Chrysler bets minivans have long road ahead

Reuters / January 3, 2007 - 8:00 am DETROIT -- Can the "parent mobile" ride to the rescue for the Chrysler group again?

The Chrysler group is betting that its minivans can reconnect with a new generation of families and help pull the No. 3 U.S. automaker out of a slump, just as its first-ever minivans in 1984 marked Chrysler's return from the brink of financial collapse.

The stakes are high for the Chrysler group as it prepares to unveil next-generation versions of its Chrysler Town and Country and Dodge Grand Caravan minivans at the Detroit auto show on Sunday, Jan. 7, launches seen as key once again to the company's turnaround, analysts say.

Even as rivals abandon slow-selling minivans, the Chrysler group is betting it can revive the segment it created and show critics have been wrong to write off a family-friendly class of vehicles that first took off with suburban "soccer moms" two decades ago.

"No one will ever take a minivan and make it anything more than a parent-mobile, but that doesn't mean they're not important -- especially for Chrysler which has dominated," said Eric Noble, president of The Carlab, a California-based consulting firm.

The Chrysler group, the U.S. unit of DaimlerChrysler AG, has forecast a 2006 loss of some $1.3 billion after failing to respond to the shift from high-margin pickups and SUVs in the face of higher gasoline prices.

With sales down 8 percent as of end-November, Chrysler is readying a cost-cutting program for the first quarter with the goal of cutting $1,000 from the cost of each vehicle produced.

CEO Tom LaSorda told employees in a year-end message that the planned minivan launch this summer would be part of the turnaround. "We invented (the minivan), and we're going to wow the industry one more time," he said.

Expectations are high that the Chrysler group could look to close an assembly plant, a prospect the company has declined to discuss.

The automaker also is certain to go back to the United Auto Workers union to try to get health care concessions similar to deals the union granted to General Motors and Ford Motor Co. but rejected last year for the Chrysler group.

"They have some very important work to do as a matter of survival," said David Cole, director of the Center for Automotive Research. "They have a new minivan and some other new products coming, but everyone does. It's going to be a very competitive race."

BIG EXPECTATIONS ON BOARD

The Chrysler group has more riding on minivans than other automakers. Its Chrysler and Dodge models are the company's top-selling vehicles and account for almost 20 percent of its U.S. sales.

The Chrysler group also sells more than twice as many minivans as the combined total for Toyota Motor Corp.'s Sienna and Honda Motor Co.'s Odyssey, its closest competitors.

"The Chrysler minivan has really dominated its genre almost akin to what the Mustang has been to muscle cars and for Ford," said Noble. "These are remarkable exceptions in the history of these companies."

The Chrysler group will take the wraps off its new minivans on Sunday, and analysts expect the redesigned vehicles to offer bolder styling and refinements intended to be parent-pleasers, such as more flexible seating and lighting.

The Chrysler group, which has about 30 percent of the segment, expects a stable market for minivans as the children of Baby Boomers begin to buy for their own families. Minivan sales peaked at 1.37 million units in 2000 and are on track to be near 1 million units for 2006.

GM and Ford think buyers will shift to car-based crossover vehicles that offer the handling characteristics of a car but with the roomier interior and higher ride of a SUV.

GM's product chief Bob Lutz recently said minivans carried a "soccer mom stigma." Ford's North American design chief Peter Horbury said while Americans liked riding high in the saddle, minivan drivers are left feeling like they are astride a cow.

None of that sniping will matter, analysts say, if Chrysler group management gets costs under control and its new minivans extend the company's winning streak.

"Purely from a sales perspective you will see things start to improve," said IRN Inc. analyst Erich Merkle. "The new minivans are the big guns they have coming."