Topic: Chrysler / Dodge / Jeep Tidbits

[UmroAyyar]

Chrysler's new trend: 3 brands, 1 location
Automaker hopes bigger outlets with fuller product lines will increase sales.
Eric Morath / The Detroit News

BLOOMFIELD HILLS -- With a child care area, full-service cafe and Wi-Fi, the spacious Golling Chrysler Jeep Dodge on Telegraph boasts amenities more akin to an upscale mall than a traditional auto dealership.

The 3-year-old store represents Chrysler LLC's vision for the future of its retail network: A single store that sells all three brands -- Chrysler, Dodge and Jeep -- and offers an inviting atmosphere that heightens each nameplate's appeal.

Chrysler's goal to narrow its stores into a single channel has gained momentum in the past year, after nearly a decade of starts and stops. The Auburn Hills automaker's latest effort, dubbed Project Genesis, appears to be succeeding, in part, ironically, because the industry is failing.

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Falling automotive sales -- especially among trucks and SUVs -- and Chrysler's goal to thin its product lineup of overlapping vehicles are two major factors that have hastened the process, pushing some dealers out of the business and others looking to expand, said Steven Landry, Chrysler executive vice president for North American sales.

"As overall volumes shrink, dealers realize that there are not enough sales for everyone," he said. "The bigger dealers, with more (volume) and a full product line are more likely to be successful."

The automaker trimmed 196 dealers from its ranks nationwide in the past 12 months; at the same time, 70 Genesis stores have been created. Now, 58 percent of all Chrysler stores sell Chrysler, Jeep and Dodge vehicles.

Unlike with previous consolidation efforts, Chrysler is eliminating overlapping products, so that a dealership may not offer a midsize SUV in more than one brand. In the future, a dealer who wants to offer a full line of products will have to sell all three brands.

Landry and others contend tri-branded stores will have more sales and will be more profitable, allowing dealers to afford some of the sparkle and business-building amenities that Golling boasts.

Efforts to trim the number of dealers and ensure the remaining are profitable is essential for Chrysler and Detroit's other Big Three automakers as they fight to retain market share against foreign competitors, said Paul Melville, an automotive specialist with Grant Thornton LLP.

The typical Dodge franchise sells 378 units a year. In the same period, the typical Toyota dealership sells 1,800 vehicles. Ford Motor Co. and General Motors Corp.'s best-selling brands average fewer than 600 vehicles per dealership annually, according to the National Auto Dealers Association.

"Consolidation is definitely the right thing to do," Melville said. "Chrysler would much rather have one really good dealership in a certain area than four poor ones."
A combination that works

Over the course of a decade, Bill Golling was able to consolidate his Chrysler-Plymouth dealership with nearby Jeep and Dodge dealers on Telegraph. He has turned the site of a former movie theater into a 14-acre retail center.

Since then, Golling has posted rising sales, with more and more customers walking through the doors under the windowed arch Chrysler hopes will become a signature of its new stores.

In 2004, the last full year in which Golling operated two separate dealerships, he sold 4,334 vehicles. In 2007, his business grew to be one of Chrysler's largest stores, selling 6,175 vehicles.

"When you sell all three brands and something gets hot, you have the flexibility to move with the market," he said.

Combining as many as three dealerships into one, however, often takes a seven-figure investment, and it's something the automaker cannot force because dealers operate as independent businesses.

Some dealers are having more trouble consolidating or are reluctant to do so.

Alan Helfman, who owns separate Chrysler-Jeep and Dodge stores in Houston, said consolidating to one location would cost him sales because some customers wouldn't be willing to drive farther and would have choices of other car dealers along the way.

Other dealers have had difficulty consolidating because some Chrysler franchises have paired themselves with other automakers' brands to offer a full lineup. State franchise laws often prohibit Chrysler from forcing consolidation of nearby dealerships.
Ford and GM follow suit

Like Chrysler, GM and Ford are taking steps to trim their dealer network.

In the past nine years, GM has successfully consolidated its Pontiac, Buick and GMC dealers into a single channel; 80 percent of those brands' sales now come from unified dealerships. That's up from less than 50 percent in 1999.

As Chrysler intends to do, GM realigned product offerings to prevent overlapping. Buick, for example, once offered eight vehicles, including an SUV and minivan. Today, it sells just two cars and a crossover.

While Ford is not looking to combine its Ford, Mercury and Lincoln brands into single dealerships, the Dearborn automaker is working to consolidate multiple dealers within the same metropolitan market, said Ford spokeswoman Marisa Bradley.

