If you watched the National Football League’s undefeated Green Bay Packers pummel the Detroit Lions on Thanksgiving Day, you probably saw a different kind of ad for Chrysler’s upscale 300 sedan — one that includes a 94-year-year old poem. “When you’re up against a trouble, meet it squarely, face to face,” Michigan’s Poet Laureate Edgar Guest wrote back in 1917. “When it’s vain to try to dodge it, do the best that you can do. You may fail, but you may conquer — See It Through!”
Although it’s still early in Chrysler’s resurgence, it’s clear that the Detroit Three automaker has met trouble head-on and seen it through. After all, it was a little more than two years ago that the U.S. government anted up $12.5 billion to bail out Chrysler, forced it to file for bankruptcy and officiated its shotgun wedding with Italian automaker Fiat SpA (PINK:FIATY).
Unthinkably, the company not-long-ago labeled “financially unviable” is gearing up to float an IPO sometime next year.
Now, as part of Fiat, Chrysler is on track to post its first full-year profit since 2005. Sales are rising, driven by strong growth in the Chrysler, Jeep, Dodge and Ram brands, and Fiat is investing $1.7 billion for its next-gen Jeep SUV, which will be built in Ohio.
Chrysler also is becoming more competitive in the U.S. market. While Ford (NYSE:F) and General Motors (NYSE:GM) October sales rose by only 6% and 2%, respectively, Chrysler’s grew 28% year-over-year. The outperforming brand was Jeep — sales through October were up 44% from the same period last year.
Chrysler’s hottest models this year include the Jeep Compass (up 160%), Grand Cherokee (up 59%) and Patriot (up 47%). Dodge pickups and SUVs are prospering, too. Through October, the company has sold nearly 43,000 Dodge Durango 4X4 SUVs, compared to just 183 last year.
Wild Swings in Profitability
Ironically, those “comeback” brands and models were responsible for a good share of Chrysler’s pain after its $36 billion takeover by Daimler-Benz (PINK:DDAIF) back in 1998. First off, the “merger of equals” turned out to be anything but, and by 2001, DaimlerChrysler was losing money by trunkload.
The Chrysler 300 sedan helped steer out of the skid in 2005, generating $2 billion in profit for the year. But when U.S. consumers snubbed large vehicles like the Dodge Durango and Jeep Grand Cherokee in 2006, the pendulum swung the wrong way, sweeping that profit into a $1.5 billion loss. Between 2006 and 2008, Chrysler lost about $30 billion, forcing Daimler to pull the plug.
That’s why Fiat’s product vision and a strong marketing hand have been a critical component of Chrysler’s current resurgence. Consider the case of Chrysler’s Sebring — a model that some dealers actually admitted trying to hide on their lots. One of Marchionne’s first acts after assuming control of Chrysler was to revamp and upgrade the deadweight sedan, which he renamed the Chrysler 200.
Amid howls of protest from Congress, the reincarnated Sebring debuted in a $2 million “Imported From Detroit” Super Bowl spot — an ad that was very much like the one the automaker premiered in Detroit last week.
It turned out to be a good bet: Chrysler has sold nearly 70,000 of the midsize Chrysler 200 so far this year, making it the second-best-selling Chrysler model behind the Town & Country. October sales of the 200 rose by more than 400%, while the full-size 300 model slipped nearly 30% — a likely motivation for the poetic ad pitch.
Chrysler to Fiat’s Rescue?
Now might be the time for Chrysler to return a few favors for all of Fiat’s faith. The Italian automaker is counting on the hot-selling Chrysler brands — particularly Jeep — to help it weather the slowdown in European sales. Marchionne said last week that Jeep, which is doubling sales in Europe, is “the best brand Chrysler owns by a long margin.”
Fiat sales have been hammered by the slump in Europe, and the Fiat brand, reintroduced in the U.S. after a 28-year absence, is foundering. The 40-mpg Fiat 500, a vehicle the company agreed to build as part of the Chrysler acquisition, had sold fewer than 16,000 through October.
That’s why Marchionne gave the boot to North American chief Laura Soave last week, handing the job to 19-year Chrysler veteran Timothy Kuniskis, who most recently served as product marketing director for the Fiat and Chrysler brands.
More Challenges Ahead
Chrysler’s Thanksgiving Day ad is more than just throwback verse and Muddy Waters background music (non-football fans can see it on YouTube). It’s a story about ruin and restoration — or as the automaker would say “capturing the resolve of the people of Detroit and Chrysler to overcome obstacles and prove their best days lie ahead.” It’s also Chrysler’s story: a ballad of the trouble it’s seen, the tenacity that brought it back and high hopes for where the road leads from here.
Is Chrysler out of the woods yet? No. The economy is still sluggish, and consumers’ tastes in vehicles can turn on a dime — a challenge given the company’s strong portfolio of large vehicles. Still, Fiat has an ace up its sleeve in its fuel-efficient technology.
The next move might well involve launching an electric vehicle like the Fiat 500 that has the style and feel of the Chrysler brands American car buyers want to fall back in love with. Marchionne has driven down this road before.
As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.