Hit by slower sales at home, domestic auto manufacturers are increasingly turning to emerging markets including China, Russia and Brazil, which raises interesting questions for Chrysler LLC as the smallest of Detroit’s Big Three.
Global sales are where forecasters see explosive growth, while conditions in the U.S. become tighter with foreign automakers such as Toyota continuing to make strides. The future may only get more competitive with Chinese and Indian companies poised to enter the market.
Analysts credit General Motors Corp. as holding the best cards globally, while Chrysler has the steepest climb here and abroad.
This week Chrysler, which lost $1.6 billion last year and became a private company, took one significant move to shake up operations, requiring all employees worldwide to take a two-week vacation this July. That alone won’t change much as the company grapples with forging a new identity and strategy.
Nearly two-thirds of Chrysler’s U.S. sales are of light trucks, a segment losing ground as the market tilts back to cars, retired American Motors Corp. Chairman Gerald Meyers said. It has cost Chrysler 1 point of market share in the U.S. this year alone, falling to 13 percent.
“Their big moneymakers are in trouble. I’m very pessimistic about their ability to stay the size they are now,” Meyers said, noting only about 10 percent of Chrysler’s sales were outside North America last year. “They don’t have the global market to balance things out while they’re going through a difficult time [in the U.S.].”
In contrast, 52 percent of the nearly 9.37 million vehicles GM sold last year were outside North America, as were about 55 percent of the 6.5 million sold by Ford Motor Co.
“GM is making a meal out of China, Brazil, India and Russia,” Meyers said.
GM is also the furthest along in downsizing its domestic operations and adopting global engineering and manufacturing systems that make it more like Toyota Motor Corp., which GM is battling for global sales leadership, said David Cole, chairman of the Center for Automotive Research.
Ford is probably two or three years behind, Cole said.
“They’re not there yet, but they’ve set the course to do it,” he said, pointing to the European-designed Fiesta set to go on sale there this year and in the U.S. in 2010.
Chrysler, on the other hand, is a North American company since its nine-year marriage to DaimlerChrysler AG ended last year, when private-equity group Cerberus Capital Management LLC bought an 80 percent stake in it.
“Chrysler has to become globally integrated and have a broad portfolio of products, and it can’t do it on its own,” Cole said. He sees Volkswagen and Renault-Nissan as logical partners.
Chrysler has small deals with both, selling a version of its mini-van to VW and agreeing to buy Nissan-made small cars for sale in South America. It also has an agreement with Chinese manufacturer Chery Automobile Co. to supply a small car for the U.S., Europe and Latin America.
Chrysler’s goal over the next four years is to double international sales to 480,000, using such strategic alliances and partnerships, said Michael Manley, Chrysler’s executive vice president of international sales.
All Chrysler vehicles are North American models, adapted to other markets with right-hand drive and diesel engines, an approach Manley concedes would keep Chrysler “a niche player.”
Preventing that is where partners such as Chery come in. Chrysler has given no specifics about the small car Chery will build or when it will go on sale, but Meyers says it would take 12 to 18 months for the Chinese manufacturer to meet U.S. safety and quality standards.
“We’re working very well with them, and in the last six months we’ve accelerated our discussions with Chery,” Manley said, adding that Chrysler could strike up similar arrangements elsewhere, including Russia.
“That’s an area where an alliance or partnership could work very well for us,” he said.
Meyers, though, thinks Chrysler needs a Big Daddy such as Renault-Nissan, a possibility the automaker has downplayed, and become a global player — even to simply finance the technology it will need to meet stringent federal fuel-economy requirements phasing in through 2020.
Compared with the global scale of industry giants such as GM and Toyota, or Ford’s $35 billion in cash, Chrysler is not up to the challenge, Meyers said. He predicts Chrysler could be forced to align with another player or an ambitious Chinese manufacturer seeking entry to the U.S.
———–
rpopely@tribune.com