"Those dealers who are one channel have higher margins and higher throughput," said Joe Chrzanowski, GM's executive director for Dealer Network Planning and Investments.

http://www.detnews.com/apps/pbcs.dll/article?AID=/20080623/AUTO01/806230327/1148/rss25

[Allen]

Chrysler denies bankruptcy rumour
KEVIN KROLICKI

Reuters

June 26, 2008 at 11:04 AM EDT

DETROIT — A spokesman for Chrysler LLC Thursday said market rumours of a bankruptcy filing by the privately held auto maker were “without merit,” saying the company had ample liquidity.

“The rumour is without merit,” Chrysler spokesman Dave Elshoff said. “There is no basis for the rumour.”

The concern about Chrysler's liquidity position and the rumour of a Chapter 11 filing drove down prices for the automaker's loans Thursday, according to Reuters LPC.

Fitch Ratings Wednesday cut ratings for both Chrysler, now controlled by Cerberus Capital Management, and its larger rival General Motors Corp., citing the industry-wide downturn in sales.

A spokesman for Cerberus also said there was no truth to the market rumour of a bankruptcy filing.

Liquidity concerns for U.S. auto makers have been rising as evidence grows that the downturn in sales that began earlier this year accelerated in June in the face of record gas prices and a consumer defection from trucks and SUVs.

Earlier this week, Chrysler drew down a $2-billion (U.S.) credit line from Cerberus and Daimler AG, the German car maker that sold off a roughly 80 per cent stake in Chrysler to Cerberus last year.

Under the terms of that sale, Chrysler had until August this year to draw on the credit line, which included $1.5-billion from Daimler. The credit line pays interest fixed at 7 percentage points above the London interbank rate, Daimler has said.

Chrysler, which lost $1.6-billion in 2007, has said it ended the year with $9-billion in cash. Its U.S. sales are down 23 per cent so far this year.

[Allen]

Chrysler to turn vehicles into wireless hotspots
TOM KRISHER

Associated Press

June 25, 2008 at 12:59 PM EDT

DETROIT — People who buy Chrysler LLC vehicles next year will have the option of turning their cars and trucks into wireless Internet hotspots.

The company on Thursday is to announce that the feature will be available as part of its “uconnect” system that will debut in most 2009 Chrysler, Dodge and Jeep models.

The wireless Internet will come as a dealer-installed option and will work over cellular telephone links. It will come with a monthly fee which has not yet been determined, spokesman Todd Goyer said.

Mr. Goyer said people will be able to use laptop computers in their cars and trucks just as if they were in an office or home.

To access the Internet, vehicles will need to have “uconnect” hardware, which Chrysler will unveil to compete with Ford's “Sync” and other in-car electronic systems.

The uconnect system will link cellular telephones and personal music players to the car's onboard electronics, with the ability to control an Apple Inc. iPod with radio and steering wheel controls. The system also has navigation and real-time traffic features, controlled by voice recognition or a touch screen.

It also includes the company's in-car 30-gigabyte hard drive, with options for three-channel satellite television service and satellite radio.

Mr. Goyer said the wireless system will work while vehicles are moving so they can be used by passengers. He said the Auburn Hills-based auto maker expects that drivers will obey all safety laws.

Pricing for the system will be announced Thursday.

[Allen]

Chrysler looks at China alliance
The Associated Press

July 4, 2008 at 7:49 AM EDT

BEIJING — Chrysler LLC, looking for foreign partnerships to help drive its business as U.S. sales slump, announced a deal with China's Great Wall Motor Co. on Friday to study sharing technology, components and distribution.

Chrysler, the smallest of the three major U.S. auto makers, is trying to expand sales in the fast-growing Chinese market and has a deal with China's Chery Automobile Co. to produce a low-cost model for sale under its Dodge brand.

Under the new agreement, Chrysler and Great Wall will look at ways to use each other's distribution networks and component and technology capabilities, Chrysler said in a statement released in the United States.

The agreement “represents part of Chrysler's ongoing efforts to explore opportunities to expand the company's involvement in the development of China's auto industry, as well as growing Chrysler's global business through the right partnerships,” Chrysler spokeswoman Shawn Morgan said in the statement.
 
Morgan said the companies were not releasing any more details.

The agreement comes as American auto makers look to China to drive sales at a time of slumping U.S. demand. China's own young but ambitious producers are looking at foreign partnerships to improve their technology and marketing.

