Will Fiat pull the plug on Chrysler?
Just the other day, it was announced that sales of the Dodge Dart – one of the first post-bankruptcy new-design Chrysler products – are down 33 percent this year so far. Toyota has sold nearly five times as many Corollas during the same period. The Dart is now in 9th place in the segment, sales-wise.
Given that the Dart is only one year old (launched as an all-new model for 2013) this is extremely worrisome news for Chrysler. The Belvidere, IL plant where Darts are assembled has been partially idled – with weeks-long layoffs for hundreds of workers. And – sure sign of desperation – Chrysler has upped the incentives for prospective Dart buyers from $400 last year to $2,200 per vehicle.
But even that is not likely to work if buyers think the Dart’s a stinker. It does Chrysler no good to “sell” cars at a loss, either. That can go on for only so long.
Whatever affection older generations felt for the original Dart, it hasn’t transferred to the new one – or to younger generations who have no memory of the original car.
Fiat – Chrysler’s fief overlord – is surely watching all this with growing concern. The Italian automotive conglomerate bought the bankrupted remains of Chrysler Corp. not for its cars but for access to its dealer network – and thereby, access to American car buyers, who haven’t seen a new Fiat (or Alfa) in decades. It was worth it to Fiat to buy-in for the sake of successfully re-launching Fiat (and Alfa) cars in the U.S. market.
There were some initial stumbles. Sales of the 500 micro-car – launched in 2012Â – were not as strong as had been hoped for during the first calendar year of its availability and as recently as this fall, overall sales had declined by an almost-Dart 29 percent. But the problem – apparently – was not with the car as such (or the Fiat brand) but with the fact that the 500 was the only Fiat in Fiat stores and it only came two ways (coupe and convertible). This limited portfolio limited sales, apparently.
Things began to change – dramatically, in Fiat’s favor – with the introduction of the high-performance 500 Abarth (a rival to the Mini Cooper S and other hot-shoe compacts) and the introduction of the 500L – a five-door wagon that gave Fiat-inclined buyers who needed more passenger (and cargo) space than the 500 could give them a reason to shop Fiat rather than some other brand.
Sales of the high-performance 500 Abarth were up 56 percent in January – and the regular 500 earned a Polk Automotive Loyalty Award – an industry award given to car models whose owners demonstrate brand loyalty and satisfaction with their purchase.
There is some good news on the other side of the street. Jeep sales – mostly on the strength of new models like the just-redesigned Grand Cherokee – are up. So also sales of Ram trucks (spun off from the Dodge brand a couple years back).
But Chrysler’s cars are – mostly – in (cue George Bush senior) deep doo-doo. The Dart thing is particularly troubling for two reasons.
First of all, the Dart is a collaborative effort between the Italians and the Americans. It is based on the Alfa Romeo Giulietta (Alfa is part of the Fiat conglomerate) and was supposed to infuse the moribund Dodge brand with import/euro-car sophistication – qualities notably lacking in Chrysler’s pre-bankruptcy small car, the Dodge Neon. That car sold well for a time – until buyers began to realize it was not particularly well-made. One still sees ’90s-era Corollas on the road today. Still-operational ’90s-era Neons are a much less common sight. The new Dart was supposed to remedy this but – so far – has not.
This would be bad regardless, but a failure in the small car segment is potentially devastating for Chrysler. Small, entry-level cars are a major automaker’s bread and butter. It’s where the volume is – and thus, the profits.
Also the practical necessity.
Chrysler – like everyone else selling cars – is facing a federal fuel economy fatwa (Corporate Average Fuel Economy, CAFE for short) that goes into effect less than two years from now that imposes a mandatory minimum of 35.5 MPG average. Cars that do not make this cut will become more expensive to manufacturer – and sell – as a result of “gas guzzler” fines. This will exert pressure on every automaker to cull models that do not generate profits sufficient to offset their cost to manufacture – or which can no longer be sold at a profit sufficient to justify their continued existence.
