Chrysler To Continue With Cruiser; Plans With Fiat Changing?By Michelle Krebs August 2, 2009
Chrysler Group LLC said Friday it will continue production of the PT Cruiser compact wagon, although the company announced more than 18 months ago the car would be discontinued.
Chrysler restarted production in mid-June at the Toluca, Mexico, assembly plant that builds the PT Cruiser and the Dodge Journey crossover. It was one of seven Chrysler plants to resume production after an extended temporary shutdown as Chrysler dealt with ongoing inventory difficulties and its eventual bankruptcy and change in ownership.
More important, the move seemingly indicates Chrysler's product and manufacturing strategies already may be significantly changing under the company's new management by Italy's Fiat S.p.A., which as part of the new alliance currently owns 20 percent of Chrysler.
It was repeatedly reported that after the PT Cruiser was discontinued, the Toluca plant would begin to be retooled for eventual production of Fiat-based subcompact cars, most likely the popular Fiat 500. The A-segment models were presumed to potentially wear both Fiat and Chrysler badges.
It was widely assumed Fiat needed the Toluca plant's lower labor rates to improve the potential for profitability from the new subcompacts built there. The resumption of PT Cruiser production at Toluca seems to indicate there now is another plan.
The situation also suggests other possibilities:
- Chrysler's new-product pipeline -- particularly for small cars -- could be too bare to bear. It is believed it will be nearly two years before any Fiat-derived compact and subcompact cars could be coming out of any Chrysler plants in North America.
If the PT Cruiser -- a reasonably consistent seller -- was to go away as planned, it would leave the Dodge Caliber and Jeep Patriot/Compass models as the company's sole compact-car options. Those models have not been strong entrants in the segment.
- Or could the move indicate Chrysler and Fiat are too short of cash to begin retooling the Toluca facility? Fiat lost more than $250 million in the second quarter and Chrysler had been subsisting on government loans for many months before completing its Chapter 11 bankruptcy, and the company's sales plunged 46 percent for the first half of this year.
- The companies also could have identified unforeseen difficulties in executing the plan to have Fiat-derived small cars in this market in a reputed 18-month timeframe. Engineering difficulties in adapting the structures for U.S.-market compliance or other product-development issues may have dictated Chrysler continue with PT Cruiser in order to avoid a long delay without enough product in the small-car segment. -- Bill Visnic