Chrysler Pounces on Minivan Market as GM and Ford Retreat

In a bid to counter a $1.5 billion Q3 loss, Chrysler is reinventing its minivans to offer bigger engines and swiveling second-row seats, among other features. The strategy could be particularly beneficial for Chrysler in view of the exit of competitors Ford and GM from the minivan market. Chrysler has led the field in minivans for 24 years, but is seeing its advantage shrink in the face of competition from "crossover" cars and offerings from Asian rivals like Hyundai and Honda. It has also been beset with reliability problems with transmissions, brakes and other components. The reliability problems will be addressed through closer collaboration with DaimlerChrysler's Mercedes unit. The company will offer "Swivel 'n Go" seats, which turn 180 degrees, in up to 40% of its minivans, and is considering offering the cars with diesel- or gasoline-electric hybrid engines. Ford and GM have canceled their minivans outright and are instead concentrating on crossover vehicles, which offer better fuel economy and a smoother ride together with an SUV look and feel. Chrysler's minivan sales fell 9.1% last year and are down 31% from their 1996 high of 538,807.

• Sources: Bloomberg, MarketWatch, Wall Street Journal
• Related commentary: Chrysler Extending Plant Closures Over Christmas in Bid to Shrink Inventory, Chrysler's Woes Continue To Weigh on DaimlerChrysler Stock. Conference call transcripts: Q3 2006
• Potentially impacted stocks and ETFs: DaimlerChrysler AG (DCX). Competitors: Ford Motor Co. (F), General Motors Corp. (GM), Toyota Motor Corp. (TM), Honda Motor Corp. (HMC). ETFs: iShares MSCI Germany Index (EWG)

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