Chrysler to put Web in the Car – Gimmick or Breakthrough?

Chrysler to put Web in the Car – Gimmick or Breakthrough?
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Chrysler plans to be the first car manufacturer to offer internet access inside the car, initially as a dealer-installed add-on, then as a factory installed option.

“We want to make the radio itself a WiFi port,” according to Chrysler product development boss, Frank Klegon, speaking at the New York auto show and quoted by the Washington Post.

This is, apparently, what passes for “product development” at the new Chrysler.

By this point, it might seem that automakers should have gotten the message: customers do not want their cars to be their cellular telephones, or their navigation system, or even their web browser.

They want their cars to be cars.

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Used vehicles with factory-installed navigation systems uniformly have lower resale values than equivalent vehicles without such systems. Meanwhile, portable GPS systems are widely available at prices that are a mere fraction of automakers’ built-in navigation systems. Similarly, there is strong demand for the ability to plug in hand-held devices and use Bluetooth with a vehicle’s audio system. There is, however, little demand for making the car a separate cell phone. Even GM’s OnStar, which pioneered that approach, has spent the last several years stressing other benefits to OnStar, as well as developing a way to merge hand-held and car cell phones into one number.

Now, Chrysler has decided the best way to sell cars is to make them into iPhones. But, Mr. Jobs got there first, and his product is a lot cheaper. It’s also probably better built.

This week marks the opening of the New York Auto Show. Though no longer a major international show, it remains the largest East coast auto show of the year, and so there is some obligation for manufacturers to come up with new and tantalizing ideas with which to impress the audience.

Even so, the Chrysler announcement seems nothing more than a calculated distraction.

What it needs to announce is a realistic plan for survival.

Chrysler is getting very near the point where people will cease considering their products – at any price – because they do not believe the company will survive.

Time and circumstances are not on the company’s side.

Earlier this week, experts revised predictions for 2008 new car sales, predicting that the U.S. auto market would drop as low as 14.5 million vehicles in 2008 – about 10% below the 16.1 million new car sales in 2007. According to the Wall Street Journal, sales that low would cut $40 billion in revenue from the industry.

American car makers would take a disproportionate hit, because sales of GM, Ford, and Chrysler products drop more in down markets than do those of Japanese and German import competitors. An overall 10% drop would mean a considerably larger drop in sales for American auto makers.

Of course, Chrysler is in the worst shape of any automaker, lacking new products in the hottest segments of the market and lacking the financial reserves to weather declining sales while simultaneously creating next-generation vehicles. Chrysler has no executives in its top ranks who have either successfully managed an automobile company or successfully engineered a corporate turn-around.

Whether they are good visions or not, both Ford and General Motors have articulated what they see as their place in the automotive market. For Ford, it’s a return to its roots as a middle-class car, a value for the money. At GM, it’s that of a technologically advanced, globalized company at the forefront.

But, Chrysler has articulated no vision for the future.

In the Cerberus purchase of Chrysler, there was always a strong, but unmistakable, undercurrent of hubris. The implicit premise of the purchase seemed to be that Chrysler’s problems were all the consequence of blind, bumbling management, not fundamental and intractable problems which had confounded some of the best management minds in the auto industry. The purchase was premised on the notion that Cerberus could make money with a car company that Daimler-Benz had given up on.

Ford’s announced plans –announced prior to the recent downturn in new car sales – call for it to spend $12 billion to $14 billion more than it takes in between now and 2009, when the company says it will be able to make a profit. Chrysler couldn’t afford to do that because it probably doesn’t have that much money and it cannot expect to be profitable in 2009.

If Chrysler is serious about exhibiting at next year’s New York Auto Show, it should be taking the opportunity of this year’s show– held, after all, in the financial capital of the world – to articulate how it intends to accomplish that goal. It cannot succeed by selling its products on price. That’s what it has been doing for years. It cannot succeed with the two new products in its line-up, the Ram and the Challenger. Both are being introduced into soft markets, the Ram against strong competition from the new F-150 and the reduced-price Tundra. Consolidating dealers, eliminating overlapping and slow-selling models, and cutting labor costs won’t solve the problem, either. Those are necessary, but not sufficient steps. Those are not steps that sell cars.

Nor, for that matter, does building an iPhone into a car.

What do you think?
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1 comments:

  (6023) posted on 03.20.2008

Gimmick or Breakthrough? How about its just a matter of time untill it happend anyway. like it or not it will be in there option or not.

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