Back in January, Chrysler Group boss Sergio Marchionne suggested that the Dodge Dart and Chrysler 200 would eventually leave the lineup as the company focuses more heavily on their popular trucks, SUVs, minivans and large cars. With midsized and compact cars being the most popular in the US, it seems unlikely that the Chrysler brands would just leave those segments altogether and based on a new report from Motor Trend, it looks like the company could still be looking into the future of their smaller cars.
Sergio Talks Partners
Motor Trend spoke with Marchionne at the Geneva Motor Show and learned that the company is currently in talks with “partners” who could build the Dodge Dart and/or the Chrysler 200 for the Chrysler Group. There were no details as to who these partners might be, but the CEO made it clear that they don’t want to produce their own small cars.
So, why did Sergio talk about letting the Dart and 200 die off, only to now state that they want to find someone else to build the cars for them?
Fixing the Small Car Problem
The problem with these two small cars is that they don’t sell particularly well and due to their low price points, they aren’t big profit margin vehicles. So, they don’t sell very many and they don’t make much money on the units that they do sell. On the other hand, a vehicle like any of the hot-selling Jeeps sells in far greater numbers and, due to the higher price points, the Jeeps have a much bigger profit margin.
Now, if Dodge was selling 20,000 Darts a month or Chrysler was moving 20,000 200s a month, that small profit margin wouldn’t be as big of an issue, but the combination of lackluster sales and a small profit margin makes these sedans less appealing to the company. Fortunately, that problem could be fixed by improving sales or improving profit margins, and while it is very hard to increase sales significantly without dropping the price, the company could increase profit margins by reducing their costs. One way place that they can reduce their costs is in the manufacturing process.
Basically, if Chrysler can find another automaker who has “room” in a production facility to build the Dodge Dart and the Chrysler 200, it will likely cost them less in the long run than building the cars themselves. Consider that the Chrysler 200 is the only vehicle built at the Sterling Height plant, so every cent of expense incurred at that plant cuts into the profit margin of those cars. On the other hand, the Dodge Challenger, Dodge Charger and Chrysler 300 are all built in the Brampton plant, so the facility expenses are split among those vehicles – having less impact on each in the process.
Consolidation in Sterling Heights
What I find the most surprising about this whole issue is that in ending internal production of the Chrysler 200, the company won’t have a purpose for the Sterling Heights plant. The company invested some $850 million dollars in the facility just a few years back to build a massive new paint area, so it seems to me that the company would want to find a way to make better use of that facility rather than just farming out production.
In any case, Sergio Marchionne’s comments in Geneva make it look like the Dodge Dart and the Chrysler 200 both have a future – but they are probably going to be built by someone other than Chrysler. The company worked with Mazda on the new Fiat 124 Spyder and they have worked extensively with Mitsubishi in the past, so either of those companies could turn out to be the partner in question.