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New Chrysler is still finding its way with partner Fiat

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New Chrysler is still finding its way with partner Fiat

Updated 1h 55m ago


By Sharon Silke Carty and James R. Healey, USA TODAY

A year out of bankruptcy court, Chrysler Group has little tangible to show for 12 months beyond a 3-inch-thick, 5-pound, five-year plan laid out in November.

Chrysler's still losing money, albeit less. There have been few new products yet: It rolled out a heavy-duty version of its Ram pickup, and a new 2011 Jeep Grand Cherokee launches this month. But on the first anniversary of its shotgun marriage with Fiat, we've seen none of the promised Fiat small cars or high-efficiency small engines. Thanks to congressional intervention, its fight to shrink its dealer network grinds on in arbitration.

Patience, CEO Sergio Marchionne has counseled analysts and media. He's also CEO of Italy's Fiat Group, which got 20% of Chrysler and management control in the government-supervised deal for Chrysler's bankruptcy reorganization.

"We are absolutely confident that the restructuring plan we announced in November places Chrysler on track" to survive and thrive, he has said.

For the moment, at least, some experts are willing to withhold judgment.

"I look at Chrysler and Fiat as a work in progress," says David Cole, chairman of the Center for Automotive Research. "They've got not just one company coming back, but the integration of two companies. Right now, they are holding their own."

Fiat is a struggling savior: Despite a first-quarter operating profit equivalent to $422 million, Fiat reported a net loss of $30 million for the quarter and said its debt rose slightly to $5.7 billion.

Too, Fiat's products in Europe, despite improvements, generally are scored no better than average against their competition.

Marchionne's challenge is to inexpensively blend two underperforming — and undersized in today's land of auto giants — companies, organizing them to manufacture and sell one another's products under various names around the world.

More than anything, though, Chrysler needs fresh products to bring in buyers and grow sales.

"It's been a long dry spell since we had brand-new product," says John Schenden, president of Pro Chrysler in Denver.

As the smallest of the Detroit 3, Chrysler has stood at the edge of its own grave several times since the gas shortages and economic malaise of the 1970s and early 1980s sent American buyers swarming to then-inexpensive, gas-sipping Japanese cars — and forever changed the competitive landscape.

This time, the company's situation is worse.

Marchionne, who likes to quote poets and philosophers, tapped rocker Bruce Springsteen's line from Thunder Road: "We got one last chance to make it real," adding, "That sums up the urgency of where we are today."

Urgent items on Chrysler's Year 2 "to-do" list:

•Improve quality. If potential buyers can't count on cars that work right, fit right and last many years, nothing else will matter.

Chrysler knows it's had a problem, admitting in the five-year plan: "New models launched below average quality." (The emphasis is Chrysler's.)

An embarrassing example: Chrysler's Sebring convertible was rated the least-reliable vehicle of any evaluated by Consumer Reports magazine in 2008. The Sebring sedan was CR's least-reliable family sedan in 2009.

Chrysler, Dodge and Jeep brands consistently have been at or near the bottom in the J.D. Power and Associates Initial Quality Study, which measures problems the first 90 days of ownership.

That reputation will be hard to lose. "It takes considerable time to positively change consumer perceptions of quality and dependability, sometimes a decade or more," says David Sargent, Power vice president for vehicle research.

Marchionne has touted the 2011 Jeep Grand Cherokee as the showcase for Chrysler's new quality and execution standards. The Jeep development began well before Fiat's arrival, but Marchionne has emphatically and very publicly said it won't go to showrooms unless and until he's sure it is flawless.

If he delivers, it could be a start on a new image. "The trick" in raising quality scores, says Jake Fisher, senior engineer at Consumer Reports, is to start with good vehicles, "then tweak rather than redesign."

He says Chrysler can't do that until its vehicles become much better starting points. "You won't get a Sebring reliable through tweaking," he says.

Is Fiat the right mentor for world-class quality?

"Some of the newer Fiat models are much improved from what they were two years ago," says Brian Walters, senior director of European research for J.D. Power. A Power report published today in France lists Fiat's 500, due in the U.S. late this year, as top-quality and also among the most satisfying minicars in Power's "city car" category.

A similar Power survey of the U.K. market rated the Fiat Panda second among city cars.

However, Which?, a CR-style magazine in the U.K., rated Fiat's upscale Alfa Romeo brand "very poor" for reliability in a recent report card on cars from new to 3 years old.

•Hold onto its personality. All else aside, Chrysler's held on by being the entertaining Detroit underdog, unafraid to play to passions and innovative in its engineering. It's the automaker that has continued to produce the beloved big-dog Hemi V-8 and also made the Hemi the first car engine on the market with a cylinder shut-off system, so under light load it runs on just four cylinders for a substantial fuel savings.

Chrysler's the one that bothered to create such exciting niche models as Viper and Prowler.

It's the company that rolled the dice — and won — with the offbeat PT Cruiser.

Chrysler embraced the retro muscle-car phenomenon and launched its Challenger before General Motors got its revived Chevrolet Camaro out the door.

It popularized minivans in the 1980s and remains the minivan sales leader. Still an innovator, its vans offer ingenious underfloor storage, swiveling seats and in-vehicle TV.

Chrysler's revival must "be about product," says Jim Hall, head of industry analysis at 2953 Analytics. "The truth is, the previous owner (Cerberus) did ... little for new product. They turned off what they could in one of those generally horrible, incompetent ways that people run a business."

Hall says Fiat's own lively personality should help particularly the Dodge brand, which will sell Fiat-designed models. Dodge's "small cars will have more Fiat DNA, and then they'll be a blast to drive."

•Make money. Chrysler said in its April "fresh-start" accounting that it lost $3.8 billion from June 10, when the post-Chapter-11 Chrysler Group was formed, through 2009, but improved cash and debt positions. And it reported a loss of $197 million the first quarter of this year. Marchionne forecasts Chrysler will finish 2010 between break-even and a $200 million profit.

Chrysler is "going to tread water until they really have new product coming," Cole says. "Until then, they have to conserve cash and stay very lean."

•Quickly integrate with Fiat globally. Chrysler and Fiat, though well-known names, are relatively small, regional automakers in an industry now dominated by global giants.

Marchionne forecasts more than half of Chrysler's sales will be Fiat-based vehicles by 2014. And more than 40% of Chrysler's powertrains either will be from Fiat, or enhanced with Fiat technology.

Chrysler, in turn, will share larger vehicle designs Fiat lacks and provide its new Pentastar V-6 engine, giving Fiat a larger, more-powerful engine developed to meet fuel-economy concerns.

Chrysler will build Fiat models to sell in the U.S. as Chrysler and Dodge cars, and also export under Fiat brands for foreign markets. Fiat also plans to build models overseas for Chrysler to sell under its brands in North America.

By 2016, Marchionne's plan envisions Chrysler will have nine new products on U.S. roads, six based on a new Fiat/Chrysler joint platform.

Schenden, the Denver dealer, says buyers already are seeing Chrysler in a better light.

"We're starting to see more positive press with the new product coming out, and the new management, and the whole organization," he says.

"It gives us an opportunity."



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