In an appearance on 60 Minutes last March, Chrysler Group Chief Executive Officer Sergio Marchionne left little doubt about how much was riding on the success of the automaker’s new Dodge Dart. The vehicle, the first Chrysler product based on a model made by its Italian majority owner Fiat (F:IM), was supposed to free the U.S. company from its longtime reliance on trucks and sport-utility vehicles by giving it a small car Americans would covet. Any serious carmaker unable to succeed in the compact-car segment is “doomed,” Marchionne told the show’s viewers. Nearly a year later, after a disappointing debut that saw Dart sales of just 25,303 in 2012, according to researcher Autodata, chastened Chrysler executives say it will take more time to prove their mettle in small cars.
The Dart’s disappointing start—last January, researcher LMC Automotive had predicted sales of 100,000 cars in its first year—is a rare misstep for Chrysler, which has enjoyed a 33-month streak of rising U.S. sales and three years of market share gains. The carmaker has yet to convince buyers it can succeed with cars other than its large-scale mainstays such as Ram pickups, Jeep Grand Cherokee SUVs, and Chrysler Town & Country minivans. “Fiat has the smaller-car expertise, they’re the European maker, and there were high expectations for that to work,” says Joe Langley, an analyst for LMC Automotive. “But Chrysler is playing in a space where they’re going to have to conquest buyers, and you have a lot of consumers that are going to stick to what they know and trust.”
Chrysler sold just one Dart, which starts at $15,995, for every five Civics sold by Honda Motor (HMC) in the last four months of 2012. General Motors’ (GM) Chevrolet Cruze, the No. 4 compact in the market, outsold the Dart almost 4 to 1 during that span. Even in December, its best month, the Dart barely made it into the Top 10 compacts sold in the U.S. Now Chrysler says Dart sales likely won’t hit 100,000 in 2013, a level seven similar-size rivals exceeded in 2012, according to Autodata. (The Civic, which sold 317,909 cars, was No. 1.)
The Dart is positioned between the tiny Fiat 500, which has yet to break into Chrysler’s Top 10, and the 200 midsize sedan, which often sells to fleet customers or with heavy incentives. The three newer models have barely dented the company’s reliance on light trucks. Chrysler’s trucks, minivans, and SUVs accounted for 70 percent of its sales last year, reports Autodata. That’s only slightly below its 73 percent level in 2008, the last full year before Fiat struck its alliance with Chrysler. By contrast, those large-vehicle segments typically account for less than half of all industry sales.
President Obama cited cars that were less popular, reliable, and fuel-efficient than rivals as the culprits that led to the demise of Chrysler’s previous compact when it filed for bankruptcy in April 2009. So building a version of a Fiat-based car that gets 40 miles per gallon—which the Dart can do on the highway—was the final milestone set by the Obama administration that let Fiat increase its government-supported ownership of Chrysler. “It’s certainly important for Chrysler to get small cars right,” Steven Rattner, the former head of Obama’s automotive task force, wrote in an e-mail.
The first Darts trickled into dealerships last June, about two months late. When they did reach showrooms, the cars came with a drive type most Americans don’t want: manual transmissions. Although fewer than 15 percent of U.S. compacts are sold with manuals, estimates Reid Bigland, president of the Dodge brand, at least the first 5,000 Darts shipped to dealers were equipped with sticks because automatic transmissions weren’t available yet. “It was an opportunity to get the vehicles out,” says Bigland, but it also contributed to the brand’s slow start. “We knew they were going to be slower-turning, but we didn’t have enough to meet the dealer demand to begin with.”
The Dart came out to positive reviews. An engineer with Consumer Reports in April called it a “frisky compact that’s entertaining to drive” and wrote that his first impression was that the car “certainly seems competitive.” But the Dart was pitted against some of the world’s most successful cars, with customer retention rates among the highest in the industry. The Civic and Toyota Motor’s (TM) Corolla both had loyalty rates of about 30 percent last year, better than even Chrysler’s popular Ram trucks, according to researcher Edmunds.com. The 2012 Dodge Caliber, the car the Dart replaced, had a retention rate of less than 6 percent in its last year on the market.
There’s also no shortage of other good compacts, including Hyundai Motor’s Elantra, Ford Motor’s (F) Focus, and Volkswagen’s (VOW:GR) Jetta. “The problem is not the car; the problem is launching a new nameplate in probably the most competitive segment,” says Dave Sullivan, an analyst at AutoPacific. Marchionne, during a press conference last month, disputed that Chrysler’s weak track record with compacts is making it harder for the Dart to succeed. The Dart name is returning to U.S. showrooms after a 36-year absence. “Whoever’s buying that car doesn’t have an historical memory of our segment predecessors,” he said. “It’s almost virgin territory when you’re talking to young buyers now.”
Instead, Marchionne says, the Dart’s slow start was due in part to component shortages and in part to features such as the car’s optional dry-dual clutch automatic transmission, which, while popular in Europe, is unfamiliar to Americans. Explains Marchionne: “If there’s a mismatch to consumer expectation, you’re going to pay the price, and we have.”