Chrysler Models in Danger

Bob Nardelli prowled the stage of the Detroit Athletic Club like a caged animal. Made famous by Michael Moore's documentary "Roger & Me," this was the same fusty, old venue that ejected Moore as he hunted down then GM chairman Roger Smith. But last Friday, all eyes were focused on Nardelli.

The new 59-year-old CEO of Chrysler was out to show that he'd brought some of the intensity he learned as a protégé of Jack Welch at General Electric before going on to become Home Depot's CEO. Speaking without cue cards to a room full of automotive reporters, he was heavy on GE-speak, waxing on about his "vertical learning curve" and "granularity." And his pacing presence on stage evoked Welch's "management by walking around" technique. But near the end of his performance, he threw some red meat to the crowd with a hint that Chrysler's product line is getting an overhaul. "We just can't have emotional attachments," he insisted, "to some of the brands and products that are out there."

That Chrysler's lineup needs a serious tuneup shouldn't come as a shock. After all, Chrysler is losing billions and has fallen to fifth place in sales in the U.S. market. Obviously, its big-gulp SUVs and pickups aren't exactly what America is after in these days of high gas prices and even higher anxiety. But here in Detroit, where the highways are still filled with American cars, denial runs deep. I recently brought up the 50th anniversary of the Edsel to a Ford exec and he started bragging about all the Edsel fan clubs that are still out there. Before the mercy killings of Oldsmobile and Plymouth earlier this decade, GM and Chrysler spent billions keeping those comatose brands on life support long after their vitals had flat-lined. For heaven's sake, Ford is still rationalizing the existence of Mercury. When's the last time Mercury came up with a must-have car?

So Nardelli's suggestion that he might euthanize brands and models at Chrysler got the assembled auto writers revved up. When he descended from the stage, he was mobbed in a scene that reminded me of the rushing reporters knocking over the phone booths in the movie "Airplane." Does Chrysler have too many SUVs? What brands are you going to kill? Nardelli backtracked—slightly. No, he's not doing away with the Dodge, Jeep or Chrysler brands. But it's time to get Darwinian about what's sitting on showroom floors. "We have to look very hard at some of the products within those brands," he told the throng of jostling journalists, "and make some tough choices."

Getting tough and getting real seems to be what Chrysler's new owner, Cerberus Capital Management, is all about. Stephen Feinberg, the brains and bucks behind Cerberus, quickly got down to business when he took over Chrysler on Aug. 3. Three days later, he brought in Nardelli to run the automaker and demoted CEO Tom LaSorda, despite earlier promises that the incumbent was his man with a plan. A few weeks later, Feinberg picked off Lexus's top marketer, Deborah Wall Meyer, to become Chrysler's chief marketing officer. And then the most stunning move of all: last week Feinberg lured away Toyota's top American executive, Jim Press, to become Chrysler's vice chairman. That was quickly followed by the hiring of GM's former top Asia executive, Phil Murtaugh. The conventional wisdom here in Detroit is that Feinberg and his $23.5 billion private equity firm are writing some mighty big checks to attract all this blue-chip talent. And the shadowy billionaire certainly doesn't expect his new crew to do business as usual. That's why Nardelli is signaling that he's breaking with the Detroit tradition of dithering over dying models.

So what's on Nardelli's hit list? Plenty. But first let's talk about Nardelli's hit man: Jim Press. The 37-year Toyota veteran is no one's idea of a contract killer. A soft-spoken industry statesman, Press, 60, comes across as a kindly automotive grandfather—not a ruthless godfather. But in Toyota's Japancentric, consensus culture, he managed to push through most of the products on the road today that have made it America's No. 2 auto company. Press didn't always get his way with his Japanese overlords. They wouldn't listen, for example, the first few times he insisted they develop a big pickup truck for this big country. But he never let up, and he eventually won the argument. Today, Toyota makes massive pickup trucks at a sprawling new factory in Texas, America's epicenter of big. "Inside Toyota," says George Peterson, auto analyst with AutoPacific in Los Angeles, "they call him Jim Pressure."

