by Jeff Reeves | January 10, 2012 7:59 am
Chrysler already was sputtering when the financial crisis hit, and the Great Recession caused the automaker to break down entirely. Only a partnership forged with Italy’s Fiat allowed the once-great automaker to survive bankruptcy in 2009.
Merging the car companies has been slow and sometimes painful for both sides. However, American motorists will have their first real chance to explore what the Chrysler-Fiat partnership can offer with a blast from the past: a sleek redesign of the iconic Dodge Dart compact.
It is the first true test of shared platforms and technology. But will it sell?
The reinvented Dart compact debuted at the Detroit auto show Monday. The model shares little with its predecessor from the 1960s and ’70s aside from the name — it is sleek, compact and fuel-efficient, with an estimated 40 mpg.
The popular nameplate will help connect with consumers, as will the Alfa Romeo frame that inspired the Dart and is expected to make the car a fun drive. It also helps that Chrysler has managed to push itself back into the marketplace with some force in 2011. Chrysler Group brands that include Jeep and Dodge managed to score a stunning 80% year-over-year sales gain in December. A refreshed Chrysler 300 helped lead that charge, as did the Ram, which was one of the top 10 best-selling cars of 2011.
The balance sheet is coming together, too, with Chrysler raising its full-year fiscal 2011 forecasts after swinging to a profit in the third quarter. The company is poised to report its first annual profit since 1997 in the year ahead.
The harsh reality, however, is that the gains made by Chrysler group outside of the Chrysler 300 have come largely from traditional segments — gas-guzzling SUVs and trucks. The corporation doesn’t have a flashy electric vehicle like the Chevy Volt from General Motors (NYSE:GM). It doesn’t have a wildly popular hybrid like the Toyota (NYSE:TM) Prius.
The fact is the Dart is a crucial test for Chrysler because without it, the company will remain an also-ran in the small-vehicle market that represents about 15% of total domestic auto sales. Chrysler hasn’t had a decent compact since the Dodge Neon, and the growth of the small-car segment amid higher gas prices and weak consumer spending means this is an opportunity that needs to be seized.
Case in point: Chrysler’s current compact, the Caliber, sold only 35,000 last year compared with sales of 240,000 for the Toyota Corolla. Rivals like Honda (NYSE:HMC) and its Civic also have a dominant position in the small-car market; Detroit counterpart Ford (NYSE:F) has been turning heads with its own European-influenced compact, the Focus; and up-and-comers like Hyundai are making sturdy progress, with the Elantra recently earning North American Car of the Year honors.
Worse than these numbers are the fact that compacts are “starter cars” for many drivers. If young, first-time buyers have a good experience, they could stick with the brand for years to come.
Chrysler is hoping that kind of brand loyalty will help give the Dart a leg up due to the nostalgic nameplate. But a name can only take the automaker so far in the crowded compact marketplace.
And let’s not forget that brand power can swing both ways. If this initial brainchild of the Fiat-Chrysler partnership falls flat, it could sour drivers on future offerings from the company for some time.
Jeff Reeves is the editor of InvestorPlace.com. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.
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