The Dart is one of just two current Chrysler/Dodge passenger cars (the other being the new Chrysler 200) that makes the 35.5 MPG cut – or even come close. The Luca Brasi-esque full-size 300 sedan is an admirable car, but it’s also a gas hog – even with its V-6 engine (and forget about the V-8). The Challenger muscle car, the Charger – even the minivans – hungry muthas, all.
Dodge – Chrysler Corp. – needs a successful economy car to even out its CAFE numbers. To make it feasible to continue selling V-6 and V-8 300s and Chargers and Challengers.
And the Dart isn’t cutting the mustard.
I would not be deeply shocked to see – a year or three down the road – Fiat either divesting itself of Chrysler and building its brand in the U.S. on the merits of its own cars (and through its own dealer network, which it is busily establishing) or shearing off all but the viable stuff – which may be primarily (or possibly only) the Jeep and Ram truck stuff.
This just speculation – but someone’s gotta do it.
Personally, I hope Chrysler’s ok – and that Fiat management isn’t already discussing behind closed doors a possible exit strategy.
But now that Fiat has succeeded – does it still need Chrysler?
That is the $64,000 question.
Throw it in the Woods?
Marchionne: Alfa Romeo returns to U.S. this year, NYSE listing by Oct. 1
http://www.freep.com/article/20140314/BUSINESS0103/303140137/fiat-chrysler-alfa-romeo-marchionne
Just sold a Dodge Dakota. It was my second Dakota (2004, 2008 respectively). The first one was destroyed in a head on collision. Both Dodges had similiar issues. First the 4.7L is a great engine from an engineering perspective, but sucks gas, the second truck never achieved the MPG on the sales sticker. Not even close, at least not until I ran a programmer on the truck, then it livened up a bit. The ball joints on both trucks went out well shy of 50k miles. They’re sealed, so you can’t service them, which means replacing them. Typically it was easier to just replace the entire assembly. On the 2008 the air condition drain was stuck behind the firewall insulation, so it effectively drained into the passenger floor pan. Couldn’t figure out where the water was coming from, thought I had a leak in the door or windshield. After searching the forums I found that it was a common issue with the Dakota’s for YEARS! And that’s the problem, my experience with Dodge is that they make no effort to correct deficiencies from model year to model year. They just pass the repair expenses onto the consumer because they typically don’t show up until after the warrantly is up.
I’m now driving a 2007 F350 with the 6.0L. Go ahead, say it, uggg. It’s a better built truck overall though, still not to the standard of my 1965 Chevy C-10, but it pulls a lot more too. The 6.0L is a good engine, right up to the point that Ford opted to use a enclosed oil cooler posited in the engine valley, and substandard coolant without a filtration system. So again, it goes back to the manufacturer.
In the case of the 6.0 though, a lot of Fords Engineering has to do with meeting EPA regulations. My last Ford F250 didn’t even have a muffler and that 7.3 thumped away like a champ. The more regulations auto-makers are forced to comply with, the more issues we’re going to have. At least now the EPA has turned it sights onto wood burning stoves… oh crap we have a wood burning stove.
Carmakers are sighing their death warrants. They never oppose govmint rules and instead implement them ferociously. It is why younger people are figuring out how to do without cars.
“It is why younger people are figuring out how to do without cars.”
Donkey Path Valley is the wave of the future?
Or, thank goodness for old cars, the people who soup them up, and the redneck philosophy that lives on in so many individuals. …Until the state crushes them under the weight of empire, that is?
Yeah, Duck Dynasty is popular for a reason. The show’s producers thought american’t’s would laugh at them and the show would be over in season one.
The coming clash will be with those people who are figuring out how to do without the car makers, … and the gooberment.
“Carmakers are sighing their death warrants. They never oppose govmint rules and instead implement them ferociously. It is why younger people are figuring out how to do without cars.”
I agree with this, to5.
New cars are too expensive, too complex, void of personality. The passion, the individuality. . . the fun is gone.
