March 13, 2008
Chrysler and the conundrum of dealers
Jim Press, the former Toyota executive who is now a vice-chairman of Chrysler, made an intriguing comment in the New York Times this morning about relations between the car company and its dealers in the US.
When I first came to the company, the orientation was about wholesaling cars to the dealers as opposed to retailing cars. That change has occurred, and now we can be responsive to what out customers want.
That strikes me as one of the biggest challenges facing the incumbent Detroit companies at the moment. Not only do they make too many vehicles - and the wrong kind - for the demand, but their dealer networks are bloated and badly-structured.
Chrysler is now consolidating its network so that dealers sell its Chrysler, Dodge and Jeep brands together. Its rivals - notably General Motors - face the problem that some dealers only market one or two brands and each wants a full range of vehicles, from small cars to pick-up trucks.
That has encouraged product proliferation, with GM selling similar vehicles under various brands to satisfy all of its dealers. Chrysler faces that problem with its Dodge and Chrysler brands. It is not obvious from the outside what the difference is.
Mr Press had it easier at Toyota because, although the company produces vehicles under different brands in the US - Toyota, Scion and Lexus - its steady growth has allowed it to fit the network to the underlying demand for the cars. So it he did not have the legacy challenges he found at Chrysler.
Nor is it easy to change the networks. Dealers protected by state laws, which means it is costly to buy them out or consolidate them, and they have their own business interests. Mr Press says he has sorted it out already but that sounds optimistic to me.
Chrysler’s problems go far beyond the “dealer” issue.
As an indication of the firm’s continued disconnect with reality, they are about to release a remake of the Dodge Challenger–the late 1960’s muscle car. This is a 13 mpg, $37K automobile. Based on current economic conditions and fuel prices, this is insanity! What they need to produce is $13K, 37 mpg car. Wait until the Chinese start release to their autos to the Americas.
Chrysler, like AMC, Studebaker, & Hudson will become a memory of the “good old days” of the American car manufacturing business.
Posted by: Ry Linfmes | March 14th, 2008 at 11:02 am | Report this comment