Industry experts unsure Chrysler can reach market share projections

Alisa Priddle / The Detroit News

Chrysler Group LLC's now-public five-year plan hinges on some targets that analysts say are unrealistic.

The plan, unveiled Wednesday during an eight-hour session in Auburn Hills, may be a fair representation of what Chrysler needs to do to thrive and repay its loans, but some of the benchmarks, such as the projection of a 4 percent market share increase, are stopping many cold.

"Is the plan outlandish or merely wildly ambitious?" said analyst Michelle Krebs of Edmunds.com, who described the overall tone as one of "aggressive optimism."

Chrysler CEO Sergio Marchionne and his team revealed product plans and initiatives to increase worldwide sales from 1.3 million vehicles in 2009 to 2.8 million in 2014. Doing so would generate a profit by 2011 and pay off government loans by 2014, the company said. Additionally, revenue is projected to increase about 20 percent a year from $42.5 billion in 2010 to $67.5 billion in 2014. On the other side of the ledger are continued cost-cutting in areas such as purchasing, manufacturing and product development.

But it is the projection of increasing market share -- from 9 percent through the first 10 months of this year to 13 percent in 2014 -- that is raising the most skepticism.

"My question is: who is giving up this market share?" said Rebecca Lindland, director of auto industry research at IHS Global Insight in Lexington, Mass.

Chrysler's projection has garnered further skepticism because dealers won't see significant product upgrades for another year or more.

"So many things have to work for this plan to go right," said analyst Joe Phillippi of AutoTrends Inc. in Short Hills, N.J.

But there is one wild card: Marchionne. He's the charismatic character orchestrating the plan and attempting to pull off a turnaround similar to the one he executed at Fiat SpA upon taking over as CEO there in 2006.

"You have to acknowledge his experience," Lindland said. "If anyone can turn the company around, it is him."

Lindland said IHS forecasts Chrysler to have 7 percent market share in 2014. "And people have questioned that as being too high," she said, adding that the company has seen its sales plunge by half in the last few years.

That is not to say it is impossible to increase market share, said Sean McAlinden, chief economist for the Center for Automotive Research in Ann Arbor, given that Chrysler has done it before -- twice.

Chrysler has seen its market share tumble to the 7 percent range twice in the last 30 years: from 1980 to 1984 and again from 1992 to 1995 and both times it rallied back to regain market share in the teens.

Chrysler is promising 11 new or refreshed vehicles by 2014 and says three-quarters of the lineup will have substantial improvements within 14 months. And by 2012 every single vehicle will have been overhauled or replaced. The Fiat 500 is expected to be sold inside some Chrysler dealerships in major metro markets in 2011.

But that still leaves tough times for dealers next year, when the only new vehicle they have is the heavy-duty Dodge Ram. Later in the year a new Jeep Grand Cherokee and Chrysler 300 will join the mix.

Gordon Farhat, general sales manager at Westborn Chrysler Jeep in Dearborn, said he's excited about the new lineup of small vehicles and improved powertrains hitting his sales lot in the next year, but said the wait for those new products will be tough.

"We're definitely seeing people asking about what's new from Chrysler. There's a lot of good buzz behind these new cars," Farhat said. "But getting to the point of having those on the lot is going to be a long wait."

In the meantime, upgrades are coming next year to the minivans, Chrysler Sebring and Dodge Avenger midsize sedans, Dodge Caliber, Jeep Compass and Patriot compact vehicles, Dodge Journey, and Jeep Wrangler and Liberty.

Giving so many vehicles a makeover inside and out, including improving the fuel efficiency of their engines, is the bridge the company is banking on until all-new products come out.

George Peterson, president of AutoPacific Inc. in Los Angeles, said while there are opportunities to increase sales with Jeep, he finds projections for the Chrysler brand "hard to back up," given the challenge of making it a more premium brand.

Chrysler plans to double from 1.7 percent market share now to 3.4 percent by 2014 for the Chrysler brand.

The remake of vehicles also raises other questions.

McAlinden criticized the decision to upgrade vehicles such as the Chrysler Sebring, Dodge Avenger and Dodge Caliber that will be discontinued a year later and replaced by all-new vehicles. "The Sebring is so bad I would cancel it now and not try to save it. It's like a low-slung (GM) Aztek."

But Marchionne said Wednesday the Sebring is in too important a segment to leave it as is and needed to be refreshed before bringing a replacement in 2013.

To get through the immediate drought, Marchionne said the company will rely on advertising and marketing, which kicked off Wednesday night. The company plans to increase the marketing budget to more than double the current advertising budget by 2011, said Richard Palmer, the chief financial officer who came from Fiat.

While the company was in bankruptcy and then putting its business plan together, it didn't do much advertising. Now, new ad campaigns are under way designed to better differentiate each brand and regain customer's attention.

apriddle@detnews.com Bryce Hoffman and Nathan Hurst contributed.