When safety and emissions standards first reared their heads, the automakers tried to fight them, to the point that GM infamously sent detectives to track Ralph Nader. This was just after Unsafe at Any Speed, which attacked the hapless Chevrolet Corvair, appeared and had become a bestseller.
GM was caught and, in a huge mistake, fessed up, making it clear to all including legislators that the company had to have been scared of the man for seemingly good reasons. As a result, automakers’ protests over ever stricter regulations in the 1970s and 1980s fell on deaf ears. At the same time the rise of the environmental movement painted cars as major polluters, exaggerating vehicles’ environmental impact in most respects.
But still there was enough of a hard kernel of truth to the criticisms that safety and emissions rules passed handily, and still do so today. Any attempts to protest now would be futile. Large corporations are looked upon as bad guys throughout society anyway.
The irony is that perhaps it didn’t have to happen in quite the same way. Donald MacDonald suggested in his 1980 book Detroit 1985 that GM could have defused the Nader–detective scandal by issuing a statement something like, “We did this because we have to protect our reputation and we suspect he’s working for a competitor. We think it’s Ford.”
I think there was a possibility that in the early 1970s, but no later, automakers could have threatened to close plants and stop selling cars over the burgeoning regulatory burden. That might have made a difference to the government, especially if a few plants had been temporarily shuttered to make new cars scarce. But this tactic might well have backfired also.
The point is that it’s far too late. No amount of protest will stop new regs, and as with so many other laws the big boys are in on the deal to keep smaller competitors from starting anyway. Only because Hyundai is part of a large Korean conglomerate was that company able to weather US conditions over the years and thrive today. You and I aren’t going to be able to start making cars ourselves, nor import a cheap Third World vehicle and sell it cheaply. That game is rigged. The big automakers aren’t going to protest a game they helped to rig.
As for me, as some of you remember, I work at a low level for Mazda, but these comments are strictly my own views. But I do worry about the long-term viability of my company because of all these factors combined with Ford forcing Mazda to go it alone in 2010 in a bad economy—after (in my opinion) milking Mazda for as much knowledge about small cars as it could…
Well-said, EK.
Especially as regard the now-closed window in re fighting them on emissions and safety rather than joining them.
The truth is (as you and any other person familiar with the industry knows) cars have been “clean” (and “safe”) for decades – according to any any reasonable standard. The standards now are unreasonable. The cost-benefit of installing catalytic converters (and later, EFI) made sense. These two changes reduced tailpipe emissions to almost negligible – at relatively low cost. Since the advent of these technologies, ever-smaller reductions in tailpipe emissions (often, fractional) are pursued at ever-increasing cost. It is madness – from any standpoint except that of deliberately increasing costs and (thereby) excluding potential competitors.
The bigger plan is to regulate personally owned vehicles out of existance, at least for 99% of the population that works for a living.
Hi Robert,
Agree – I’ve written (and spoken) about this, too. Case in point: The anti-diesel jihad is not about emissions; it’s about killing a viable threat to electric cars… which are never supposed to be affordable.
Any chance the CAFE standards are reduced or their implementation postponed. One of the idiosyncrasies of the Obama and perhaps Bush II administrations was creating rules for all sorts of stuff like light bulbs, washing machines and ceiling fans. I still have trouble understanding the cap on ceiling fan light wattage. There is even an equivalent to the CAFE standard for furnaces which is adding to cost, complexity and things that can go wrong (Since the furnaces now condense the water in combustion gas people are finding their condensate drain line frozen and the furnace not starting).
George, there is a reason for the cap on fan light wattage. The incandescent bulbs generate lots of heat and have no avenue of escape due to all the metal above. In a short time, the wire insulation becomes brittle, yellow and crumbly. The amount of heat can generate fires. And I’ve seen many of these fans with blackened wires and light fixtures. An LED light would be much suitable for these fans due to their low heat output.
to5 wrote, “An LED light would be much suitable for these fans due to their low heat output.”
