Chrysler looks to China to drive a sales recovery
Published on January 12, 2011 by Tycho de Feijter
Chrysler has its eye on China and is counting on its iconic Jeep brand to boost global sales and help return the US automaker to profitability after a government-backed bankruptcy.
The first boatload of the new Jeep Grand Cherokee exported from Detroit is expected to reach China soon and Chrysler is also preparing to expand sales in South America, Eastern Europe and Russia, officials said.
The push coincides with the brand’s 70th anniversary, which Chrysler celebrated on Monday at the Detroit auto show.
“Jeep is one of the best known brands in world – it’s as recognizable as Coca Cola,” said Mike Manley, president of the Jeep brand who noted that in many parts of the world, driving a Jeep is a status symbol.
“Since they were first produced in 1941, Jeep vehicles have been the authentic benchmark for off-road capability, having mastered more terrain, led more adventures and provided drivers more freedom than any other vehicle before or since.”
Part of Jeep’s fame reaches back to the legendary vehicles built exclusively for the US military during World War II.
Relatively few of the original Jeeps, which remained in production for more than 40 years, ever came back to the United States and wound up on roads and rugged trails across the globe.
“We left free samples all over the world,” Manley said recently.
In fact, Jeep has become so synonymous with four-wheel-drive vehicles that Chrysler’s lawyers regularly file suit against companies misappropriating the trademarked name.
The new Grand Cherokee has earned a host of honors from the automotive press and the Jeep brand led Chrysler’s recovery in its home market.
Overall, Jeep sale increased 26 percent in 2010 to 291,138 units, and accounted for a quarter of Chrysler’s US sales, even though the Grand Cherokee was available for only half the year.
Sales in China also surged as Chrysler, with Fiat’s help, restarted Asian sales. In 2010, Jeep sales increased 10 percent at 149,000 vehicles.
“The Jeep brand continues to be the best thing Chrysler has going,” said Karl Brauer, senior analyst at Edmunds.com.
Chrysler has yet to come close to tapping Jeep’s potential in overseas markets, said Jesse Toprak, senior analyst for TrueCar.com
“It’s substantial,” he said.
Jeep is also working to boost its reputation among US consumers, who considered the original Grand Cherokee a luxury vehicle when it first appeared in the mid-1990s.
“We want to recapture that and we think we can,” Manley said, noting that a significant number of Grand Cherokee customers are now trading in luxury cars like Lexuses and BMWs at dealerships in California.
Jeep’s reputation in its home market suffered greatly in recent years as product design and quality were neglected amid the internal turbulence.
It began in 2007 with the Chrysler’s divorce from Mercedes, followed by two years of inept management by private equity group Cerberus.
After seeking billions of dollars in federal aid after the 2008 financial crisis, Chrysler entered bankruptcy protection in June 2009 and emerged a month later under the management of Fiat’s Sergio Marchionne.
Fiat gained a 20 percent stake in Chrysler in exchange for sharing technology, and Marchionne instigated a major product revamp, introducing 16 new or revised vehicles last year.
Chrysler is expected to show a profit on an operating basis in 2010 and return a net profit in 2011. It is expected to launch an initial public stock offering in the second half of 2011.
Marchionne said earlier this month that Fiat may boost its holding to 51 percent before the IPO which will help the US government wind down its eight percent stake in Chrysler.
Marchionne has set ambitious targets for the two companies, saying they should produce 6 million vehicles combined by 2014.