Given the fact that we still get almost daily calls regarding Chrysler, it is probably a good time for an IRN update on their outlook.  The key question we are perpetually asked is “Are they going to survive?” A series of additional questions normally follow such as:
• “We have been actively moving away from Chrysler but we are still seeing new opportunities. Should we change our strategy?”
• “We really like the new regime at Chrysler. Great communication, honest attempts to resolve differences, beginning to feel like the old Stallkamp days. While I hated them during the Nardelli period, now I would really like to see them succeed.”
• “We are seeing a ton of opportunity at Chrysler right now but my boss (or my private equity owner) is very reluctant to support anything relating to Chrysler. Should I change their minds, and if so, how?”

Since we are somewhat schizophrenic regarding their outlook in our office, we know how our customers feel. I (Kim) have been quite positive on the likelihood of Chrysler’s survival for some time. Tracy, on the other hand, has been quite skeptical. On the whole, however, the entire IRN team believes that Chrysler’s outlook has been steadily improving and their likelihood of survival has improved dramatically over the last six months. A few data points to support this increasing optimism:

• Chrysler North American light-duty sales totaled 671k units for the first 6 months of 2010 – significantly better than the same period in 2009 when they sold 582k units during a disappointing bankruptcy-induced stupor.  June 2010 sales totaled 120k – up over 46% from June of 2009 (82k units). While these sales are still relatively anemic, they now have a cost structure that will allow them to survive at a sales level of 1.4 million units per year. (See chart below.)
• The Grand Cherokee just launched. While it is a little pricey for the segment, we think it will do very well, particularly since it is supported by a new ad campaign that reflects a higher level of sophistication in Chrysler marketing. It will also drive traffic to Chrysler dealers who have been spending the last year significantly upgrading their dealerships.
• Chrysler has been particularly hard hit in the area of sub-prime lending due to the more stringent lending policies of GMAC (aka Ally Financial). They have been working with their parent Fiat to expand their lending options and to allow them to finance more of their buyers. The Cherokee, for example, is offering 0% financing which should definitely help pump sales.

So the bottom line regarding Chrysler? While their outlook is certainly cloudier than that of either Ford or GM, it is looking a lot better than it did six months ago and we are encouraging our clients to actively pursue doing business with Chrysler.