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Chrysler’s new comrades

New liaison: Chrysler Australia is expecting to cut ties with Mercedes-Benz Australia and move in with Iveco Trucks.

Chrysler closes in on distribution deal with Iveco to shore-up Australian operations

10 Nov 2009

CHRYSLER Australia remains “absolutely” confident it will run as a factory-backed operation as it embarks on a massive product renewal program and a new distribution structure under Fiat SpA, despite handing responsibility for New Zealand over to the independent Sime Darby Automobiles.

In an interview with GoAuto after the resurrected Chrysler Group revealed its much-anticipated five-year plan in Detroit last week, Chrysler Australia managing director Gerry Jenkins revealed that he was close to securing a distribution deal with Fiat-owned Iveco Trucks Australia.

Once finalised, the new arrangements will end speculation that Chrysler’s Australian operations might be contracted out to Sime Darby or another large independent distributor, such as current Fiat importer Ateco Automotive.

Ateco, which also handles Fiat’s Alfa Romeo brand and, under a separate arm, Ferrari and Maserati, told GoAuto last month that it was well placed to handle Chrysler Group brands were it given the chance. It has declined to comment on the latest developments.

 center image From top: Chrysler Australia MD Gerry Jenkins, Chrysler 300C concept, Chrysler 200C concept.

Sime Darby’s Australian automotive division currently includes Peugeot and SsangYong, and the Malaysian multinational has made it clear that it is looking to broaden its operations in Australia.

Sime Darby Motors Group (Australia) managing director Rob Dommerson told GoAuto this week that those expansion plans remained, but said he was unaware of any moves at head office level to extend its reach with Chrysler beyond New Zealand.

GoAuto can also now reveal that planning is underway for Chrysler to shift its operations from Mercedes-Benz Australia/Pacific headquarters in Mulgrave, east of Melbourne, to the Fiat-owned factory-run Iveco Trucks Australia head office in nearby Dandenong.

Chrysler Australia has also been holding discussions with Fiat-owned Case New Holland.

The latest developments are in line with Chrysler’s intention to sever sales and marketing operations, financial services and back office support services with former alliance partner Daimler across the globe. Instead, it will leverage the Fiat Group’s distribution infrastructure and resources, integrating into this parts distribution and logistics.

Mr Jenkins told GoAuto that Iveco Trucks Australia, whom he described as “great comrades”, had welcomed Chrysler Australia “with open arms”.

“We’re pretty certain that we’re going to be able to move in with Iveco eventually, and they can give us a lot of support for back-office functions, such as IT and parts logistics and things like that – the things that are really invisible to both dealers and customers,” Mr Jenkins told GoAuto.

“From an operational point of view, that goes a long way for me. It’s something that I don’t have to spend money on, that I can put money elsewhere on. It’s just good business. So we’re going to continue to look at ways that we can fully leverage the partnership with the Fiat Group.

“We’re not competing brands with Iveco so it works really, really well. There’s a lot of background (activities) – distribution, our vehicle logistics – where we can pool all of our volumes and just get better deals in the marketplace.

“The best one, of course, is parts. We sell roughly $40 million worth of parts every year – I don’t know what they do, but they probably do twice that – so by adding our volume to the basket, it allows them to grow and get a better deal with their suppliers.

“It’s just win-win everywhere you look. It’s just very, very positive and very beneficial, so we’re quite eager to move on.

“The partnership with Mercedes has been absolutely excellent. For us, it’s been great. But let’s move on now – it’s time to get on to something else.”

Mr Jenkins described the situation in New Zealand as a “different scenario” where the market was too small to justify running a full factory-backed operation. As a result, Chrysler decided to find an independent distributor, and Sime Darby was seen as the ideal partner.

“We started discussing and looking at opportunities within New Zealand and beyond, and they became very interested in the business because not only did they have three retail outlets, but those three retail outlets represented like 65 per cent of the retail volume for us in New Zealand,” Mr Jenkins said.

“So it seemed like a natural situation, where they have a wholesale (arrangement) – they already do a wholesale for Peugeot, and some other manufacturers on the truck side – so it just seemed like a perfect situation.”

Chrysler last week revealed in Detroit that it planned to increase its sales outside North America from 144,000 forecast this year to no fewer than 500,000 units by 2014. Australia’s part in this is still to be specified, although Mr Jenkins identified its short-term target as 12,000 sales a year for the Chrysler, Dodge and Jeep brands combined.

It will not achieve that this year, with Chrysler sales down 30.6 per cent year-to-date, Jeep down 29.9 per cent and Dodge down 1.1 per cent. The three brands achieved 10,000 sales combined in 2008.

Nonetheless, Mr Jenkins said the Australian sales volume – unlike New Zealand – was high enough for Chrysler Australia to maintain its status as a factory-backed operation.

“It’s a different scenario in Australia where our target is to get to 1000 a month – that’s where our volume needs to travel, and we’re really set off in that way from both a wholesale and retail perspective,” he said. “We’ve got just under 50 people (at head office) and we’ve got about 60 dealers across the country, so it’s totally a different scenario where I can generate sufficient volume to amortise my overhead cost.

“So the final record is obviously we’re going to grow the business here in Australia, added to what we now call an NSC – a national sales centre/office.

“I’m always interested in reducing my costs, but I have sufficient volume here in Australia to justify an NSC and we feel that is strategically where the company wants to go.”

Chrysler Australia’s marketing and product general manager Craig Bradshaw told GoAuto last month that the company was eager to take on the Fiat and Alfa Romeo brands from Ateco should they become available.

However, Mr Jenkins said he did not see a change in the status quo, at least in the short-term.

“I don’t know how that’s going to pan out,” he said. “I know that Turin seems to be very happy with them (Ateco), and I don’t see anything in the short-term coming with regards to Ateco and us.

“Fiat’s intent is to continue to run the business here in Australia through Ateco, which I respect, and so be it. If something changes in the future, we’ll certainly look at it but there is absolutely nothing planned at this point.

“They’re going to remain in Sydney, and run their business through their network, and we’re going to do our business as we currently do today through our network. We do not have one dealer in common at this point, but it will be interesting.

“We’ll keep in the loop, though, if something does materialise over the next two or three years.”

Sime Darby took control of Chrysler distribution in New Zealand last month. It represents the Chrysler, Jeep, Dodge and Mopar brands “in their entirety in New Zealand with a seamless continuation of new vehicle supply, parts supply and warranty/technical support”.

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