Why Chrysler is going to thrive in the next 10 years

October 2007

The parent company of Chrysler, Cerberus, is a privately owned investment firm. These guys know how to make money, and they know that they have the potential to make a lot of money with Chrysler (through an IPO after a few years of good profits). Instead of selling off the three main divisions of Chrysler, Dodge, and Jeep they are reinvesting in the company. Cerberus also already owns the majority of GMAC, the financing arm of GM. Pairing Chrysler Financial with GMAC makes for a strong division. The financing arms of autodealers often bring them back to the black every quarter.

Speaking of quarterly finances, since Cerberus is a privately owned investment firm they are not bound by analyst predictions, stock market fluctuations, and investor need for huge profits every quarter. Because of this management can look to the long term future and make decisions that are good for the company long term but might hurt profits near term. Being able to make decisions like this allows Chrysler to be more creative and aggressive with their line up, marketing, and relations with the UAW.

The Lifetime Warranty speaks volumes to what Cerberus feels about Chrysler. They know that durability and quality is the main concern for most car buyers. Before people put down tens of thousands in cash or go that far in debt they want to know that that their purchase is going to give them many trouble free years. Right now none of the big three US automakers have a great reputation for this, but giving away a lifetime powertrain warranty on their vehicles is a good step in the right direction for Chrysler. Now they just need to make sure that the vehicles they produce dont need that warranty.

Jim Press is a big name in the industry. He wasnt the only reason Toyota is the second largest automaker in the world today, but he was a big part. Cerberus has convinced him to come work for Chrysler. Press knows the auto sales better than almost anyone in the world, and he isnt the only person that Cerberus hired away from Toyota. Press will be working closely with Chrylsers dealer network to encourage and help them. Press frequently visited the Toyota dealers in the 90s and helped them become the richest in the auto industry. He hopes to do the same with Chrysler, his compensation package is tied to company performance.

The 2008 model year is going to be a big one for Chrysler. They have a new generation of minivans out and early next year the new Dodge Challenger goes on sale. The new minivans have a plethora of features that will attract moms and dads for years to come. Satellite TV beamed in for the kids to watch in the back (wireless headphones and remote included), swivel around chairs so that the kids can play games, a table for them to play on, luminescent lighting at night, etc. etc.

The Dodge Challenger has been one of the most asked about Dodge vehicles in recent history. Pricing has yet to be announced but an insider has posted on allpar.coms message forums that the Challenger will be available with a full complement of engines (eventually, there will only be a V8 available in the 2008 model year but they will add a V6 in 2009). This would indicate that they want to compete with the Mustang and should be priced similarly. With the look that this car has and the power it will have available under the hood Dodge is going to sell a lot of these vehicles.

The 2009 Dodge Ram is the best kept secret in the auto industry right now. We dont know what it will look like, we dont know what kind of horsepower wil be available for it, we dont know what kind of mileage or towing capacity it will have, we dont know much about this vehicle. What we do know, is that the 2009 Dodge Ram is moving away from the big rig styling that we see today. This is probably for aerodynamics. Chrysler has also stated that this redesign will have the same presence on the road that the 94 Ram did. Thats a tall order to fill considering that basically all trucks on the road today look the way they do as a result of the 94 Ram.

Dodge is revamping the signature engine for the Ram, the Hemi. They have been testing the Ram against the Tundra which is a good indicator that they are going for similar number to the Tundras 5.7L engine (more HP, torque and better fuel economy). The new Hemis will also have an updated version of the MDS.

As exciting as the new Hemi will be the engines to look for in the next couple of years are the new Cummins 4.2L V6 and the 5.6L V8 diesel engines. These engines will be fitted into just about everything Chrysler can fit them into; the Ram, Dakota, Durango, Aspen, Grand Cherokee, and Commander are all likely fits for either of these engines. When tested the V6 in the Durango got 25 miles per gallon highway (22.1 combined) and the V8 fitted to a 1500 Ram got 24.6 miles per gallon highway (21.7 combined). Those are huge improvements over their gas engine counterparts. These two engines both produce more than enough power to keep the towing and hauling capacity of both vehicles as high or higher than current capacities. The V6 is rated at 270 hp and 420 lb-ft of torque while the V-8 is rated for 325 hp and 500 lb-ft of torque. These numbers are not final either and may rise by the time of production. Within a couple years the Ram might be the only truck to get 25 mpg on the highway and still have a great towing capacity when needed. GM, Ford, and Toyota are going to have their work cut out for them playing catch up.

Along with new engines Chrysler is introducing a hybrid transmission to save even more fuel economy. This is a 2 mode hybrid system. It has two electric motors, one to provide added power and fuel economy in town and the other to provide added power and fuel economy while on the highway. Initially the transmissions will only be available with the Hemi (I imagine the Hemi will run in MDS mode a lot more often when paired with this transmission) but it will probably become available with other engines in time. Who knows, in five years this transmission might be available with the V6 Cummins giving the Durango close to 30 miles per gallon. That isnt the only new transmission in the works at Chrysler. The Dual-Clutch Transmission has been approved for production. This transmission will improve 0-60 time and increase fuel economy while providing a smoother ride. Click the link to read the full report.

Right now its easy to say that Chrysler (along with GM and Ford) are going to be out of business soon if all you do is look at what their market share has done in the past decade. But looking to the future Chrysler has too many exciting products in the pipe to consider it dead in the Water. Cerberus wants to make money with Chrysler, they know who they need to get to turn Chrysler around, and I believe that is exactly what they are going to do.