Last month, Fiat S.p.A. exercised a third option to increase its stake in Chrysler Group LLC above its current 58.5% and move closer to fully absorbing its American partner in a bid to form a company with sufficient scale and scope to compete in an increasingly competitive automotive landscape. While such news is evidence of how far the Fiat-Chrysler partnership has come in its turnaround since the Italian automaker took over a bankrupt Chrysler, the newly formed company’s journey to this point has had its fair share of hurdles. The sluggish first-year sales of the all-new Dodge Dart, the first fully collaborative effort between the two carmakers, has certainly been less than ideal after receiving mixed reviews and failing to receive a “recommend” rating from Consumer Reports. In addition, the controversy over Chrysler’s initial refusal to comply with the National Highway Traffic Safety Administration’s request to recall 2.7 million Jeep Grand Cherokee and Liberty models created a public relations nightmare and may cost Chrysler millions of dollars. Unfortunately for the automaker however, the challenges continue to mount with the latest culprit, despite having yet to reach dealer lots, being the upcoming Jeep Cherokee mid-size crossover SUV.
Jeep ceased production of the Liberty in August 2012, ending an 11-year run for a model whose sales peaked in its first full year of production, at 171,212 units, emphasizing consumers’ abating demand for the SUV over the years. With the departure of the outgoing model however, Chrysler had the opportunity to start fresh with a clean slate and deliver an all-new model that could find sales success in markets throughout the world. Thus, the automaker invested $550 million in its Toledo North Assembly Plant to repurpose the manufacturing facility to produce the new model, which included demolition, disposal of assets, the purchase and installation of robots and machinery, and a completely new body shop. As plant improvements neared completion, the plan was to add a second shift of workers and begin training before starting production for the Liberty successor in April 2013, with dealerships taking deliveries in May 2013, but as with any major plan, the potential for missteps was high.
In February 2013, spy shots of the upcoming model, which were taken from the assembly line at the Toledo plant, were leaked onto the internet after rumors had already begun circulating that the Jeep brand would eschew the Liberty name and reuse the Cherokee nameplate instead. As a result of the leaks, Chrysler was compelled to release an official press release, complete with photos of the new Jeep as well as confirmation that the model would indeed be called Cherokee. Initial reaction to the vehicle’s exterior design were polarizing, to say the least, and Jeep enthusiasts were left wondering how the much anticipated mid-size SUV could be such a huge departure from past Jeep designs. From an engineering standpoint, as well, the upcoming model appeared to have left its off-road roots behind in favor of a “soft-roader” concept, with a focus on improved fuel economy and a roomier interior. Committed to supporting the design however, was Ralph Gilles, president of the SRT brand, and head designer for Jeep, Mark Allen, who earlier this year stressed in a report from the Wall Street Journal that they want to "make sure the design still looks modern five years from now."
The original Jeep Cherokee, which was first sold in 1974, sported a boxier, simpler design that remains popular among Jeep faithful and was one of the first sport utility vehicles to come to market. Its off-road capabilities received high praise at the time, and with speculation growing that the lackluster Liberty would be supplanted by a revived Cherokee model, enthusiasts had much reason to be excited; however, once the new Jeep was made public, only questions remained. In an interview with Forbes this past March, when asked about the controversial changes, Jeep president and CEO, Mike Manley, said, “Our segment share was roughly 3 or 4 percent in the midsize SUV segment, so when we styled this vehicle, when we set our engineers to create this new generation, we wanted to make sure that we were progressive, not just in terms of its capabilities—it is more capable than Liberty—not just in terms of its fuel economy—it’s 45 percent more fuel efficient than the previous vehicle—not just in terms of its styling or its interior, but the complete package.” In an effort to evolve the model into a more all-around capable vehicle, it is understandable how the brand would have to make some very difficult decisions with regards to the direction of the new Jeep. When defending such decisions however, Manley added, “I’ve heard a lot of people say the new Cherokee is not true to the Jeep style, but I can’t survive on 3 percent market share.”
Unbeknownst to many however, is that while the new Cherokee may be progressive in certain regards, as was Chrysler’s stated intent, much of the design on which the upcoming model is based was determined by a pre-existing model. Rather than starting with a blank slate to produce the new Jeep, Fiat-Chrysler based the Cherokee on a European platform that had been developed for Fiat’s Alfa Romeo brand. While doing this saved the automaker hundreds of millions of dollars in engineering costs and expedited the time from concept to launch, it also played a significant role in dictating the new model’s design.
