The Great Divide at Dodge

Chrysler LLC's decision to divide Dodge brand administration by product line portends greater focus on the marque's underperforming car business, according to insiders and observers.

The move also represents a “vote of confidence” in design guru Ralph Gilles, named president and CEO of the new division, and suggests a strategic departure for Chrysler CEO Sergio Marchionne.

Historically, Marchionne favors executives with business backgrounds as brand chiefs. Gilles, while having an MBA from Michigan State University, has made his mark on the industry by penning dynamic designs, most notably, the Chrysler 300 sedan.

The changes at Chrysler, the latest in a seemingly steady stream of maneuvers calculated to stabilize the struggling auto maker, establish a Dodge Ram brand under former Denver business center director, Fred Diaz Jr., and a Dodge Car brand.

The Dodge Ram brand lineup is expected to comprise light- and heavy-duty pickups and, possibly, the Dodge Dakota compact pickup. The Dodge Car collection likely will encompass everything else, from the Caliber C-car to the Journey cross/utility vehicle.

“This reorganization will allow us to protect and develop the unique nature of the product offerings within the Dodge brand,” Marchionne says in a statement.

Expect Gilles, who retains his duties as senior vice president-product design for all the auto maker's brands, to now devote extra care to the Dodge car lineup, says Chrysler spokesman Gualberto Ranieri. “(It) is a brand that needs some kind of attention,” he concedes.

Through September, U.S. sales of Dodge-brand cars trailed like-2008 45.3%, according to Ward's data. The overall car market lagged prior-year 26.1%.

Dodge's share of the car market is tracking just below 3% for the first three quarters of 2009, compared with 3.95% for full-year 2008, according to Ward's.

Dodge had its worst year on record in 2004, when it claimed a 1.6% share of the U.S. car market.

Marketing professionals are divided on the wisdom of spitting Dodge.

It is “natural” to split the lineup according to truck and platform lines, says Mike Bernacchi, marketing professor at the University of Detroit-Mercy. “But is it unnatural in terms of sales?” he asks.

Derrick Daye, managing partner-The Blake Project, an international strategic brand consultant, calls Chrysler's strategy “a smart move.”

“Chrysler has discovered that Dodge Trucks and Dodge Cars each stand for something very different in the minds of their existing and prospective customers,” Daye tells Ward's. “That is, the perception of a Dodge Truck is different from that of their cars. Marketing is about perceptions, not products.

“Unique focus will be helpful in building an advantage for the struggling car division and will help both cars and trucks build on what they each truly own in the mind,” he adds.

In addition, the move gives Chrysler a structure that roughly parallels that of Fiat. The Italian auto maker has a separate division for its truck business.

Marchionne, who also is CEO of Fiat Auto SpA, which controls Chrysler, has rarely put brands in the hands of engineers or designers, such as Gilles. Harald Wester, CEO of Fiat-owned Maserati SpA and Abarth & C. SpA, who has an advanced engineering degree and led product programs at Audi AG, is another exception.

The reason, Marchionne told Ward's in 2005, is engineers believe “as long as we put our heart and soul, from an engineering standpoint, into the vehicle, it should intrinsically sell. That's the wrong answer.” Vehicles are consumer products, he explained.

That Gilles, who also has a racing background, would be named to lead Dodge Car represents “a great vote of confidence” from Marchionne, says Ranieri.

“For Ralph, this is an opportunity to grow,” he adds, noting the Chrysler CEO also is a big believer in nurturing talent.

In a story published last week on WardsAuto.com, Gilles credits former Chrysler design chief Tom Gale with encouraging him to educated himself about the business side of the auto industry.

Asked about the dearth of designers among the ranks of CEOs, Gilles told Ward's: “Designers need to become aware of (business). Then CEO, one day, is possible.”

Gilles' elevation comes hard on the heels of General Motors Co.'s appointment of Bryan Nesbitt to lead the Cadillac brand. Until now, Nesbitt's career has been entirely in design.

Mike Donoughe, former Chrysler executive and senior partner with The St. Clair Consortium, a Michigan-based business manufacturing consultancy, worked with Gilles.

“Ralph is an excellent person for (the new Dodge job),” Donoughe tells Ward's. “He'll do fine.”

Gone as Dodge chief is Mike Accavitti. Chrysler says he resigned to pursue other opportunities.

And Olivier Francois replaces Peter Fong as president and CEO of the Chrysler brand. Francois, who leads Fiat's Lancia brand, a position he retains, also will be responsible for the auto maker's global marketing strategy.

Fong resigned for personal reasons, Chrysler says.

<i>Ward's</i> data show how Dodge car-market share has gone up and down over the past decade: