For $7 Billion, You Get Chrysler ... and a Marketing Quagmire
DETROIT (AdAge.com) -- You want to buy Chrysler Group? You'd better have some marketing savvy -- as well as $7 billion to spare.
Last week, Chairman Dieter Zetsche confirmed the industry's worst-kept secret: DaimlerChrysler is in discussions with undisclosed parties to sell Chrysler.
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Sure, the incoming buyer of the group will, on paper, be getting a bargain. The price tag being bandied about is $5 billion to $7 billion -- substantially lower than the $36 billion valuation of the original merger. But the new owner of Chrysler will have to market its way out of one of the great automaker inventory gluts of all time -- a surplus of steel that drove Chrysler into the red last year.
Branding and positioning issues
And even as it's solving that problem, it has a monster positioning and branding issue -- namely, how to clearly delineate and define Chrysler's brand trio, something experts queried at last week's New York Auto Show said the group has failed to do.
Vic Doolan, non-executive chairman of consultant Courland Automotive Practice, said the carmaker has overlapping Dodge, Jeep and Chrysler models that compete too much with one another. He also recommended the automaker build its global presence to reach fast-growing emerging markets such as China.
The automaker will have to spend a lot on marketing, but before a penny is laid out, Chrysler must better differentiate its brands, said John Morel, director-product and market planning at American Suzuki Motors Corp.
The Chrysler brand probably needs the most work -- its perception now is "vaguely premium" -- and the company has too many similar models, he said, citing the Dodge Durango and Chrysler Aspen.
Jeep stretched too thin
Management tried to stretch the Jeep brand too far, Mr. Morel said, with the Commander hurting the Grand Cherokee and the Jeep Compass competing with the Dodge Caliber. "Jeep is an iconic brand," he said. "They need to keep it pure."
Auto consultant Gordon Wangers said Jeep's crown jewel, the Grand Cherokee, has been ignored, and the Dodge Ram should be redone so it can compete again as a key player in the full-size-pickup segment. The last time the model got a total redo was in 2001; it is the oldest in Detroit.
The auto-show chatter followed the company's annual meeting last week, where Chairman Dieter Zetsche confirmed the industry's worst-kept secret: DaimlerChrysler is in discussions with undisclosed parties to sell Chrysler.
Reporting on contenders
The auto press has been reporting contenders for weeks, which are believed to have been whittled down to two New York financial outfits, Blackstone Group and private-equity firm Cerberus Capital Management, and Canadian auto supplier Magna International Corp. Last week Kirk Kerkorian offered $4.5 billion.
Mr. Zetsche indicated a sale Feb. 14 by saying: "We do not exclude any option in order to find the best solution for both the Chrysler Group and DaimlerChrysler."