DaimlerChrysler Gambles on Smaller SUVs

DaimlerChrysler has had years of losses and falling sales in the US, but its 300 Sedan is hot and helping it build market share. However, the company has decided to risk its future on the SUV. In the next few years, it plans to expand its line of Suburban Useless Vehicles from five to ten. While two of the five models are awaiting board approval still, it looks like the directors are happy to gamble this way. With gasoline the far side of $3 a gallon, one can only admire their bravery while questioning their wisdom.

According to the Wall Street Journal, the Jeep Patriot (“compact SUV with classic boxy, utilitarian Jeep look”), Jeep Compass (“compact, sporty car-like Jeep inspired by rally racing”) and Jeep Wrangler (“redesigned version to be followed by a new longer, roomier Wrangler”) are all set for 2006. The Dodge Nitro (“midsize SUV based on recently unveiled concept” – whatever that may be) and the Chrysler Aspen (“sleeker, upscale SUB based on Dodge Durango”) still need the board’s OK but will turn up in 2006 and 2007/8 respectively.

This seems to be the middle ground among the Big Three US car makers. GM has decided the big SUVs are where its future lies, while Ford is opting for a gas-electric hybrid line to keep it afloat. By taking up the smaller SUV banner, Chrysler is giving itself a line to sell against the Japanese small truck line. And the question is whether the company can gain market share or whether this segment is already occupied to the point of saturation.

Regardless of the outcome, America is looking at a very unpleasant fact. One of the three has got to be wrong. The profit margins on the big SUVs are ridiculously attractive, and with gasoline permanently above $2 a gallon, and rising beyond $3 at the moment, hybrids are looking promising. So, could it be that Chrysler Group is doomed? Only the market knows.

But Toyota has already made sounds about backing off the American market for fear of provoking Congress to act against its interests. Meanwhile, Porsche is upping its stake in VW to 20% to prevent a hostile takeover of its parts supply. Consolidation is going to continue in the car business, and DaimlerChrysler seems to have placed a bet with pretty long odds.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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