ChryslerDaimler is interested in small cars after all

Looks like Chrysler is smartening up. They have decided to go after the small car market after all. Albeit by partnering with a Chinese company who only pays its employees up to a whole $2 (USD) a day; looks like building a higher fuel efficiency compact automobile is not the only "efficiency" they have in mind. And, yes, Chery is the same company GM complained, not so long ago, that it had a deceptively confusing, trademark-infringing, name. Potential entrepreneurs take note, choosing a deceptively similar product or company name could eventually land you a large deal, or a partnership... with the the copyee's competitor.

Today's announcement:

PRESS RELEASE: Auburn Hills, Mich./Stuttgart, Germany, Feb 27, 2007 - The DaimlerChrysler Supervisory Board today approved the framework of a limited partnership to develop small vehicles between the Chrysler Group and Chery Motor Company of China. The deal is still contingent upon approval by the Chinese government, but the final pact of the framework is expected to be signed by the end of March. Under the non-equity partnership, Chery-built vehicles will be distributed under Chrysler brands, primarily in North America and Western Europe. Chrysler Group indicated that the partnership would allow the company to become a bigger player on the global automotive stage by giving it access to products in new segments more quickly, with less capital spending.

Small vehicles such as these will allow Chrysler Group brands to compete in segments in which the brands do not currently compete, and which are especially important in price- and fuel-economy sensitive markets. Some 67 percent of all vehicles sold outside of North America are in these segments. Chrysler Group’s major competitors in the U.S. and Western Europe have similar arrangements with Asian manufacturers for vehicles in these segments.

Chrysler: The canary in the "big car" coal mine?

This week DaimlerChrysler announced some pretty significant job cuts. The affected plants are located in Michigan, Ohio, Indiana, and Ontario -- speficially, those involved in the production of sport utility vehicles, pickup trucks, and other large vehicles. These types of vehicles, we're told by DaimlerChrysler, are just not selling as well as they used to. This is certainly not just a Chrysler-specific phenomenon. Rather, it is early evidence of the eventual move towards smaller vehicles in North America. Although the general public is not clamoring for small cars quite yet, there is an unmistakable trend towards higher fuel efficiency. This the first step. Unfortunaely for Chrysler, they are not very well positioned for the "small" future -- their smallest vehicle available is the PT Cruiser -- perhaps destining them to be just a small player in the auto field. There is currently a lot of buzz around about Daimler spinning off Chrysler, and business news headlines are filled with talk of potential buyouts or mergers (particular with GM). If I were a potential suitor looking at Chrysler, I would only value it as a future niche player; they are pretty good at making "pimp-mobiles" after all, such as the Chrysler 300 that's still a hot item in the hip-hop world.

Economic myths about small cars

We (I'm including you, the loyal reader of the small car blog) are not the only ones lamenting the lack of small car options in Canada or the U.S. Is it a conspiracy? Not likely. It's primarily a matter of lack of demand. Although we North Americans do follow the trend of lusting after smaller cell phones, smaller cameras, smaller computers (Although I'm starting to doubt this last one. Have you seen the size of laptops these days? Forget portability, big wide screens are what the masses want apparently.) we buck the world trend when it comes to cars. Mr. John Smith wants his car big; Ms. Jane Doe wants her car to be higher up for a better view and more security. So the car makers (North American for not making them, Foreign for not importing them here) are not totally to blame. It's a culture thing. But we all know that clever marketing (aka. brain washing) can change the psychology of our wants and needs within a generation, heck even less than a decade (my commute to work is 10 minutes, I can't listen to music at work, I have a great stereo at home... why is it that I need an iPod again??)...

But wait! (I hear you economists rumbling out there...) Even if there was a demand for small cars, wouldn't the margins be too low to be worth the while of any manufacturer? Perhaps. But consider this:

First myth: Small cars, small profits. That's the thinking, but great car companies have been built on small cars. The Model T was pretty small and low-priced at times--$500, or some $7,500 today--and it made Henry Ford one of he richest men in the world. Volkswagen came out of the rubble of World War II with a small car, the Beetle, and grew into a world power. Toyota and Honda built their empires on small-car profits. Ford did quite well with its Escorts not too long ago, too. Small cars can make money.

Second myth: Wages here are too high for small cars. VW, Ford and Opel (German GM) make small cars in Germany, where wages are high. That Model T was built by very high priced labor: $5 a day.

-- Excerpt from "The Plot Against Small Cars" in the latest issue of Forbes (if you have a subscription, you can view the article here).

Convinced yet? Anyone want to try to get rich? You need a great psychology-altering marketing campaign, oh yes, and a great car to sell...

GM is to car as Vespa to scooter?

Wrong! It turns out that Piaggio, the makers of the massively popular Vespa line of scooters, once made a car, a tiny microcar to be exact. The Vespa 400 (circa 1957-1960). And "micro" is almost an exaggeration; we're talking a 392cc engine (most motorcycles have larger engines; even Piaggo make some scooters these days that are 500cc), rear wheel drive convertible. And if you happen to live near Toronto, one is available for purchase right now! These are extremely rare, and those still around rarely go for sale.

The small car for nerds

Calling all nerds! Yes you. I bet you're driving a Honda Civic, aren't you? Well, I present to you the 2008 Renault Twingo. 15-inch LCD display; check. Multiple iPod docks; check. USB data ports; check. Internet access; check. Great sound; of course. Oh yes, and it has a drink cooling system too. More photos of this concept car here. Too bad Renault stopped exporting their cars to North America decades ago! Perhaps if enough nerds band together...