Do you suppose a vent of some kind for the incandescent bulbs would work just as well?
It’d be a hell of a lot cheaper, too.
There’s no way in Hell I’m buying one of those $40 bulbs without having any other choice.
Maybe that’s why I’m practicing using candles?
The new Dart is just a boring car. No compelling virtues. No real identity. “Nice,” but uninspired styling. Good but not outstanding fuel economy. No expectation of exceptional quality.
Nobody was excited when the Dart was introduced. And nobody will miss it when it’s gone.
Chrysler/Fiat needed a modern day Lee Iacocca when they were planning this product. Someone with the brains to devise a sharp marketing angle and the balls to swing for the fence. Lacking anyone like that, they created the Dart.
A modern day Iaccoca would be a refreshing change. Unfortunately there are too many bored federal paper pusher bureaucrats to ever be a viable possibility. They would only allow of the next “CARB approved plastic gas can” inventor’s version of a car.
Hi Gary,
Yup – except of course the K Car would never pass muster today; it’d be “unsafe” according to federal regulations.
What this country needs, I submit, is a sane car. Something like the original K-car in terms of being simple, inexpensive and fuel efficient. There is no technical reason why a car capable of averaging 50 MPG that could also cruise at 75 MPH and cost no more than $8,000 brand new couldn’t be built.
But there is a political reason why it can’t be built.
Now what bureaucrat would have predicted (approved?) this:
The Ford Mustang was brought out five months before the normal start of the 1965 production year. The earliest versions are often referred to as 1964½ models, but VIN coded by Ford and titled as 1965 models with production beginning in Dearborn, Michigan on March 9, 1964 and the new car was introduced to the public on April 17, 1964 at the New York World’s Fair.
Original sales forecasts projected less than 100,000 units for the first year. This mark was surpassed in three months from rollout. Another 318,000 would be sold during the model year (a record), and in its first eighteen months, more than one million Mustangs were built
I think this ‘Dart’ has the same problem as the ‘GTO’. It’s misnamed for the market. When most people in this country who would be buying cars in this segment think of ‘Dart’ they’ll at best, think of Al Bundy’s car. The ‘GTO’ was named ok for people who really know cars, it fit the very earliest GTOs, but those aren’t the ones the general public thought of, so the car fell flat.
http://moparblog.com/wp-content/uploads/2013/05/AlBundyDodge.jpg
While I know what Shelby said about car names, I think that only applies to names that don’t already have images associated with them. Fiat would have been better off giving this car a model number or something than calling it a Dart.
Reading all these comments/stories, I really feel like I missed out. I must be in the minority, because I like this Dart. I’m sad it’s not doing well. Chrysler is in a particularly tough spot because their best is their gas guzzlers Jeep and Ram. Can’t divest from them. Chrysler will just have to take the federal penalties I guess.
My first car was a 1975 Dodge Dart Sport. I still have dreams of driving that car. It was so big and heavy, it just floated down the highway. It was a “slant six” and put out about 90 hp. As a 16 year old, I drove the shit out of it, and it always kept going, defiantly. Now I drive a 2005 Dodge Stratus from point A to point B, zombie-like, waiting and saving for the day I can get my hands on a late 60’s early 70’s Mopar again.
Anywho, that’s pretty much irrelevant to this conversation, but I have nothing to say about late model cars of any brand. Eric, I admire you that you can find the passion in you to write articles about products that are mere shells of their former glorious selves, not due to free market choices, but due to regulatory dictates.
Ditto that –
Every time I see a car like the old Dart, I smile. It’s not just reminiscing about an idealized era, either. Those days were better – if the criteria for that include a less hassled, more carefree existence. The old Dart was affordable, owner serviceable and fun – three things few, if any, modern cars can claim to be.
I’ve never owned a Dart, but have had a couple of the earlier Valiants which were great little cars. Very reliable, and the pre-emission models were good on gas as well. Handled pretty well for the day with torsion bar front suspension. Usually the body would rust out around the drivetrain, which just kept running and running.
