Chrysler axes Pacifica, Magnum, Cruiser – moves to cut costs and raise money
It’s not official, but the inside word – according to the Detroit News – is that Chrysler’s board of directors will today ratify the decision to discontinue the Chrysler Pacifica, the Dodge Magnum, and the P.T. Cruiser.
The Pacifica was the first “crossover” vehicle by an American manufacturer and one of the first on the market, but it never sold well. Auto magazines panned it for being underpowered and slow. Also, Chrysler blundered in introducing it with lavish levels of standard equipment, making it high-priced, especially in relation to the similar appearing Chrysler vans.
The Magnum was also a pioneer: a two-door wagon, the first since the ’55 – ’57 Chevy Nomad. It, too, sold poorly. Dodge dealers complained and Chrysler gave them their own version of the 300, the Charger. Interestingly, it is rumored that Cadillac will build a wagon version of the new CTS, presumably with four doors. So, once again, Chrysler may have spotted the market first, but missed hitting it.
The PT Cruiser, in contrast, was directly on target. It was a strong seller, offering both style and practicality at an attractive price. But, it was also a niche vehicle and, as such, hard to update. Its unique appearance couldn’t be altered much without affecting its appeal, yet without altering its appearance greatly, it would eventually grow stale – and did. Chrysler is abandoning this market to the Chevrolet HHR.
The move has been anticipated. Pacifica sales are down 30% from last year’s terrible sales level. Magnum sales are off 32% and the PT Cruiser is down 27% from last year. The Jeep Commander’s sales are down 23% and it may also be dropped.
Meantime, Chrysler CEO Robert Nardelli characterized Chrysler as “laser-focused” on rapid decisions, including the product line. Yesterday, Chrysler hired former General Electric executive John Cataldo to fill the new position of vice-president for business development, mergers, and acquisitions. Chrysler said he would be in charge of “all major business activities globally, including alliances, partnerships, joint ventures, and key multiregion, product-related programs.” In other words, he’s the man who’s going to be looking for a platform from another manufacturer upon which Chrysler can base a new small car.
Nardelli also said that Chrysler is selling $1 billion of unneeded real estate.
So far, the new Chrysler management team is taking very predictable steps: mending relations with dealers, cutting employment, cutting labor costs (the new UAW contract), eliminating slow-selling models, and focusing on outsourcing for new products. To say that these are predictable moves is not to downplay them: in a couple of months, Chrysler has done more toward achieving a turn-around that Ford appears to have done in the year that it’s had a new CEO.
But this is still picking low-hanging fruit. Identifying problems is the first step toward solving them, but it isn’t arriving at a solution, either. Nardelli’s emphasis on raising and conserving cash indicates that he appreciates that the future of the company depends on its ability to market and sell new models. The moves the company is currently making can buy the company time, but they can’t buy it a future. That can only come from marketing and selling new models.
Bob Nardelli is not the first hot-shot executive from outside the industry brought in to run a car company. In 1952, Packard brought in James Nance, at the time the boss of Hotpoint, an appliance maker, to run the company. He’d turned Hotpoint around, in a market where it was competing against General Electric and General Motors (Frigidaire). He was recommended for the job by George Mason, the boss of Nash-Kelvinator.
As President of Packard, Vance made a number of moves quickly. He pushed development of a V-8 engine and automatic transmission. GM had introduced both to the market previously, and other car companies were following suit. He also pushed to make the Clipper a separate line from Packard, so that the mid-priced car would not detract from the prestige image of the Packard brand. He also started negotiations with Mason which could have led to a merger between Packard and Nash, allowing development costs for the Packard V-8 and Ultramatic transmission to be spread over more vehicles and arguably creating a competitive product line-up.
Initial reviews of Vance’s performance at Packard were stellar. But, by 1956, Vance was out of the company and that year saw the company build its last real Packard. Part of that undoubtedly was bad luck, part may have been flawed judgment. Mason died, which eliminated the chance of a merger with Nash. Chrysler bought the Briggs Body Company, which had been subcontracting Packard bodies. That forced Packard to build their own, which cost them a lot of money and created serious production delays. Developing that V-8 and the Ultramatic transmission cost a lot of money, too.
In the end, though, Vance made mistakes that someone experienced in the industry might have avoided. He merged the company with Studebaker. A more experienced executive might have spotted Studebaker for the dog it turned out to be. A more experienced executive might have elected to buy Hydra-Matics from GM rather than develop an automatic transmission. A more experienced executive might have realized that Briggs was a weak spot and anticipated the risk.
But then, a more experienced executive also might have recognized that it was already too late for Packard when Vance took the job.
It is way too early to determine whether the new Chrysler and Bob Nardelli are making the right moves. So far, all that can realistically be said is they don’t seem to be making wrong ones. Yet.