Feb. 19, 2006 - Cost Cutting too Far?

Chrysler has been on a roll of late, introducing cars that people want to buy.  The 300 line has been a phenomenal hit, the trail rated Jeeps continues to do well and the SRT tuned models are the best performance bargains out there.  But things are beginning to slow down, and rather dramatically at that.  Fourth quarter 2005 earnings were down and inventory is way up.  Dealers are beginning to complain that they are being force fed vehicles they can’t sell, even with the industry’s highest average rebates.  The once hot 300 is a little bit cooler, the Magnum and Charger never really got out of the gate, and the Grand Cherokee is losing out to the Pacifica of all things.  Thanks to the draconian cost cutting measures implemented by its savior from the fatherland, Dieter Zetsche, Chrysler still had a profit for the year 2005-- which stands in stark contrast to its cross town rivals-- but for how much longer?   Has Chrysler cut too much from the cost of its cars and consequently made them less appealing in the long run? 

The one thing that Chrysler had going for it the last few years was good product at great prices.  The SRT line of tuned cars is the perfect example of this philosophy of rigid cost controls creating good value, and the just introduced SRT-4 Caliber is its new poster car.  And it may also be the beginning of the end, because eventually customers notice those cost cuts and begin to question them. 

In the case of the SRT-4, a collective gasp was heard when it was announced that the SRT folks plan on harnessing 300 horsepower through nothing but the front wheels of their Caliber.  This may be one of the biggest blunders the carmaker has made since the Zetsche era began, and is a clear indication that cost has become the preeminent consideration at the Chrysler group.  Prices were not yet announced, but my guess is the Dodge SRT-4 Caliber will close in pricing to the outgoing SRT-4 Neon, which itself was already a great performance bargain. 

Knowing what the engineers at SRT are capable of-- don’t forget the fire breathing Viper SRT-10 and Competition Coupe sprang forth from their fertile minds—you just have to think they wanted to use all the available wheels to put the 300 horses down, but somebody said too expensive to build, or too expensive to sell, or both.  It is admirable to offer good value, but in the case of a 300 hp front wheel drive economy car value has to be considered along with sound engineering.  And sound engineering would suggest that the torque steer in this little beast will be a handful, bordering on the uncontrollable. 

The Chrysler group could get away with cost cutting moves like low rent interiors in their mainstream cars because people didn’t expect more considering the prices they were paying, but when that cutting gets in the way of sound engineering, the value equation changes.  Enthusiasts especially will notice this gaffe, and the street credibility so important in the performance market will be lost before the race even begins.  Let’s hope that the astute engineers at SRT can convince the bean counters that value is not just a cheap price, and 300 horsepower coupled to front wheel drive is not an appropriate money saving solution.