Great Wall, based in Baoding, a city west of Beijing, is best known as a producer of sport utility vehicles and trucks but is expanding in cars.

Auburn Hills, Mich.-based Chrysler says sales through the first five months of this year are down 19 per cent from the same period last year. The company has denied rumours it is close to seeking bankruptcy court protection.

[sirAQUAMAN64]

Campi takes big risks with Chrysler's supplier relations

David Barkholz
and Robert Sherefkin
Automotive News
August 25, 2008 - 12:01 am ET

DETROIT — Chrysler purchasing honcho John Campi says his hard-nosed style of supplier relations — which critics say amounts to using the courts to bring companies to heel — is paying off handsomely.

Campi says he'll stick with the strategy. This month Chrysler LLC hauled one of its biggest suppliers into court to resolve a dispute that in the past would have been settled with backroom diplomacy. It is the second time that has happened this year. And Chrysler forced another supplier into bankruptcy instead of helping bail it out.

Why risk bad blood with crucial partners at such a difficult time? Suppliers say a weakened Chrysler has less clout when it comes to making parts makers bend to its will. Disputes are more apt to end up in court.

Indeed, surveys show that Chrysler's supplier relations have deteriorated this year, and a growing number of suppliers aren't sure they want to continue selling parts to the company.

But the strategy also reflects a tough-minded purchasing boss in Campi, an automotive outsider with a decisive style and scant regard for deep-rooted industry traditions.

When troubled Plastech Engineered Products Inc. quietly asked Chrysler and other automaker customers for a third bailout in February, Campi canceled purchase orders and tried to retrieve Chrysler's plastic-making tools.

Ham-handed?

Suppliers called the reaction excessive, even ham-handed. Plastech rushed into Chapter 11 bankruptcy protection to keep Chrysler's tools and briefly withheld some shipments of plastic parts bound for Chrysler.

But today, Campi says his handling of the Plastech case has been vindicated. He says Chrysler's actions enabled the automaker to pay a fraction of what a bailout of the supplier would have cost.

According to court documents in the Plastech bankruptcy case, Chrysler was looking at a bailout tab of between $60 million and $100 million.

Plastech, with sales last year of $1.4 billion, was busted up and sold off in Chapter 11 this summer.

"I'm not looking to kill suppliers," Campi said after a speech at the Management Briefing Seminars in Traverse City, Mich. "I will work with every supplier I can in a collaborative fashion to help them become profitable and help us.

"But we don't have the wherewithal to prop up a supplier simply to keep them running. I won't do it."

The blunt-talking Campi is playing out supplier disputes in a very public way. Since January, Chrysler has sued two of its largest suppliers over disputes that almost certainly would have been resolved quietly in years past.

This month, Chrysler sued Johnson Controls Inc. for what it says were $15 million in overcharges for materials used in batteries. With a $40 billion annual purchasing budget, that is barely a rounding error at Chrysler.

'It's hardball'

Yet, Chrysler is publicly taking to task the company that makes seats and interiors for some of its most important models, including the Jeep Grand Cherokee and the redesigned 2009 Dodge Ram pickup. In a court response, Johnson Controls denied the allegations.

In February, Chrysler sued Magna International Inc. over seat recalls that occurred in 2005, two years before Cerberus Capital Management LP acquired a controlling stake in Chrysler.

As Chrysler's largest single supplier, Magna sold $3.33 billion in parts to the automaker in 2007.

Industry analyst Dave Cole says Chrysler is under so much financial pressure from Cerberus that it is willing to risk bad blood with even key suppliers to maintain liquidity.

"It's hardball," says Cole, head of the Center for Automotive Research in Ann Arbor, Mich. "We're in an era where you might have to take some risks that you normally wouldn't want to take."

Chrysler's lawsuits reflect an unrelenting quest for cash, says Fred Smith, an attorney with Warner Norcross & Judd LLP.

Two of Smith's supplier clients have sought help fending off warranty claims from Chrysler. Smith says it is nearly impossible to determine who is at fault in the cases. But Chrysler's position, he says, is " 'we don't care who is at fault, you will contribute; give us money if you want to maintain a parts relationship.' "

Too costly

A third client is dealing with demands by Chrysler for money back over an engine project for which the automaker thought it paid too much.

Smith did not identify the clients.

Chrysler says it is simply trying to protect its commercial interests.

"Sometimes litigation is a logical course to resolve issues that cannot be resolved in the normal course of business," said Chrysler spokesman Michael Palese.

