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Chrysler Group LLC Has Big Plans for Ram Trucks

December 8, 2009 by · 1 Comment 

logoChrysler Group LLC wants to make its new Ram truck brand as big, bold and profitable as the full-size pickups that are its cornerstone, and plans to do it by expanding into commercial vans and potentially big rigs, according to The Detroit News.

Building on the success of Chrysler’s truck division is part of the Auburn Hills automaker’s five-year plan to return to profitability by 2011. The plan includes putting more emphasis on individual brands and incorporating products from Italian partner Fiat SpA.

One of Sergio Marchionne’s first moves after taking over as Chrysler CEO was splitting Dodge into two brands: Ram for pickups and commercial vehicles and Dodge Car for everything else, including minivans and SUVs. Ram is banking on trucks’ high profit margin and the brand’s history of innovation, including features such as the box storage unit available on the newest models, to boost sales, market share and profits.

“It’s not such a terrible idea to take the Dodge truck and try to brand it as an entity because it really doesn’t fit the car business,” said Gary Dilts, senior vice president at J.D. Power & Associates and former head of sales for Chrysler. “A Dodge Ram truck is in a totally different hemisphere than a Dodge Caliber.”

The goal is to boost global Ram truck sales from 280,000 today to 415,000 in 2014, mostly in North America.

Steady growth will come from product improvements, significantly more advertising than has been done in the past, and adding new commercial vans to the Ram lineup, Fred Diaz, Ram brand chief, said in a recent interview with The Detroit News.

By 2012, two new Ram commercial vans will be for sale in the U.S. and the brand could broaden further as Chrysler considers adding 18-wheelers to the Ram product portfolio, Diaz said.

Also key to the Ram expansion is Chrysler’s partnership with Fiat, the third-largest producer of commercial vehicles in the world. Fiat has commercial vans that can be imported fairly quickly, as well as its Iveco brand of big trucks that are popular in Europe and Australia but not sold in North America.

“Pre-Fiat Chrysler would have had nothing to compete in many (truck) segments,” said James Bell, executive market analyst with Kelley Blue Book in Irvine, Calif. “But with Fiat they do.”

Still trail Ford, Chevy trucks

All Ram products still fall under the Dodge umbrella and the Dodge name will be somewhere on every vehicle, Diaz said, but “Dodge” does not appear on a new Ram’s head logo that will debut on trucks in about six months. Nor will “Dodge” appear in advertising for the trucks, Diaz said.

While the pickup is one of Chrysler’s jewels and holds 16.5% of the market, its U.S. sales pale against the No. 1 selling Ford F-150 and the Chevrolet Silverado.

But analysts say if Chrysler continues to improve the pickup and the brand becomes a credible player in the commercial truck market, Ram will establish itself as a stronger brand.

Changes are planned from bottom to top.

The smallest vehicle in the Ram brand, the Dodge Dakota compact pickup, will be discontinued in 2011 but may be replaced with a car-based — or unibody — midsize truck to better differentiate it from the larger, body-on-frame Ram pickup.

The commercial truck sector includes the all-new Ram 2500 and 3500 heavy-duty pickups, which were completely redesigned for the 2010 model year.

Up another rung are the Ram Chassis Cabs, often used as a base for ambulances and other emergency vehicles, and work trucks. Chrysler introduced the 3500 Chassis Cab in 2007 and claimed a 28% share of the segment.

“We were new to that space and knew we had a hit on our hands,” Diaz said. The automaker followed up with the larger 4500 and 5500 chassis cabs in 2008.

Next fall, all three chassis cabs will be completely redesigned and introduced as 2011 models.

The commercial segment

Continuing along the evolutionary scale for the brand are plans to add a small and large commercial van from Fiat in 2012.

The small van is expected to be the Fiat Doblo, which was redesigned and goes on sale in Europe next month as a seven-seat passenger van or a cargo van.

A name has not been chosen for the Ram version, which will compete against the well-received Ford Transit Connect that went on sale this summer. Like the Transit Connect, the Doblo is expected to be imported from Turkey.

Ford has the small commercial van market to itself and is doing much of the work to establish the segment in the U.S., said John Sousanis, director of information content for Ward’s Information Products in Southfield, Mich. “Bringing in a competitor right away seems like a prudent move.”

Diaz said Chrysler is studying what changes, if any, Fiat vehicles would need to bring them to the U.S.; the business case will weigh those costs, and the expense of shipping from Europe, against the cost of building in North America.

The large van coming in 2012 could be the Fiat Ducato to fill the gap that will be left by the Daimler-built Dodge Sprinter. Dodge’s contract to sell the Sprinter ends Dec. 31. After that, it will be sold only by Mercedes-Benz and Freightliner dealers.

“If the Ram brand is going to compete as a commercial-grade truck-only brand, it can’t afford not to play in the commercial van segments,” Sousanis said.

U.S. sales of large vans dropped to 248,600 in 2008, down from more than 325,000 vehicles two years ago. Analysts expect sales to recover with the economy.

Importing commercial vans is “really good business,” J.D. Power’s Dilts said. The vans are not as profitable as Ram pickups, but a fleet order provides constant production of a vehicle with margins not subject to fluctuating market conditions and incentives.

Ram brand aims big

Chrysler’s partnership with Fiat could allow the Ram brand to expand into the big rig market.

“We’re giving serious consideration to entering the heavy truck segment, which includes the 18-wheelers you see out on the road today,” Diaz said last month.

But in an interview he said getting into those trucks, known as Class 8, would be a huge undertaking and is not imminent. “We need to focus on the business at hand and get healthy as a corporation before we venture too deep.”

There is no urgency. The heavy truck market “has been in the absolute gutter for two years,” Sousanis said. With 74,380 trucks sold through October, sales are unlikely to hit 100,000 this year, down from 284,000 in 2006. Many players have consolidated or closed.

It is a bold but possibly risky move, said Rajesh Kothari of Seneca Partners Inc. in Birmingham, who monitored the big truck industry for years.

Adding commercial vehicles complements the big-rig look Dodge introduced with the 1994 Ram pickup. “If the new Ram brand wants to be viewed as truck central,” Kothari said, “it can only add toughness to the brand.”

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