IHS Global Insight Perspective | |
Significance | Chrysler Group LLC has announced that it will accept product liability for vehicles made before the bankruptcy, similar to the plan which General Motors has announced. It is also reportedly looking at withdrawing from the Global Engine Manufacturing Alliance with Hyundai and Mitsubishi. |
Implications | The product liability move will help the company assuage angered consumer advocates, but the possibility of ending the Global Engine Manufacturing Alliance (GEMA) is not surprising given Fiat's new ownership role at Chrysler. |
Outlook | Given Chrysler's capacity and Fiat's powertrain expertise, leaving the GEMA joint venture is probably more likely than not for the emerging company. |
Chrysler Group LLC has announced that it will be indeed be accepting product liability for its vehicles built before it declared bankruptcy earlier this year. The company stated as much in a press release late last week, citing its newfound comfort with its financial situation. "We know a lot more about the viability of our business today than when we purchased Old Carco's assets in its bankruptcy proceedings several months ago," said Chrysler's John Bozzella, senior vice president, External Affairs and Public Policy. "While Chrysler Group still faces challenges, we are confident that the future viability of the company will not be threatened if we accept these claims." Previously, the company had been granted the ability to wash its hands of its product liability on any vehicles made by the "old Chrysler"—that is, the "new Chrysler" could not be held accountable for a product defect on any vehicle made before the company exited bankruptcy. "We want our customers to feel comfortable and confident buying, driving and enjoying one of our vehicles," Bozzella said. "Chrysler Group vehicles meet or exceed all applicable federal safety standards and have excellent safety records."
In other bankruptcy aftermath news, Chrysler is reportedly considering withdrawing from the Global Engine Manufacturing Alliance which it has with Mitsubishi Motors and Hyundai. Chrysler and Hyundai had no comment on the report, but alliance spokesperson Len Sennish confirmed it to Automotive News on Friday (28 August). "There are discussions about that going on at the highest levels," Sennish stated. The alliance operates four plants around the world, including one in Dundee (Michigan, U.S.) which assembles engines for several Chrysler vehicles in the United States. Chrysler's new minority owner, Italian automaker Fiat, is calling the shots on the company's product plans and has reportedly put the alliance participation up for review, considering that it has significant strengths in powertrain itself. GEMA builds the same four-cylinder engine, or different sized variants of it, in all of the plants globally. The plant in Dundee began supplying Chrysler in 2005 with engines for several vehicles, including the Chrysler Sebring, Jeep Compass, Jeep Patriot, Dodge Avenger, Dodge Caliber, and Dodge Journey. The Caliber SRT4 is equipped with a 2.4-litre turbocharged engine.
Outlook and Implications
Chrysler seems to be quietly coming out of its shell in the post-bankruptcy period, not like General Motors at all, which has been loud and active in convincing consumers and media that they are a viable company again. Chrysler on the other hand is still getting its house in order, and has been quiet about most aspects of its business other than announcing its personnel restructuring. Moving to accept product liability on previously built vehicles from "old Chrysler" is a good idea, and one that GM recognised it needed to do from the get-go. Chrysler's move to reject product liability in bankruptcy triggered an angry response from consumer advocacy groups, who immediately petitioned Washington to try and force Chrysler to place warning stickers on previous model year vehicles, alerting owners and potential buyers that the vehicle had no corporate liability behind it should something eventually go wrong with it. This would have meant that any mass defect, however rare the occurrence these days, would have left owners without legal recourse; a lawsuit against the "new Chrysler" for a previous model year Chrysler would have been tossed out per bankruptcy court restrictions. GM recognised the massive public-relations disaster which would have resulted from walking away from product liability; Chrysler it seems is finally following suit.
Chrysler's withdrawal from the GEMA alliance, if it does indeed go through with these plans, is not entirely surprising. One of Fiat's biggest strengths is in powertrain manufacturing, and given that many new Chryslers are likely to be based off of Fiat platforms and powertrains, it would make little sense to continue to participate in the alliance if Chrysler has no need of the engines. Using Fiat's engine technology also allows Fiat to expand volumes and employ economies of scale to make the existing engines less expensive to build. Chrysler also has plenty of idle capacity in the NAFTA region which could accommodate Fiat powertrain construction without issue. As with any of the new Chrysler technology however, the company needs to execute its plans as quickly as possible, as its market share (and relevance) is rapidly fading with the economic downturn causing a market constriction in the auto sector.