Chrysler declined to discuss details about how much the automaker saved by not helping bail out Plastech.

But Cole, who sat on an advisory board at Plastech, says the supplier's other customers leaned toward helping the company get through a cash crunch.

But when Chrysler refused to participate, that made it too expensive for those customers to shoulder the full cost, he says.

In the Plastech bankruptcy documents, Chrysler said its response was influenced by the accommodations it had made for Collins & Aikman Corp. after the supplier collapsed into bankruptcy protection in May 2005.

The cost to customers for keeping Collins & Aikman afloat until the autumn of 2007 was more than $700 million, according to an Automotive News estimate compiled from court documents and interviews. Chrysler shouldered the biggest share among automakers of the loans and price increases that were never recovered.

Don't push us

Campi, a trusted longtime lieutenant of Chrysler CEO Bob Nardelli who moved into his job in January, says he is trying to improve Chrysler's battered supplier relations. In Traverse City, he said Chrysler and its suppliers would need a "fierce collaboration" to slash $1,000 per vehicle in material costs within three years.

But he pledged "equally shared benefits" and promised Chrysler's procurement office would stabilize scheduling, reduce complexity and streamline change notices to make suppliers' tasks easier.

But in an interview minutes later, Campi warned suppliers not to demand faster payment for parts.

"If a supplier wants to push us because of their fear, then they are violating the contract in place, and I will take the necessary action," he told Automotive News.

He acknowledged some suppliers had threatened to stop delivery of parts to Chrysler.

"And I say, I'm not going to let you shut down production," Campi said. "If you're serious about this, you have to live with the legal consequences."

[sirAQUAMAN64]

Daimler charges Cerberus with 'absurd' demands

Bradford Wernle
Automotive News
November 26, 2008 - 10:42 am ET

Daimler AG says Cerberus Capital Management LP is making new and "exaggerated demands" that have hampered Daimler's effort to sell its 19.9 percent stake in Chrysler Holding LLC to the private equity firm.

Daimler issued a statement today charging that "demands by Cerberus exceed the value of Cerberus' investment in Chrysler." Daimler sold 80.1 percent of Chrysler Holding to Cerberus in August 2007. That money went into the Chrysler business.

"The claims made now go beyond the framework of the contractually agreed possible obligations," the Daimler statement said. "Daimler rejects these absurd allegations."

Han Tjan, a Daimler spokesman, said talks over sale of the stake had slowed because of Cerberus' demands. He declined to elaborate on the allegations beyond the statement.

In September, Daimler announced it had been approached by Cerberus to sell its remaining stake. In October, Daimler wrote down the value of the stake to zero.

Cerberus did not immediately return a phone call today for comment.

In its statement, Daimler said Cerberus also had made an "allegation of conduct outside the ordinary course of business by Daimler during the time between the signing and closing of the transaction."

The allegations come a week after Chrysler LLC CEO Bob Nardelli said in Congressional hearings that Cerberus would be willing to forgo any financial benefit if Congress delivered $7 billion to Chrysler as part of a $25 billion loan package. Terms of a possible loan are being negotiated.

Chrysler Holding consists of two entities: Chrysler LLC, the carmaker, and Chrysler Financial, its captive finance company.

[sirAQUAMAN64]

No big surprise here. A complete purchase would be the best thing for Chrysler, or parcelling out of products and brands the end.

Cerberus offers to give up stake in Chrysler

Bradford Wernle
Automotive News
December 22, 2008 - 12:01 am ET

In brighter times, Cerberus Capital Management LP hoped to save Chrysler LLC, which it called an American automotive icon. Now the private-equity firm is offering its entire equity stake in the automaker to labor and creditors to help Chrysler secure its $4 billion portion of a federal loan package.

Cerberus said it was making the offer to help Chrysler "make the accommodations necessary to affect the restructuring" of the company. Under the federal loan announced Friday by President George W. Bush, Chrysler needs to swap equity for debt to reduce its debt load and to fund half of its obligation to the UAW Voluntary Employee Beneficiary Association trust with stock.

Cerberus also announced that its Chrysler Financial unit would offer $2 billion to backstop the federal loan, which Chrysler must repay at the end of the first quarter. Cerberus acquired 80.1 percent of Chrysler from Daimler AG for $7.4 billion in 2007.

