AFSCME 3357-HOF'S BLOG

Two Blows to Chrysler

I want to mention two items to watch that might have a significant impact on the ability of Chrysler LLC to rebuild itself.

The first is rapid decline of Dollar Thrifty Automotive Group, Inc. In the past year Dollar-Thrifty (DTG) stock has fallen from the mid 30s to about a dollar per share. The Dollar-Thrifty rental car company used to be owned by Chrysler. In its separation from Chrysler, there was an agreement that for a certain period of time, Dollar Thrifty would continue to buy the majority of its cars from Chrysler. Things are tough overall in the rental car industry, but things are even tougher for Dollar-Thrifty. Would you rather be Hertz, who can buy a Toyota Camrys wholesale, rent it for a year, and sell it for 80% of what it paid, or Dollar, which buys a Dodge Avenger wholesale, rents it for a year and sells it for 40% of the purchase price? In the meantime, the Camry is going to have a higher "take" rate. Why? People like Camrys.

In the past few months Chrysler has been posting sales volumes 35-40% below the levels of a year ago. Many of Chrysler's models are completely dependent upon fleet sales. If Dollar-Thrifty goes Chapter 11, Chrysler's subsequent sales losses will be immediately noticeable.

The second significant development is the revelation that the new dual clutch transmission plant that is being built as a joint venture between Getrag and Chrysler is stalled due to a squabble between the partners. Apparently somebody was supposed to bring $300 million to the table to complete the project, and nobody has come up with the dough. It already looks like the original target date for production, 2009, is out of the question. Chrysler desperately needs these transmissions. A dual-clutch transmission gives you the drivability of a conventional automatic with the fuel economy and performance of a manual. For example, a vehicle like the 4-cylinder Dodge Journey which goes 0-60 in almost 12 seconds with its conventional 4-speed automatic, would typically improve to 10 seconds with a dual-clutch trans. Fuel economy would go up a couple mpg as well.

The competition is not sitting still. The 2009 Chevrolet Malibu, Saturn Aura, and Pontiac G6 each receive a new 6-speed automatic transmission for 2009. This new transmission transforms the 4-cylinder versions of these cars from laggards to highly competitive. Highway fuel economy in these GM products goes from 30 to 33 MPG, higher than anything in the Chrysler lineup. Ford is supposed to introduce a similar 6-speed automatic in the Ford Fusion and Mercury Milan in the first half of 2009. The Sebring and the Avenger were uncompetitive in the segment even before the new transmissions in the Ford and GM models, failure to bring a new transmission to the Chrysler midsize entries will marginalize them even further.

Hey, time flies, it's time for a marginally relevant video, my favorite scene from Planes, Trains and Automobiles, AND a bonus for people for people who have too much time on their hands FROM people who have way too much time on their hands, the same scene done in Lego. WARNING - LANGUAGE - Not SAFE FOR WORK