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Elliott: ‘We don’t want gin palaces that lose money’

ChryslerJeep spent more money on the launch of the Grand Cherokee than any other previous model. It’s a sign of things to come as the company prepares for a model onslaught and new brand (Dodge) in the UK.

Next month, dealers start selling the 300C, which Chrysler says is already proving a draw for Premiership footballers. It is also bringing in 50 Dodge pick-ups and 40 left-hand drive PT Cruiser cabrios. The SRT-10 will also go on sale, while next year sees the roll-out proper of Dodge with the Astra-sized Caliber. Dealers will also take delivery of right-hand drive PT Cruiser cabrio and Jeep Commander. Six other models are due shortly afterwards.

News of a wider model range attracting incremental business will be welcome for dealers. This year they’ve seen Chrysler registrations dip 6% to 5,536 on the back of poor Voyager sales, while Jeep has really struggled due to the run out of the old Grand Cherokee, dropping 33% to 2,972 units. Managing director Simon Elliott says the year has gone “okay”, but admits to a few problems “of our own making”.

Retailers have undergone considerable change, with 30% of the network redeveloping, refurbishing or moving showrooms during the past 12 months to accommodate ChryslerJeep’s growth aspirations. That affected sales, but the company is confident about doubling volumes from 16,000 this year to 32,000 in 2008.

“Our showrooms now make a dramatic statement and the buildings are very visible,” says Elliott. “The Chrysler group is on the move and we have given every member of dealer staff an insight into our vision of the future.”

He has a number of open points to fill and is looking to grow the network from 93 outlets, owned by 45 businesses, to 105 over the next 12 months. First refusal goes to neighbouring ChryslerJeep dealers, then Mercedes retailers are given the option. Elliott stresses the company does not have a strategy to appoint Mercedes dealers as the first port of call, contrary to some claims by dealers.

Chrysler a ‘viable’ franchise

Four former MG Rover dealers, including ex-council chairman Richard Cort, have joined.

“They have an existing vehicle parc so the service department is already busy,” says Elliott. “That means less reliance on sales so they are viable from day one.”

Chrysler is piloting a new variable margins scheme where dealers are rewarded for ‘excellence in customer service’ as part of a new customer culture change programme (CCCP). It’s due to be rolled out from January with performance measured via on-site mystery shopping and six-monthly phone calls.

CCCP is a two-year scheme intended to tackle sales and aftersales issues as volumes increase and new customers come to the showroom. Elliott points to the 300C, a model targeting Mercedes E-class, BMW 5-series and Audi A6 customers, and says CCCP will include sales training to tackle these customers. “They will have different expectations regarding showroom facilities and standards of service and it’s up to us to help our dealers to understand them,” he adds.

“But we don’t want to load dealers down, so we are keeping it simple. We are confident that they will benefit financially.”

Keeping a close eye on finances

That should bring a smile to retailers’ faces. This year has been a struggle, with the network averaging less than 1% return on sales, slightly down on 2004, and just two-thirds actually profitable. Product supply has been the main issue, but with June figures showing 1.3% ROS, Elliott predicts the network will end the year around the 1% mark. He says some of the profit issues are due to management problems at the dealership or dual franchised showrooms.

The goal is 1.5%. In addition to raising new car sales, this will be achieved through greater focus on used cars – with dealers exploiting Chrysler’s used car programme – and by growing the aftersales parc.

Elliott, in a job he describes as “one of the best in the motor industry today” for the past six years, claims to be “paranoid” about money. He refused to let dealers buy Dodge signage until he had secured a larger discount from the suppliers and says the cost of taking on the franchise has been pegged at between £5,000-10,000.

“We had one dealer that wanted to build a 20-car showroom . That’s fine, but it has to make financial sense. We don’t want gin palaces that lose money – there’s your headline for this article!” he says. “Dealers that make money are easier to deal with than those that don’t.”

The price is (finally) right

On the subject of retail representation in high cost metropolitan areas, and in particular London, Elliott brushes aside suggestions from some dealers that the company should raise margins to help them make sufficient returns.

He points out that costs are also high in Birmingham, Scotland, even Lincoln, adding: “If we were to offer greater support to dealers in London, the risk is if they sell cars to customers living in other areas of the country, for example through the internet – it would unbalance the network.”

With 60% of ChryslerJeep’s sales coming from the private sector, the company acknowledges it needs to address the fleet market. Several of its forthcoming models will be attractive to user-choosers and dealers should be looking to achieve a 50/50 split with the private sector.

Pricing will be key. Elliott admits that the company got it wrong on the Crossfire, which affected sales. “It was priced against the Audi TT, then the Mazda RX-8 was launched at substantially less and that became the benchmark. We realigned the price and we are now hitting targets, although we took a brave pill and reduced volumes to keep residual values in check.”

The 300C appears spot on at £25,700 for the 3.0-litre petrol, and Elliott urges dealers to squeeze every penny out of the deal rather than resort to discounting. “It’s priced right, so the message is ‘fill your boots’,” he says.

“Our dealers deserve to be rewarded for their patience with some success.”

Coming soon to your showroom

Jeep Commander

Due to be launched in the UK next year, the seven-seat Commander will strengthen a Jeep product line up that includes Wrangler and Grand Cherokee.

Targeting SUV rivals such as Volvo XC90 and Land Rover Discovery, Commander power options include 3.7-litre V6 and 4.7-litre V8 petrol. It’s also likely to get the new Mercedes 3.0-litre V6 diesel.

Already a 4x4 winner in America homeland – it was voted top off-roader by Wheel and Off-Road magazine – the car is just two inches longer than the Grand Cherokee with three rows of seats. It has the same wheelbase, so promises similar levels of off-road capability. The roof is stepped to provide passengers with ample head room, while the second row of seats fold flat into the floor for added flexibility.

Dodge SRT-10

The SRT-10 goes on UK sale in November. Fifteen of the 500bhp V10 supercars will be sold in left-hand drive, priced £77,500.

The 8.3-litre 500bhp two-seater (called Viper outside the UK) produces 712Nm of torque and surges from 0-60mph in 3.9secs and onto 190mph. Brembo brakes stop the car from 60mph in less than 100 feet.

Chrysler says the car will appeal to buyers who wish to stand out from the crowd of supercars, pointing to its deliberate exclusivity (although if it proves popular, expect more than 15 to be imported next year). They’ll also be attracted by unsupercar-like pricing.

British engineering specialist Pro-Drive has re-engineered more than 50 SRT-10 components to make the car compliant with EU standards. These are fitted to vehicles on the production line in Detroit.

Dodge Caliber

Launched next July, the five-door hatchback Caliber spearheads Dodge’s launch in the UK. Chrysler says the car features a sporty coupé-like profile with the strength and functionality of an SUV.

Designed as a car for the global market, Caliber has an aggressive stance with bulging wheel arches and broad shoulders giving a hint of PT Cruiser.

“Dodge Caliber’s bold, graphic design and inherent interior functionality shatter the conventional definition of a compact car,” says Trevor Creed, senior vice president of design at Chrysler Group. “Caliber is pure Dodge.”

Engines include a new 136bhp 2.0-litre diesel and three petrol units: 1.8-litre, 2.0-litre and 2.4-litre. Each promises fuel economy, reliability and performance. Customers will also be able to select a new generation six-speed continuously variable transmission system.

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