Chryslers Strategies for the Future.

Implications: Chrysler is pursuing two strategies to improve the fuel economy of its product offerings: focusing it limited resources on developing a flexible mid-sized platform capable of producing a large variety of vehicles and working with other manufacturers to badge engineer smaller sized automobiles. While these are smart strategies near term, there are risks to the company longer term.

Analysis:  It doesn’t take a rocket scientist to conclude that all of the automotive manufacturers are going to be driven to concentrate on the small vehicle end of the market. The new federal fuel economy standards surely will force the automakers to produce more fuel-efficient cars. There are a host of new and mostly very expensive technologies that can offer significant fuel economy benefits. It an open question whether large numbers of automotive customers will be willing or even able to purchase these high tech vehicles based on the expected large price increases. I am sure that most automotive manufacturers will choose to produce these new technology vehicles, but they may represent a small segment of the overall market. The only realistic avenue open to them is to concentrate on smaller vehicles. These smaller vehicles which by virtue of their size and reduced weight can provide superior fuel economy at a price that a large number of potential customers may be willing to pay. The current run up in gasoline and diesel fuel prices will just accelerate these pressures on the manufacturers.

Chrysler is in a somewhat unique position. It is the smallest of the Detroit automakers and competes primarily in the North American market. With its limited resources it probably will not be able to vie effectively in the new emerging and potential technologies. So I find it reasonable for them to focus on what will in all probability become the heart of the automotive market. Of course the other OEM’s will also be aggressively competing in this market segment as well. Thus Chryslers strategy seem to be two fold. First to develop a flexible "platform" that can be used to produce a variety of vehicles in the small and mid-sized market. This maximizes the efforts of the limited design and engineering resources and can also enable its assembly plants the option of building several vehicles at the same time and shifting volumes to reflect market conditions. Chrysler literally invented this strategy with the "K-car" platform that was its salvation in the Lee Iococca era. Other automotive manufacturers have and are utilizing this strategy as well. Chrysler’s second strategy is to market vehicles produced by other manufacturers. They have already started programs with Nissan and Chinese automaker Chery. This will allow Chrysler to quickly bring to market small high-fuel economy vehicles without utilizing large amounts of its limited resources. However while this may provide a near term advantage, in the long term Chrysler will lose some of its technical expertise in designing, engineering and assembling small vehicles. Both of their strategies involve risks to the company, but given current circumstances it is probably, in my opinion, the best that Chrysler can do.