January 12, 2010 / 12:42 AM / in 8 years

Lacking new products, Chrysler touts plans

By Soyoung Kim - Analysis

DETROIT (Reuters) - At a convention hall packed with auto executives from Frankfurt to Tokyo to Detroit touting their gleaming products, Sergio Marchionne has the toughest sell: a still-unproved promise to turn around Chrysler.

Taking the stage at the Detroit auto show, Marchionne said the worst is behind Chrysler and his five-year revival plan for the automaker will work -- based on a product lineup that is still taking shape and will take years to deliver.

“That we’ve just lived through 2009, it is one of the most painful experiences that any industry can possibly go through,” Marchionne, who is chief executive of both Chrysler and Fiat SpA, told reporters.

“We’ve been given a second chance. I have absolutely no intention of disappointing.”

Chrysler, which emerged from a U.S. government-financed bankruptcy in June under the management control of Fiat SpA, is struggling to rebuild trust among American consumers by revamping its aging, truck-heavy lineup through 2014, with a dozen new vehicles built on Fiat platforms.

Chrysler is not unveiling any new vehicles at the Detroit show, the industry’s biggest annual trade event.

Other major automakers unveiled dozens of new models, concepts and tweaks to existing vehicles at the Detroit show. GM, which went through its own bankruptcy, is showcasing the Spark subcompact, the Cruze small car and a concept for GMC intended to broaden that brand’s appeal to younger car buyers who only know it as a maker of rugged SUVs.

The first vehicle due from Fiat -- the 500 small car -- is not expected to arrive in U.S. showrooms until the end of 2010. Analysts and industry experts have warned that Chrysler could be short on time to steer its faltering operations toward recovery.

Chrysler saw a 36 percent decline in U.S. sales last year, the largest drop among the six biggest automakers in the U.S. market. Overall U.S. industry sales were down 21 percent to 10.4 million vehicles, their lowest level in 27 years.

“The issue with Chrysler is simply how long this vacuum in their product pipeline is going to be,” said Earl Hesterberg, chief executive of auto dealership chain Group 1 Automotive.

“Chrysler’s product development was the most disrupted -- going from Daimler to Cerberus and now this alliance with Fiat. They’re going to struggle until this alliance with Fiat matures,” AutoNation Inc Chief Executive Mike Jackson told Reuters.

Under the former ownership of Cerberus Capital Management , Chrysler was forced to freeze product development for much of 2008 and 2009 as it scrambled to save cash amid mounting financial problems.

Jackson also said that the termination of Chrysler dealerships also has created “tremendous ill-will” among its dealers, hurting the company in the marketplace.

Addressing concern about the recent decline of sales, Chrysler executives and some of their government supporters said they were prepared for the near-term void of new vehicles and Chrysler is adequately capitalized to cover the period.

Steve Rattner, the former head of the Obama administration’s autos task force which oversaw the restructurings of GM and Chrysler, said it was too early to judge Chrysler’s progress.

“The cupboard was bare. They were left with very little product. We knew that, Sergio knew that, and so what we look for is what is coming,” Rattner said, after touring the Chrysler stand with Marchionne.

“We knew that it was going to take a while to get from here to there and we capitalized them in a way to give them the running room to get from here to there. I think they have the running room they need to do what they can do.”

Rattner headed the White House team that made the decision to hand management control of Chrysler to Fiat through a bankruptcy funded by the U.S. Treasury.

He has said that administration officials were deeply divided last year about whether that was the right course or whether it would have been better for the industry to have the automaker liquidate.

Concern for preserving Chrysler jobs -- including those at its suppliers and dealerships -- tipped the balance in favor of the Fiat deal, Rattner has said.

Marchionne said Chrysler was on track to deliver an operating profit for 2010, as outlined under the five-year turnaround plan.

“We’re trying to run this business for the long-term. At the end of the day, the question is we’re going to make money doing what we do or we’re not going to make money,” he said. “And if the answer is that we won‘t, then I think we should pack up and go home.”

The automakers briefed reporters on their new products and plans on Monday, and were set to do so on Tuesday as well. The show, which marks the start of a season of trade shows for automakers, opens to the public later this week. (Reporting by Soyoung Kim; editing by Carol Bishopric)

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