I don’t know much about the new Dart, aside from its being an Alfa Romeo (these days meaning FIAT) under the skin. It is strange seeing new Fiats on the road again. Hopefully they are more reliable and more rust-resistant than they were when they ran out of the U.S. market 30 years ago with their tails between their legs.
My preference is for older American iron to begin with. I like simple, honest machinery that I can maintain and repair myself.
I don’t know why the Saturn is no longer produced. Mine has been a remarkable vehicle, the whole 13 years I’ve driven it. Gets 36 MPG on the highway, and at least 35 in town. Probably would do better if I could get rid of the air conditioner, which came with every Saturn then. I don’t use it here.
The really strange thing is that I’m still receiving mail from Saturn/GM after all these years. I’d buy another Saturn if this one ever died so dead it couldn’t be fixed, but that’s not an option! So far, I’ve never put a penny into it beyond basic maintenance and tires. Zip. My kind of car.
The original (plastic bodied) Saturns were neat little cars – excellent mileage (as you’ve pointed out) and also a lot of fun to drive. My opinion is they lost focus when they began producing conventional (steel bodied) and competent (but boring) cars like the L series.
The Sky was too little, too late – and just a rebadged Solstice anyhow.
My daughter had one of those when she lived in the San Francisco area; she sold it when she moved back to the east coast a few years ago and had a dozen people lined up to buy it, ended up selling it for more than she paid for it. Damn good car, guess that’s why the stopped making them – not enough repeat business. 🙂
I had a ’75 Dodge Dart that had the great slant six with everything up front and easy to work on, you could sit inside the engine compartment there was so much room. Unfortunately you always had to keep a spare ballast resistor handy, and the body pretty much rusted away before my eyes.
Now I own 2 Corollas, an ’01 and ’03 that I hope to keep running until I croak, given the self-spying capabilities built into new cars today.
Mama L,
“I don’t know why the Saturn is no longer produced. Mine has been a remarkable vehicle, the whole 13 years I’ve driven it.”
I’d politely ask you to think this through a bit more….
If it cuts down on sales, why might longevity be a factor to be ignored, or even sabotaged….?
Dodge, Chrysler, Chevy, Ford……all companies that lost my business many years ago. After WWll the Japs started producing cars….and other goods…..that did not break down. This sent a shockwave around the country waking up America that its not normal to experience constant breakdowns. Unfortunately American manufacturing never woke up and withered itself to death. This is why they try to “sucker” people with their incentives and only attracts people looking for a bargain and not quality.
In a last note….none of the “American” companies are really American. As an example my 2000 Harley Ultra-classic was made from mostly cheaply foreign parts. Even Harley knew not to advertise American made as they got sued for it yet knuckleheads ( no pun intended) still buy that crap.
JoePA,
I would not classify a Harley as inexpensive.
I would think that more people today would buy “big-ticket” items (actually every type of purchase) more on a value base than strictly up front costs. (ie not penny-wise pound foolish).
I said cheap parts….not cheap bikes. In fact it was the most expensive bike I owned and it was a turd with two wheels. This was the only bike I did not care when it was sold. A turd and I let Harley know it was a $26,000 turd.
I have no animosity toward Harleys – and am all for “different strokes” and “whatever floats your boat” – but I don’t get the attraction, personally.
The prices they charge are shocking – given you can get a very comparable (functionally, perhaps superior) bike from any of several Japanese bike companies.
A base Sporty is – what – almost $9k?
And that bike is too small for most men.
For me, part of the fun of ‘cycling is that the cycles I like (Japanese) are very inexpensive to acquire and rarely, if ever, break down. I can’t imagine spending $20k (let alone $35k) on a dresser… not when I can (and have) bought a very nice Japanese cruiser that stacks up quite favorably, functionally, for a third or less that sum.
Eric. One thing I stress with people in my club or those looking to purchase their first bike is you don’t need to spend a lot to get a great bike.