Merrill Lynch "Car Wars" Report Claims Cerberus Readying Chrysler For Chop Shop

Illustration for article titled Merrill Lynch Car Wars Report Claims Cerberus Readying Chrysler For Chop Shop

The new Dodge Challenger is hitting showrooms. The 2009 Dodge Ram launch is scheduled for fall. But it's the sounds of silence after that when it comes to product. What's going on? One influential industry study, the Merrill Lynch "Car Wars" report (yes, that's it's real name), states Chrysler's lack of new product may be a deliberate effort on the part of owners Cerberus Capital Management to thin the herd in advance of a breakup and subsequent sale. In an excerpt that again proves financial analysts are paid by character count, the report says,

"Chrysler's product pipeline severely lags the industry on a number of key metrics, which is an ominous sign for its market share. We believe that this is an active decision by new owners to rationalize the product portfolio in advance of a breakup/sale."

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Cerberus, of course, is denying any such plans, stating that, "We have a model that is buy, fix and hold." Uh-huh. Didn't Gordon Gecko say that too?

The argument that Chrysler is entering a product drought in advance of a sale also doesn't sit well with some industry watchers. Although the company doesn't have any major product reveals scheduled for the next year, they have one of the youngest vehicle lineups currently on the market. Others claim that Chrysler is reducing product in a long-term effort to become more competitive with a smaller fleet, and at the same time force weaker dealers out of business by depriving them of products during the current industry downturn. Such a move would allow Chrysler to pare down its dealer body without expensive — and potentially litigious — buyouts and consolidations.

Whatever happens, we do tend to agree with at least one Cerberus statement: "You can't judge an investment like this after just one year." Only question — does Cerberus believe that? [Freep, Photo Credit: blog.vehiclevoice.com]

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DISCUSSION

Chrysler has said repeatedly that they know that Sebring/Avenger and Compass/Patriot weren't what they should have been and are already changing them.

We've seen evidence of the external updates to Sebring already - spyshots of the now-flat hood and such - and reports they are adding a lot more standard equipment and improved interiors were on the way.

It actually sounds like a sensible approach, since it must be cheaper to fix something you already have in production than start from scratch.

They will focus on the ones they intend to continue and cancel the redundant ones. So far, they say that's Sebring and Patriot.

If they do go the route of aligning product to marque as reported months ago, that means cars at Chrysler, trucks/crossovers at Dodge and SUV at Jeep.

And this all fits what Cerberus has publicly said.