models that Chrysler has long been known for.  Its Jeep Grand Cherokee, a runner-up for 2011 North American Truck of the Year, gained 47 percent, while the Dodge Charger muscle car jumped 124 percent. But one of the biggest increases in the industry came from the flagship Chrysler 300 sedan, which saw sales surge 480 percent compared to February 2011.

The strong February numbers follow Chrysler’s standout performance during the recent Super Bowl, where the maker aired a 2-minute, cinematic-style commercial narrated by Clint Eastwood. The spot – which focused on the nation’s need to pull together and move ahead – generated plenty of political controversy, especially among conservatives , but appears to have resonated with the market at large.

Whatever the reason – creative advertising, improving consumer sentiment or simply better products, Chrysler clearly had a strong month. Whether it can maintain the pace remains to be seen, but for the moment, at least, it has momentum working on its side.

Source: [MSNBC]


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