Chrysler sales collapse heightens need for product

DETROIT -- On the eve of CEO Sergio Marchionne's unveiling of his five-year turnaround plan for Chrysler, the U.S. automaker did something it had done for each of the past 22 months: announced a decline in U.S. sales.

October's 30 percent fall amid one of the industry's strongest months this year highlights the size of the task facing Marchionne and his Chrysler restructuring team.

"The biggest issue for Chrysler is how quickly they fill the void in their product pipeline," says Earl Hesterberg, a former Ford Motor Co. executive who now heads the Houston-based Group 1 Automotive Inc. dealership group.

Today, almost five months since Chrysler emerged from bankruptcy, Marchionne is expected to outline a new product plan for the company now controlled by his Fiat S.p.A. The first major new product -- a redesigned Jeep Grand Cherokee -- is due in the second quarter of 2010. Fiat-based products aren't expected until 2011.

When New York private-equity firm Cerberus Capital Management took majority ownership of Chrysler from Daimler AG in August 2007, Chrysler's U.S. market share stood at 11.4 percent. Through October 2009, its share had fallen to 9 percent. .

Only two models -- the Dodge Avenger sedan and Grand Caravan minivan -- saw sales increases last month. The Chrysler brand was down 36 percent; Dodge was down 26 percent; and Jeep, widely regarded as Chrysler's most valuable asset, took the steepest dive -- down 37 percent.

Million sales lost

Overall Chrysler sales have fallen 39 percent year to date to 781,319. Two years ago through the end of October, Chrysler had 1,724,139 sales. Chrysler last posted a monthly increase in December 2007.

Marchionne has said that Chrysler will continue to experience "painful" sales results during its restructuring period. On Oct. 1, he told journalists: "Our intention is to improve share from this point on, but I don't get alarmed. The machine is timed. We're not bleeding like people think we are.

"We are undergoing a painful process," Marchionne said that day. "But we need to go back to the real starting point."

Marchionne has predicted that Chrysler could return to profitability by 2011 and has said Chrysler could break even holding a 9 percent market share in a 10 million-unit market.

The company has been in a news blackout since emerging from bankruptcy June 10 as Marchionne and his teams worked on the plan. He has reorganized the company along the lines he used at Fiat. Chrysler is now built around its brands: Chrysler, Jeep, Dodge car, Ram truck and Mopar parts.