What comes around goes around… I’ll tell you why
From the moment the new Jeep Cherokee broke cover online, squinting into the bright lights of massive expectation, the signs of trouble have been there. Starting with styling which managed to be both jarring and forgettable, and continuing on to transmission issues and other introductory awkwardness, the Cherokee is quickly becoming the most troubling new product launch of the year. After all, the stakes couldn’t be higher: not only does the new Cherokee represent Jeep’s latest attempt to make progress in the absolutely crucial compact CUV segment, its launch is coinciding with Chrysler’s IPO.
But for all the signs of nervousness in Cherokee nation, a drive down Malibu’s 27 sun-kissed miles last weekend revealed no fewer than three new Cherokees glaring their way down Highway One. If the Cherokee is in good enough shape to flaunt for journalists and the One Percent, perhaps things are not quite what they seem.
This would be the point at which I auto writing protocol calls for me to mention my fond memories of learning how to drive in my dad’s old Cherokee, rambling the backroads of Eastern Oregon years before I ever got my license, stopping to switch spots with the old man when we arrived at each dusty little town. The inescapable conclusion: That old XJ was the real Jeep, a thing of integrity and character, while this new so-called “Cherokee” is but a pale impostor. Possibly even a symptom of some broader decline in the moral fiber of the United States.
But that’s bullshit. After all, that beloved old XJ was a living reminder that sometimes even modern classics have launch issues. Though the XJ is best known for its robust, grunty 4.0 I-6 engine, it launched in the 1984 model-year with a choice of a 2.5 liter four-cylinder or a 2.8 liter V6, both carbureted. Our brown ’84 Laredo had the bigger engine, but it still made just 115 horsepower. Combined with a 3-speed torqueflite transmission, the drivetrain kept even the most leaden-footed teenager from exceeding a frustratingly sedate pace. Ask me how I know.
The point is that the modern-classic XJ had its fair share of issues at launch, all of which were overcome through steady upgrades. Though the new Cherokee may not seem to be as groundbreaking as the XJ, which practically created the modern SUV trend singlehandedly, it could easily become the brand’s biggest volume seller. But the real question now, as it was when AMC was launching the first Jeep Cherokee, is whether the company can afford to even give the new Cherokee a real shot at success.
The parallels between AMC at the launch of the XJ and Chrysler now are fascinating. Then AMC was 49% owned by Renault, which tried first tried to sell its European products in its American partners’ showrooms, and eventually rebrand and and adapt them to American market tastes. Now Chrysler is 58.5% owned by Fiat, which is attempting a similar stategy by introducing the European Fiat 500 family and transforming vehicles like the Alfa Giulietta into the Dodge Dart. Fiat is also in deep trouble in its home markets of Europe, just as Renault’s French operations were gushing cash in the mid-1980s.
In both cases, problems at home for Jeep’s European partners put immense pressure on their US-market efforts. And Fiat is finding, as Renault did, that introducing European brands and vehicles into the US market is not easy. Four years into Fiat’s five-year plan for Chrysler, optimistic initial plans like the 100,000 unit sales goal for Fiat 500 have proven to be a mirage and sales appear to have already peaked. The much-anticipated Dodge Dart was plagued with launch issues of its own, much criticized for its underpowered 1.4 liter base engine, and has yet to show anything close to segment-competitive sales volume. Whether these two front-runners for Fiat’s American conquest plans are directly comparable to the Renault LeCar and Alliance is debatable; the fact that neither has proven to be the smash hit Fiat needed is not.
Which brings us back to the XJ, the only Renault-era AMC product that was truly successful both commercially and in its impact on the market. There has been some debate about details of the XJ’s development, but it’s clearly the most “American” vehicle of the AMC-Renault period, if only in spirit*. Similarly, Fiat-Chrysler’s main hope for survival depends on its most distinctly American products: the Jeep Grand Cherokee and Wrangler,the minivan twins and the Ram Truck. Cherokee may add some much-needed volume to the Dart’s CUSW platform volumes, but it seems unlikely to become a new profit-generating franchise for the firm if only because it represents such a late entry into such a crowded field. Let’s face it: in any car-based segment, Subaru is the new Jeep in terms of a brand being defined by its unique AWD system.
That would be a good place to wrap things up, but it seems unfair to bring up Fiat’s challenges with Chrysler and not discuss the drama surrounding the upcoming IPO. After all, nothing is quite as dramatic as Fiat CEO Sergio Marchionne’s struggle with the UAW to get the 41.5% of Chrysler he didn’t get basically for free for as little as possible. It’s like watching a python that’s halfway through devouring a sleeping animal suddenly having to cope with the sudden awakening of his would-be meal.
And, as it so happens, the IPO presents a real challenge for Fiats two most important new products, the Cherokee and the upcoming Chrysler 200. As Automotive News [sub]’s Larry Vellequette reports, with an IPO likely to happen next Spring, Chrysler could be stuck in an SEC-mandated “quiet period” through the launch of products in two of the biggest and most competitive segments in the market (C-CUV and D sedan). Since Chrysler has had little success in either segment in years, any inability to promote these vehicles at launch and beyond could be a major issue.
More than likely, this is precisely the story Sergio Marchionne wants people to hear. If I were of a more paranoid bent of mind, I might even believe that all the stories about Cherokee delays and drama were leaked intentionally. After all, it’s in Sergio Marchionne and Fiat’s interest to actually hurt Chrysler reputation in the short term, so as to drive down the value the UAW VEBA can get for its stock. Most analysts agree that Fiat won’t risk letting Chrysler stock get out into the open market, so it’s going to spend at least $5 billion for the stake anyway. If threatening the launch of its two most crucial products doesn’t convince the VEBA to blink on its valuation, it’s hard to imagine what would.
Sure, hurting a company that you have to buy in order to survive is a crazy move, but when the stakes are survival everything is one the table. Madness? THIS. IS. MARCHIONNE!
