There was a rare piece of good news for Chrysler in February when Dodge teams cleaned up at the Daytona 500. Six of the top eight cars in the biggest stock car race of the season were Dodges, including the Charger driven by winner Ryan Newman.
The Daytona wins are a welcome distraction from the troubles at Chrysler. The automaker was acquired last year by private equity firm Cerberus Capital Management for $7.4 billion, having struggled under the ownership of Germany’s Daimler-Benz since 1998. Cerberus hired Robert Nardelli, the former head of Home Depot, and former Toyota North American President Jim Press to run operations, but despite an initial whiff of optimism about the deal, Chrysler remains in dire straits.
Now Nardelli is set to open the 2008 New York auto show, delivering the keynote speech Wednesday at the last big trade fair of the auto-show season. Consumers will get a chance to see some of the industry’s newest vehicles, and among them will be Dodge’s Challenger SRT8, a reinvention of its iconic muscle car.
“New York’s the world’s media capital, so you have some auto companies that want to put their best foot forward there and make a good impression, and that includes Chrysler,” said Jack Nerad, executive market analyst for Kelley Blue Book, which tracks the automotive industry.
Assuming the old motor racing maxim of “win on Sunday, sell on Monday” is accurate, Dodge’s big win in Florida could help the automaker stem its sales slide. The automaker is No. 4 in terms of U.S. sales behind General Motors, Toyota and Ford.
In the currently depressed automobile market, with some analysts predicting the worst year of sales since 1998, there’s a fierce struggle to win over the hearts and minds of consumers, and the positive publicity generated by the NASCAR win could pull some sorely needed customers into Dodge dealerships.
The new Challenger, which will be shown in New York, is designed to appeal to baby boomers, a generation that spends some $2 trillion annually and increasingly looks for cars that exude luxury and prestige and remind them of their youth. But the question is whether the new Challenger will have a “halo effect” on Chrysler, driving sales among younger car buyers in their 20s and early 30s, Nerad said.
“The Challenger’s not particularly fuel efficient, but the two ends of the scale where we are seeing growth are in fuel-efficient cars and high-horsepower, limited-production vehicles,” he said, adding that a V6-engined model that’s expected to be shown in New York will broaden the car’s appeal.
Still, Chrysler faces many challenges when it comes to product. Its fleet is one of the industry’s least fuel-efficient, and last month Consumer Reports’ influential issue on cars gave Chrysler very low marks for its vehicles, saying they lack quality.
What’s more, the fortunes of Chrysler’s profitable Dodge Ram pickup are dwindling in the wake of the slumping housing market. Truck sales rely on steady sales among builders, contractors and other small business owners to replace their existing work vehicles.
“The main criticism of Chrysler is its product,” said Jesse Toprak, executive director of industry analysis for Edmunds.com, an automotive Web site. “They don’t have anything that meets the needs of today’s consumer, such as smaller, fuel-efficient vehicles, and their minivans had a lot riding on them, but they aren’t meeting expectations.”
Chrysler, which lost $1.6 billion in 2007, is making drastic moves to regain its focus, trimming its work force and scrapping poorly-performing models. Recently the automaker said it will shut all but its most essential operations worldwide for two weeks in July as part of an attempt to cut costs and preserve cash.
Toprak doesn’t expect Chrysler to come out with anything new and exciting for another three years or so. Until then the company will remain inside the Cerberus cocoon and focus on realigning its dealership network and distribution system to become a smaller, more focused company, he said.
“You’ll see executives at auto shows talking about their plans and what they expect to accomplish, but there will not be anything special or earth-shattering in terms of product because it takes time to bring in new talent and truly restructure an automobile company,” said Toprak. “And as part of a private equity company you have the luxury of not having to deal with stockholders or analysts. Publicly traded companies have to be focused on short-term goals, but with private ownership you can truly focus on the long term.”
Other automakers also will be hoping to create some buzz with new models at the show including the tiny, 2009 Honda Fit, the 2009 Nissan Maxima, Volvo’s XC60 crossover and Pontiac’s new G8 sport truck.
“Pontiac has been wandering in the wilderness for the past 10 to 15 years, but now I think they’ve got a handle on what their brand should be about,” said Kelley Blue Book’s Nerad. “So I’m expecting to see Pontiac return to the successful image of their best years.”
Another highlight of the show, according to Nerad, will be Saab’s 9-X BioHybrid concept, which uses active aerodynamics to reduce drag and fuel consumption at cruising speeds above 43 miles per hour. And Mercedes will show off its BlueTec diesel technology, which will be used in three SUVs to be sold in all 50 U.S. states.
Scion, which has seen sales struggle in recent months, will show its Hako Coupe concept in New York, indicating the new style direction for Toyota’s youth-focused brand. Scion’s first cars — the xA, the xB and the tC — were well-received by younger American buyers, who warmed to their unconventional style and customizability. But since then the brand may have suffered from a sophomore slump, said Edmunds’ Toprak.
“Brands like Scion are buzz-driven, and they tapped into extreme customization, which is a growing trend, but these sorts of products have to be propelled by constant change to keep the interest in them alive,” said Toprak. “And since those fist models came out there have been other choices out there, like the new Honda Civic and the Mini Cooper — they could have stolen some of the attention away from Scion.”