Cerberus to take the venom out of Dodge?
Chrysler’s recent announcement that the company is considering spinning off their Dodge Viper business raises some interesting questions.
One. What’s next? The possible sale seems likely to fuel further speculation that Chrysler parent Cerberus Capital Management intends to parcel out bits of Chrysler piece by piece to quicken a return on the $7.4 billion dollars they paid for a controlling interest in Chrysler last year.
Two. How much could selling Viper really help their bottom line? While Viper sales are said to be up 111 percent this year, that still adds up to a total of just 682 units. Even with 2009 prices at $86,685 for the convertible and $87,435 for the coupe, 682 sales are unlikely to make much of a dent in $7.4 billion.
Three. What about the impact on image? Chrysler’s press release about the possible sale mentions "Viper is an integral part of the company’s heritage." It gives a nod to dedicated owners, suppliers, and employees, 110 of whom hand-build each Viper in Michigan. It might seem like the sale might do more to alienate loyalists than the cash infusion would be worth, especially since the rest of Chrysler’s lineup is more likely to inspire emotions ranging from ambivalence to outright rage. These guys can use all the friends they can get. Imagine Ford unceremoniously dumping the Mustang or Chevrolet ditching the Corvette. Such moves would cast an even darker cloud over Detroit.
Four. Just like with GM trying to sell Hummer, who really might want to buy it? On the surface, owning the Viper name and assets could offer instant access to the American market for an overseas sports car company. Likewise, there are major automotive suppliers who could become car builders. And there are aftermarket performance houses that could grow to become manufacturer, just as Saleen has done. But for a buyer, how appealing is the core engineering, with its low-tech approach to performance? Could the Viper name carry the car for years to come, much like Carroll Shelby’s iconic Cobra has spanned generations? Tough to say in the face of blazing-quick competitors boasting high performance, civility, and lower price tags.
Five. What customers remain? The Viper has been around since 1992, and you’d think just about anybody who ever wanted one, and could afford it, already bought one. In our test of high-end sports cars, we found the Viper to have the fastest acceleration of any car we’ve tested, but it was loud, crude, and difficult to live with on a daily basis. Sales are indeed up for 2008, but a Chrysler spokesperson attributes the increase to the fact there were no 2007 models. Pent up demand and the more powerful engine in the '08 Viper has helped sales. He also said the company doesn’t expect that boost to last.
In the end, it probably may not make much difference to automotive historians or to Chrysler’s future whether anybody buys Viper or not. But I suggest the company might be better off if they could dump some other models like the low-rated Avenger, Caliber, and Nitro instead. Trouble is, that wouldn’t leave much of Dodge.
What do you think?
- Should Chrysler sell off the Viper?
- If something had to go, what would you suggest they part with if you were on the board of directors?
- What brand name would you like to see on the Viper? Personally, I think the Travers name works even better here than on the upcoming Chevrolet SUV.
Posted by: Cale | Sep 5, 2008 11:09:05 AM
Long lag time to post up on your request, Jim... had to think about it.
Actually...the New York Times (business page) had a story about the Cerberus investment in Chrysler on Sept. 3. It talked about the problems facing Cerberus and mentions the possible sale of the Viper business. That got me thinking about your blog.
The article was a long read but I came away thinking, to stay in business (especially in uncertain economic times), Chrysler's going to need a lot of cash. In that light, selling the Viper makes sense.
The worst case scenario, in my mind, would be the complete loss of the Chrysler, Dodge, and Jeep brands. Consumers always benefit when they have the greatest choice, so narrowing major domestic manufacturers to GM and Ford doesn't strike me as good for competition.
I support the sale of the Viper car business because I think as far as saleable assets go; the Viper business will bring the most cash and cost the company the least damage as it moves forward. I wouldn't support the sale of the Jeep brand because doing so would cripple the company's ability to recover to financial health.
Just my $.02.