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Tuesday, November 14, 2006

 

Trouble In Auburn Hills


What with GM digging out of a hole and Ford still in the hole, it seemed only a matter of time before DCX felt the brisk winter wind whistling around its financial ankles. Like Ford and GM, Chrysler Group has launched hot new cars and crossovers like the Chrysler 300 and Dodge Caliber but many of its Cars, Trucks and SUVs are not moving as well as originally "programmed." Blame the economy, gas prices or the favorite reason for market share losses, Toyota. It doesn't matter, $1.5 billion in losses in the most recent quarter get your attention. "Domestic" products, especially SUVs and Trucks have gone from cash cows to financial boat anchors. New Sales chief, Steve Landry has his work cut out for him and further production cuts are underway. The problems are deep enough that aggressive discounting is once again front and center.

The cutbacks are underway...from production cuts to supplier cuts and a new aggressive leasing program that carries with it the usual residual risks. When you fly into Detroit Metro airport, you may see large parking lots of new cars...likely, those are Chrysler products, waiting to be shipped to dealers who have cut back on their order banks. Unlike Ford and GM, however, Chrysler group's parent in Germany has already whispered the word, "spin-off."

We're not sure how DCX would spin-off Chrysler Group should the sales/profit story worsen. It would likely require a suitor...perhaps Nissan? Plus...how do you unravel the cross product plans? One thing for sure about the current car business...it's not boring!

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