After the Cherokee reveal, once news became public that the new SUV was going in a different direction, particularly in terms of styling and engineering, it became easy for consumers to wonder why Chrysler would bring back the Cherokee name, one that embodied a certain kind of ruggedness, if the new model’s focus was to be on features that were not emphasized in the original model. This past June, in an interview with The New York Times, Jeep explained that market research conducted by the automaker inferred that consumers had an affinity towards the name. Considering how dissimilar the new model is from the original however, the supposition that the company chose to revive the name based on its popularity instead of how well it applied to the vehicle becomes more likely. Certainly, Chrysler had the freedom to choose from numerous viable names that were not only well-liked, but also suitable for the Liberty successor, suggesting that if the automaker decided on bringing back the Cherokee name, there must be other reasoning behind the selection.
The marketing of a new brand or moniker, especially for a vehicle that is to be advertised and sold globally, is certainly that which bears great cost and justifies the logic of reusing of one from the past that already has equity built up. According to the article published by The New York Times, experts from the auto industry assess the expense associated with the reutilization of a brand name potentially being in excess of $50 million. With the cost of recycling a name being as high as it is, foregoing the introduction of an entirely new one is sure to be one which would save an organization a significant sum of money. Therefore, seeing as how the incoming product is unlike that which it shares its Cherokee name, as well as how Fiat-Chrysler saved hundreds of millions of dollars in engineering costs and millions more in marketing costs, the most plausible conclusion is that the company’s financial concerns were largely responsible for dictating the product’s end result.
Aside from the gaffe related to the rushed product reveal and the debate that followed regarding its controversial design, Chrysler also had the issue of keeping up with its production timeline, but as the winter months passed, it became apparent that it was having trouble doing so. Reiterating the significance of the new Cherokee, Fiat and Chrysler CEO, Sergio Marchionne, stated in February that the plan was to launch the vehicle on May 24th. Regrettably, with progress coming along sluggishly, the CEO then announced on April 28th that the introduction would occur in mid-June, but the company’s streak of missing its own deadlines continued. In a May 2013 report from the Detroit Free Press, Marchionne was quoted as saying, “Chrysler has got a number of objectives, which it needs to execute flawlessly between now and December of this year. The launch of the Cherokee, which will roll into framing sometime in the middle of June, is crucial to the success of that plan. We need to get everything right between now and then." Yet curiously, despite the Chrysler CEO clearly stating that the organization could ill-afford any more hiccups with regards to the new vehicle’s critical production timing, the problems would persist, but even more strangely, the reasons for the delay remained unclear.
Chrysler scheduled a media drive event for August 8 and 14 in Seattle to showcase the 2014 Jeep Cherokee and allow journalists from around the world to discover their initial driving impressions of the SUV. By late July however, the vehicle still had not made it to market and the automaker was forced to push back the event until at least September, releasing a statement explaining, “Over the last couple of weeks during final quality and durability testing, we have discovered the opportunity to further improve powertrain calibration,” with the company adding, “We will introduce the vehicle to media and consumers as soon as the process is complete.” During that time it was announced that the Cherokee would be delayed once again until September due to problems related to the calibration of the Jeep’s new nine-speed transmission, which was co-engineered with ZF Friedrichshafen AG, a global supplier of driveline and chassis technologies.
In spite of the apparent existence of numerous issues surrounding the Jeep Cherokee, Marchionne talked down the engineering delay by saying, “These things go on all the time in any product launches and they go on with a certain degree of frequency.” Interestingly, he admitted that the company was “paying a huge price” by not currently offering a mid-size SUV, after having said, “We keep on tweaking and finalizing the car.” The new SUV has been delayed multiple times; however, the Chrysler CEO continued to emphasize that if the company is to achieve its financial objectives, a well-executed introduction is “an absolute necessary condition.” Nonetheless, back on July 30, Chrysler cut its forecasted profit for the year, predicting the company to finish 2013 somewhere between $1.7 billion and its original $2.2 billion target. Considering the sequence of events that followed, the potential for even further profit reduction this year would appear to have increased, but the Cherokee’s drag on the automaker’s bottom line may continue into the future.
It has been quite a roller coaster ride up until this point for the Jeep Cherokee. With improved quality being one of Chrysler’s stated top priorities, the expectation would be that the automaker would not allow for the numerous problems to occur like they have, but the issues have arisen nevertheless. As Mauro Pino, head of North American World Class Manufacturing and former plant manager of the Toledo Assembly Complex that builds the Cherokee, conceded, “We have the perfect storm: new product, new plant, new people, new platform.”
Certainly, Chrysler officials have done the right thing in not letting the Cherokee reach dealership lots until they believe the SUV is absolutely ready for prime-time, and at the end of the day, the all-new model may be a tremendous sales success for Fiat-Chrysler. However, considering the challenges faced by the model thus far, it would not be too surprising if it were to experience a few more bumps in the roads in the months ahead.