With Jim Pressure now at the wheel of Chrysler's new product strategy, Nardelli can expect a dispassionate dispatch of the biggest losers in the lineup. And he'll have a lot to choose from. "Chrysler is absolutely choking with product that steps all over itself," says John Wolkonowicz, auto analyst with Global Insight in Boston. Nardelli and Press are still figuring out how to sort out that mess. One thing, though, seems certain: they want to clear the shelves of the stuff that isn't selling. They won't say what is going yet, but here are some models analysts say are headed for the end of the road:

Jumbo SUVs As gas prices began to soar a couple of years ago, Chrysler decided it was high time to add SUVs to their lineup. What were they thinking? First to go will be the Chrysler Aspen and Jeep Commander—seven-passenger, Hemi-loaded behemoths. They are the slow-selling siblings of the Dodge Durango, which itself could be threatened by a breathtaking 28 percent sales drop this year. The success of GM's new fuel-efficient, seven-passenger crossover utility vehicles—the Buick Enclave, GMC Acadia and Saturn Outlook—show that old-school guzzlers just aren't how we roll with our kids and cargo anymore.

Small SUVs Chrysler also introduced a dizzying array of small SUVs in the last few years. There's the Jeep Compass, Jeep Patriot, Dodge Nitro, Dodge Caliber and a four-door Jeep Wrangler. Only the Wrangler is selling well. So here's how analysts expect Cerberus to cull the herd: The Compass, a "girly Jeep," according to Peterson, bites the dust. The Nitro gives way to the similarly sized and priced Caliber, which sells better. The Patriot stays in the lineup, but perhaps at the expense of the older Jeep Liberty, which is also similarly sized, but pricier.

Sport Wagons Personally, I loved the low-rider look of the Dodge Magnum when it hit the market three years ago. But apparently, too many car buyers think it looks like a hearse, (which, in black, it really does). How else can you explain its 79 percent sales drop last month? Yikes! Analysts expect Nardelli and Press to let the Magnum drive itself into an early grave. The days are also numbered for the Chrysler Pacifica sport wagon. Chrysler's previous owners, DaimlerChrysler (which retains a 20 percent stake in the company) already planned to pull the Pacifica from the market after the 2008 model year. Don't expect Cerberus to reverse course since the Pacifica, a confusing mishmash of minivan, SUV and station wagon, never caught on with car buyers. The PT Cruiser, on the other hand, could get a reprieve from the new owners. The modern interpretation of a 1930s gangster getaway car long ago ran out of gas—sales are down 26 percent this year. But the latest word inside Chrysler is that the PT will get a new design and be built alongside Dodge's new Journey crossover utility vehicle in Mexico. Apparently, GM's success with the Chevy HHR—a PT clone—has emboldened Chrysler to try to revive its one-time hit.

Pickups The slump in the housing market is taking a toll on sales of big pickups. Small pickups, though, have always been a hard sell. Automakers produced them mostly to meet federal fuel-economy regulations. But those mileage rules are changing, which could give Cerberus an opening to drop the salesproof Dodge Dakota small pickup.

Cars The arrival of $3 gas has sent many of us rushing back to good, old-fashioned family cars. You remember those things with four doors, but no four-wheel drive? Chrysler's biggest recent hit came three years ago with the 300C, which for a while was the official ride of Hip-Hop Nation. Chrysler, however, did not repeat that success with the Sebring sedan, which critics panned. "The Sebring is every bad Chrysler design cliché thrown into one car," says Peter De Lorenzo, editor of the Detroit car blog autoextremist.com. Toyota, under Press, has owned the family-car market with the Camry. So analysts expect him to kill the Sebring and order up a new sedan that is a worthy Camry competitor.

All these predictions are subject to change. Because change, of course, is what Cerberus is all about. Quick change. "In six weeks," says Peterson, "Chrysler's entire product plan will be turned upside down." And that's what it will take to keep Chrysler from going the way of the Edsel.

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