Chrysler’s $1.8 Billion Factory Retool for a…WHAT?

By Jason Lu

08.15.2008

Things have been pretty grim for Detroit’s weakest automaker in the past few years. With all three brands relying heavily on large SUVs and pickup trucks, the recent consumer shift towards fuel-sipping vehicles has taken a big toll on the Pentastar. Since April of 2008, Chrysler LLC has posted severe double-digit drops in sales every month, ranging anywhere between 28 to 34 percent. What happened?

No, that’s not a fair question. We need to look at what is happening and what will happen. Chrysler, just like Ford, is undergoing major structural changes. However, unlike Ford, it does not have the support of other world-wide divisions. The vehicles you see in Europe are vehicles you already see in the U.S. There is no “bring-over the European model” option for Chrysler. Fortunately, Chrysler still has money for a major project.

Being the first move for the company since the gas-price hike, Chrysler will pour $1.8 billion dollars for new vehicle developments and to retool the Jefferson North assembly plant in Detroit that currently produces the truck-based Grand Cherokee. The factory will also be expanded by 285,000 square feet and become more flexible so multiple vehicles can be built on the same assembly line. “This investment in our future products and at Jefferson North will enable the Company to produce a future generation of vehicles more efficiently, with world-class quality.”

The factory expansion will include some “green” features. Efficient fluorescent lighting will decrease electricity use and new air filtration systems will improve workplace comfort and cleanliness. Here’s a cool one: Decanting technology will enable paint sludge to be used as an energy source. Chrysler will also improve welding quality of vehicle bodies with new Electric-servo weld guns.

So what exactly will come out of this green assembly plant? Will we see a new wave of revolutionary vehicles that will make a bigger splash than the Malibu? Will we see a next-generation Chrysler that will lead Detroit with a lineup of attractive, timeless designs?

Obviously, Chrysler is in need of new products and to keep up with the competition, there are many arduous tasks that Chrysler has to complete. One of them being to get rid of the hard plastic found all over Chrysler vehicles, and yes the Dodge Journey is an improvement, but not the revolutionary improvement that Chrysler needs. Next Chrysler needs better designs for small cars (ah-hem *cough* Sebring). Yes, the Ford Focus is ugly on the outside, but the inside is actually quite nice. The Sebring on the other hand, is poorly made both inside and out so not surprisingly, it is achieving low sales even when others in its class are flying off of dealer lots. Finally, there is the fuel economy that Chrysler has been lagging behind in compared to its competition. Arguably, that is also the biggest reason behind its dangerously low sales.

So, Chrysler’s answer to its woes? It’s turning a head to its least fuel-efficient brand: Jeep. Now, we’ve all heard of phrases like “four-door coupe” and “Lamborghini SUV” that just seem to contradict each other. A coupe is supposed to have two doors. Lamborghini is supposed to build Italian supercars. Well, Chrysler is adding another controversial phrase that is sure to receive some heat from Jeep purists. “Yo Detroit, how about a car-based Grand Cherokee?” No, you don’t need to check your eyes. Chrysler is really going to build a car-based Grand Cherokee…at the retooled Jefferson North Assembly Plant.

Originally, it was unclear whether or not the new vehicle planned for production was going to replace a current model, but it was confirmed by CNN and Chrysler President Tom LaSorda that the new car-based vehicle will retain the Grand Cherokee name. “The segment the [current] Grand Cherokee competes in has seen some of the most decline (because of the) high gas prices,” said Rebecca Lindland, Global Insight analyst. “This new product will allow the consumer to keep all attributes of the Jeep Grand Cherokee. They won’t be able to navigate the Rubicon trail but they will get to the grocery store on less fuel.” The new car-based Grand Cherokee will reach dealers in 2010.

And so it is, the new small SUV will not only be car-based like the RAV4, it will also depart Jeep’s brand image of being a rough-tough off-roader. So much for “Trail Rated.” The new Cherokee will be built at the Jefferson North assembly plant in Detroit as part of a massive retool effort by Chrysler.

Chrysler may be the underdog of the Detroit 2.999, but it surely isn’t lagging behind in its restructuring effort. LaSorda said that “Chrysler is meeting or exceeding its financial targets” and is finding more ways to cut costs. But does it really need to dilute a brand heritage by putting a car-based SUV in Jeep? Well whatever happens, as new products come to light, we hope that Chrysler can learn from its past. Please, no more flash on the materials. No more hard plastic in the interior. Chrysler can return to its days of glory and it just needs to aim beyond the competition.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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6 Comments

  1. Chrysler is not ever going to regain it’s former glory. Ever. They may survive, but it will be as much smaller independent or a large division of some other company. Chryler’s fate is sealed, I’m afraid.

  2. This is exactly the one brand Chrysler should not be watering down. This is a stupid move on their part, and subtracts even further from the notion that maybe Chrysler has a good plan for recovery; one we just are not aware of yet.

    DUMB

  3. anonymous, by a coincidence Pete DeLorenzo of Autoextremist posted the following at the “On the table” section of his site this week and I taught it was worth to quote

    “(one arrow up)Nissan, et al. Chrysler is going to invest $1.8 billion in an expansion of its Jefferson North (Detroit) Assembly Plant. Good news for all of the companies planning on using Chrysler’s facilities once they take over.”

    Another possibility is the Aspen or the Durango move to the Grand Cherokee platform to became unibody and a car-based/SUV or a “Jeep Wagonner” similar to this old concept-car showed in 1991

  4. Well, question is, what car is the new GC going to be based? Seems like they are using the term to queel gas fears, so buyers will feel better.

    Also, why keep the ‘Grand’ in the name when the old plain Cherokee is gone?

    And another point, this is in reaction to Ford moving Explorer to unibody, and GM pahsing out the T’Blazer + its clones.

  5. The Grand Cherokee has always been “car based”. It is currently on a unibody frame so this is not really news. The fact that they are pouring $1.8 billion into a factory for a dying segment of the market is the astonishing part of this story. If the plant is flexible there is a good chance that the other models that will be built there have a chance. However, if “the other” models include anything in Chrysler’s current lineup all hope is lost. Every model they sell currently is the leading “rental fleet queen” in every segment so the names of all current models have been irreversably tarnished. Maybe Nissan has told them that in order for them to buy them out they want another flexible plant to seal the deal. That seems more logical than the implication of this press release.

  6. I’ts like watching a terminal cancer patient tell evryone he’s feeling much better.

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