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Jeep's Uphill Struggle
Link: http://www.businessweek.com/autos/content/feb2007/bw20070221_751704.htm
For potential buyers of Chrysler, Jeep is a tempting asset, but the iconic brand has been so mismanaged that its value may be compromised
by David Kiley
As DaimlerChrysler (DCX) and its investment bankers get ready to show Chrysler Group's books to prospective buyers, Jeep is the asset that will be uppermost in browsers' minds.
But they had better look close. Chrysler has mismanaged the iconic brand, the original off-roader and long-time military warhorse, to the point where its best future may lay outside the U.S.
"Jeep is golden," asserts Jason Vines, Chrysler Group vice-president for communications. But if you ask some dealers and analysts, there may be something coming out of the Jeep goose besides gold.
At the recent National Association of Automobile Dealers gathering in Las Vegas, some 300 dealers and auto executives were presented with new findings from J.D. Power & Assoc. (JDP) showing that among 22 non-luxury brands in four of six key categories Jeep scored in the bottom 25%. According to dealers present at the meeting and one Chrysler official, these categories included profit per vehicle, customer relations, quality, and marketing effectiveness. (Like BusinessWeek.com, J.D. Power is a division of The McGraw-Hill Companies (MHP).)
Losing Its Sheen
The company's overall score in the bottom 25% of mass-market brands wasn't what dealers, who look upon the annual JDP analysis to help guide their investments, expected. Tom Libby of Power Information Network (PIN), an affiliate of JDP, says the specific data was proprietary. "But there's no question that Jeep has been going in the wrong direction, at least in the U.S," he adds.
Jeep, which was made up entirely of body-on-frame SUVs until the last few months, has suffered the same downturn as other SUVs. Jeep sales overall were down just 3.5% last year. But that's misleading because of new models added in 2006. Sales of Jeep Grand Cherokee were down 35%. Jeep Liberty sales were down 20%.
Chrysler has been trying to broaden the appeal of Jeep, but the results have been mixed. According to PIN's Libby, the sales of Jeep Commander, launched in 2005, have come almost entirely out of the Jeep Grand Cherokee franchise. The Commander was meant to satisfy the demand by some Grand Cherokee owners for a third row of seats without having to change the styling and packaging of the Grand Cherokee. Making a Grand Cherokee longer, say Chrysler executives, would have changed the look of the vehicle and its off-road performance.
Splitting the Brand
But almost immediately after launching with a starting average transaction price price of around $37,000, its chilly reception forced Chrysler to discount the model by $5,000 (see BusinessWeek.com, 6/15/06, "Detroit's Mid-Size SUV Problem"). PIN's Libby notes that Commander sales came almost entirely from Grand Cherokee sales.
Indeed, the off-road performance of any Jeep is at the heart of its image and the debate within Chrysler. In the last five months, Chrysler launched the car-based crossover vehicles Compass and Patriot, which aren't "trail-rated" for serious off-roading (see BusinessWeek.com, 10/25/06, "Jeep's Misguided Compass"). Chrysler execs say they extensively interviewed die-hard Jeep owners to ask whether selling junior Jeeps would dent the brand.
The result? Jeep fans said as long as the hard-core off-roaders like Wrangler and Grand Cherokee are protected, the soccer-Mom class could have their grocery-hauling Jeeps. But why two? The decision was driven entirely by production concerns, say Chrysler insiders, not consumer research. Chrysler wanted to fill up its Belvedere, Ill., plant, which manufactures the Dodge Caliber as well as the two Jeeps. However, Chrysler may end up discounting the new models if demand is low, which hurts Jeep's overall brand value.
Link: http://www.businessweek.com/autos/content/feb2007/bw20070221_751704.htm
For potential buyers of Chrysler, Jeep is a tempting asset, but the iconic brand has been so mismanaged that its value may be compromised
by David Kiley
As DaimlerChrysler (DCX) and its investment bankers get ready to show Chrysler Group's books to prospective buyers, Jeep is the asset that will be uppermost in browsers' minds.
But they had better look close. Chrysler has mismanaged the iconic brand, the original off-roader and long-time military warhorse, to the point where its best future may lay outside the U.S.
"Jeep is golden," asserts Jason Vines, Chrysler Group vice-president for communications. But if you ask some dealers and analysts, there may be something coming out of the Jeep goose besides gold.
At the recent National Association of Automobile Dealers gathering in Las Vegas, some 300 dealers and auto executives were presented with new findings from J.D. Power & Assoc. (JDP) showing that among 22 non-luxury brands in four of six key categories Jeep scored in the bottom 25%. According to dealers present at the meeting and one Chrysler official, these categories included profit per vehicle, customer relations, quality, and marketing effectiveness. (Like BusinessWeek.com, J.D. Power is a division of The McGraw-Hill Companies (MHP).)
Losing Its Sheen
The company's overall score in the bottom 25% of mass-market brands wasn't what dealers, who look upon the annual JDP analysis to help guide their investments, expected. Tom Libby of Power Information Network (PIN), an affiliate of JDP, says the specific data was proprietary. "But there's no question that Jeep has been going in the wrong direction, at least in the U.S," he adds.
Jeep, which was made up entirely of body-on-frame SUVs until the last few months, has suffered the same downturn as other SUVs. Jeep sales overall were down just 3.5% last year. But that's misleading because of new models added in 2006. Sales of Jeep Grand Cherokee were down 35%. Jeep Liberty sales were down 20%.
Chrysler has been trying to broaden the appeal of Jeep, but the results have been mixed. According to PIN's Libby, the sales of Jeep Commander, launched in 2005, have come almost entirely out of the Jeep Grand Cherokee franchise. The Commander was meant to satisfy the demand by some Grand Cherokee owners for a third row of seats without having to change the styling and packaging of the Grand Cherokee. Making a Grand Cherokee longer, say Chrysler executives, would have changed the look of the vehicle and its off-road performance.
Splitting the Brand
But almost immediately after launching with a starting average transaction price price of around $37,000, its chilly reception forced Chrysler to discount the model by $5,000 (see BusinessWeek.com, 6/15/06, "Detroit's Mid-Size SUV Problem"). PIN's Libby notes that Commander sales came almost entirely from Grand Cherokee sales.
Indeed, the off-road performance of any Jeep is at the heart of its image and the debate within Chrysler. In the last five months, Chrysler launched the car-based crossover vehicles Compass and Patriot, which aren't "trail-rated" for serious off-roading (see BusinessWeek.com, 10/25/06, "Jeep's Misguided Compass"). Chrysler execs say they extensively interviewed die-hard Jeep owners to ask whether selling junior Jeeps would dent the brand.
The result? Jeep fans said as long as the hard-core off-roaders like Wrangler and Grand Cherokee are protected, the soccer-Mom class could have their grocery-hauling Jeeps. But why two? The decision was driven entirely by production concerns, say Chrysler insiders, not consumer research. Chrysler wanted to fill up its Belvedere, Ill., plant, which manufactures the Dodge Caliber as well as the two Jeeps. However, Chrysler may end up discounting the new models if demand is low, which hurts Jeep's overall brand value.
