06 November 2009

FIAT-Chrysler's Impressive Plans

FIAT-Chrysler to overhaul vehicles
under new 5-year plan...
forecasts break-even results in 2010

Chrysler plans to overhaul its vehicles with technology from its new Italian partner, FIAT SpA, and contrary to what they skeptics have portrayed, FIAT is willing to spend a lot of money to restore Chrysler to glory... helped by the U.S. government and lower costs.

FIAT and Chrysler CEO
Sergio Marchionne introduced an elaborate new five-year business plan for Chrysler in Auburn Hills, MI on Wednesday. The plan calls for 75% of Chrysler's vehicle lineup to be replaced or substantially refreshed in just twelve months from now, onwards towards a complete rejuvenation of product by 2012.
Marchionne said the company plans to spend $23 billion on the product turnaround through 2014.

CEO Sergio Marchionne

Chrysler now expects to break even in 2010... and report an operating profit of $5 billion in 2014.

But future growth is surely dependent on better cars... and sales. The company's mid-sized sedans, the Dodge Avenger and Chrysler Sebring, have performed poorly in a competitive segment vs such sales leaders as the Toyota Camry and Honda Accord. Chrysler plans to update these cars to make them more comfortable and quieter for now, then replace them in 2012 with a FIAT-based platform.
That could make Chrysler competitive in the largest part of the U.S. car market- as the Dodge Intrepid and other LH-midsize cars did for the in the early 90s, dragging the company out of the
K-Car era.

Besides the mid-size car, Chrysler will introduce four new Dodges by 2013. They include a seven-passenger crossover vehicle, a mini-car and a compact. In only a year from now, most current Dodge models will receive new exteriors, interiors and engines.

Ralph Gilles, the company's chief designer, said the Dodge brand will have crisp handling, be quieter, more fuel-efficient and have more luxurious interiors, reflecting reoccurring consumer complaints regarding these areas.

Chrysler brand also will get six new vehicles, including a FIAT-based small car and a new mid-size crossover in 2013. The automaker is also considering adding a mid-size pickup to its Ram truck lineup.

Chrysler is counting on a recovery in U.S. sales and instigating an increase in market-share. It expects auto industry sales of 10.5 million vehicles in 2010 to rise to 14.5 million in 2014, and that its share can jump from 9 percent this year to 13 percent in 2014. It also expects its global sales to more than double to 2.8 million in 2014 from 1.3 million this year.

Marchionne said that is a realistic goal... especially now that consumers can be more confident that Chrysler has a plan for its future, and will likely be around for awhile.

"We've been incredibly quiet for the last five months," he said. "The lack of information outside of Chrysler has not helped." the company's sales or public confidence in it's brands.

The company plans to lower sticker prices to boost sales and generate more cash as it fixes its struggling lineup.

Marchionne's Fiat, which now owns 20 percent of Chrysler (with an option for a full-buyout) was put in charge of rescuing the 84-year-old automaker by the U.S. government, which so far has provided roughly $15 billion in aid. Chrysler still has around $9 billion of that loan.

Its operations already broke-even in September because of savings from job cuts and factory closings by the prior owner and through combining Chrysler and Fiat's operations.

Joe Veltri, Chrysler's product development chief, said he has a lot more funding to revamp products and create new ones. Chrysler can go to a cupboard of impressive, cutting-edge FIAT technology to develop new products, a vast difference from Chrysler's prior owner, Cerberus Capital Management LP, which was not a manufacturer but a private equity firm.

"We have far more tools to work with," he said.

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