"Cerberus is really focusing on the lending side of the automobile industry," said Lars Luedeman, head of auto analysis for Grant Thornton in Southfield, Mich., referring to Cerberus's stake in Chrysler Financial and GMAC "They're effectively offering up the automotive side of the operation."

Craig Fitzgerald, analyst for Plante & Moran, in Southfield, said Chrysler's best hope for the future lies with finding a partner or partners "that will cause some of their brands and products to be moved over to competitors."

Cerberus's move to give up its equity stake could help the restructuring, said Kimberly Rodriguez, also with Grant Thornton.

"It's really a pre-packaged bankruptcy without the pre-pack where equity is no longer in control," she said. "It's a cooperative way of handing over your position in a company to help it see another day. It's an industry-supportive move by Cerberus, which is more beneficial to the other OEMs."

Not an ATM

The offer came two weeks after Cerberus had been lambasted in congressional hearings. Sen. Bob Corker, R-Tenn., asked Chrysler CEO Bob Nardelli why taxpayers should fund a Chrysler bailout when Cerberus refused to put any more money in it.

In a statement today, Cerberus responded to that criticism. The company said it manages and allocates capital on behalf of its investors -- including "retirees, teachers, municipal workers and ordinary citizens'' -- and its charter limits how much it can put in any single investment.

Said the statement: "Cerberus is not a deposit-taking institution that can act as an ATM machine for its portfolio companies."

[sirAQUAMAN64]

Sounds like someone with big power is making sure things are getting done.

Chrysler may be revived swiftly by bankruptcy surgery after all

Automotive News
May 24, 2009 - 12:01 am ET

NEW YORK -- Even Chrysler's own executives thought bankruptcy for the automaker would mean liquidation. Instead, emergency surgery appears to have saved the patient, and sooner than many critics ever imagined.

The sale of Chrysler's main business to Italy's Fiat S.p.A. and other groups will likely go off by the end of May, hitting the government's target to take the vast majority of the company out of bankruptcy within 30 days of its April 30 filing.

In one of the most complex bankruptcies ever filed, there are a few possible sticking points that could hang up the sale. A group of Indiana pension funds filed suit in a separate court, for instance. Most specialists expect Judge Arthur Gonzalez to approve the sale after next Wednesday's hearing.

Gonzalez has been instrumental in quickly parsing objections from retirees, disabled employees, parts suppliers and railroads, among others.

"There is a clear path to the sale going through. And the court is really trying to help that along," said Carren Shulman, a partner in the bankruptcy practice at Sheppard Mullin.

Under pressure from a large debt load and declining car demand, Chrysler crafted a deal to put most of its assets into a new company that would be sold to Fiat, a union-aligned trust, and the Canadian and U.S. governments. Some plants and real estate will remain in bankruptcy, possibly for years, to settle outstanding claims.

Signing soon

The agreement between the buyers and sellers will likely be signed as soon as the judge issues his decision, which could be within one day of the hearing's end, according to one source with direct knowledge of the situation.

The Fiat deal is an example of what is called a "363 sale" in the bankruptcy world, which is typically done in the first couple of months after a filing. In Chrysler's case, the sale sped through quickly because Chrysler showed that the 30-day timeline was critical to saving the business.

Chrysler idled its plants the day after it filed for bankruptcy but is still spending billions of dollars a month to keep the plants open, even while they are not making cars, the source said.

"In the absence of having someone like the government continue to put in money, you can see that the company would go into liquidation in just a few weeks," the source said.

Obstacle

The sale is not clear yet. A group of Indiana pension funds asked the New York bankruptcy court to postpone the case until a separate court could rule on whether the government exceeded its authority in dealing with Chrysler. Gonzalez said no, but the funds then filed the request with a District Court, anyway. The District Court will hear the arguments on Tuesday.

"I don't think their argument is that plausible, but that doesn't stop them from appealing and trying to get it stayed," said Stephen Lubben, a professor of law at Seton Hall Law School in Newark, New Jersey. "Getting a stay from bankruptcy court is an extreme long shot. They might have better odds in District Court."

Creditors and suppliers are lining up to be heard at the Wednesday sale hearing, but their hopes of slowing or stopping the sale have been nearly extinguished.

In the first week of bankruptcy, Gonzalez heard and overruled all the objections likely to come up at next week's hearing, attorneys in the case said.

"The judge has accepted the premise that any interruption has the potential to really imperil the sale," said one attorney who filed objections in the case.

"The judge has made up his mind to approve the sale. He's listening to objections, and overruling them," said the attorney, who asked not to be identified.