Scott Held draws a line in the sand. “I firmly believe we will be selling Chrysler for quite a long time.” Held is the president and managing partner of Sherwood Partners. In the same year that Chrysler’s U.S. sales have shrunk by 35.9 percent, his group has just spent CA$18m on a new, super-sized Chrysler dealership in Edmonton, Alberta. What if Held’s wrong and Chrysler goes belly up? “I know I am taking a risk,” Held admits. "But I have faith."
Held’s been in the business for fourteen years, including the last three managing or running dealerships. He’s lived through Chrysler’s chequered past– and sees good things in its future. He disputes the widely-held belief that Daimler-Benz pillaged Chrysler.
“Yeah, it was a take-over. I mean, all the Chrysler execs were fired and replaced with Benz guys. But under Benz, I saw some of the product development; it gave us access to some high-technology Mercedes components we would never have had access to,” he states matter-of-factly. “It was better for Chrysler than it was for Benz. Benz bought the company for $40b and sold it for $7b,” he reminds me.
And yet, the sharp decline in bankable market value didn’t set off warning signs that Chrysler may be in bad shape.
Several factors fuel Scott Held’s optimism, not the least of which is the 22 straight months of sales increases for Chrysler’s Canadian retail operations. The success is in stark contrast to Chrysler’s U.S. misfortunes. Held attributes the Chrysler’s Canadian success to “aggressive marketing and incentives”, and, surprisingly, product.
“The Patriot, Caliber and Compass are giving us access to young people we’d never have seen… The Caliber is doing much better than the Neon.”
It’s difficult to say if Held’s analysis is on the mark. Though smaller SUVs have always fared better in Canada (where gas prices are currently hovering near $5.20/gallon), Chrysler advertises heavily in the U.S. also, and all of the models Held named are also on sale there. And doing badly.
Chrysler was one of the earliest automakers to cut Canadian MSRP to achieve parity with U.S. prices. I asked Held if he thought the move created a sales bubble, foreshadowing an eventual decline.
“They addressed the [rising dollar] very early. It didn’t give us a boost. November and December [2007] were tough months for all of Canada but we still kicked ass. If anything that just let us keep our customers we would have lost to the U.S.”
Held is fully confident in Canadian demand for Chrysler products; no bubble here, move along.
Held admits Chrysler has made a few mistakes over the years, most visibly on the Sebring. “That’s an easy one to pick on,” he jests. He was also worried about Chrysler dropping the short-wheel base Caravan for the new 2008 generation. “It did a lot of stuff for not a lot of money.”
But the bravado of the salesman always returns to the discourse. Those things “have been addressed” now. Old Sebring buyers are going for the Avenger, and SWB Caravan shoppers are going for the new Dodge Journey. “I’m surprised at how well that thing is doing,” he muses.
Despite the “good years” under Daimler, Held thinks Cerberus is a better fit for the troubled Detroit automaker. “I’ve met Bob Nardelli,” he mentions. “They’ve done a significant amount of restructuring. They’ve committed to spending large dollar amounts on product development and on hybrids.”
Daimler, he recalls, was much more obsessed with diesel-powered cars, as befitted its European heritage. Held thinks the hybrid Durango/Aspen twins will be some great sellers. He’s so confident, that he’s ordered a “bunch of them” for his dealership. “A more volume-selling [i.e., smaller] hybrid is on the way. I think that’s where Jim Press wants to go.”
When prodded about Chrysler’s lengthy development time, Held concedes that Chrysler is a bit late to the hybrid party, but it still has to be done. “Honda and Toyota have the most success with hybrids on cars that are already fuel-efficient. We’ll be a bit late to the party, but I don’t think the party will be over.”
Held isn’t sure when such a car will come, as he doesn’t hear from Chrysler’s new, mysterious overlords much earlier than the Internet does, but his optimism isn’t tainted.
To my relief, Held’s not fazed by any of the doom-and-gloom I bring to the conversation. “I think that ‘operational bankruptcy’ thing was played up by the press because it makes a good story. The brand isn’t going to disappear.” One thing’s for sure: time will tell.
A good deal is in the mind of the customer. And a good dealership is in the mind of the dealer. Chrysler could own the Canadian market completely and it still won’t stop the inevitable. They need a larger market than that to survive.
“The Patriot, Caliber and Compass are giving us access to young people we’d never have seen… The Caliber is doing much better than the Neon.”
I see some patriots, calibers and compasses but I’d like to see the sales stats of the neon vs. the caliber. I have always seen a ton on neons on the road since their introduction.
There very well may be “Chrysler” or “Dodge” labeled products for many years to come. However, it seems increasingly likely they will be re-badged Korean, Chinese (or Malaysian, or Indian, or whatever…) vehicles.
If they are able to break the strangle-hold their franchised dealers have on them, you’ll probably be able to buy them at Wal-Mart or Target.
If you’re going to peddle mediocrity, you might as well assemble it using the least expensive labor you can find.
Samir,
When did you do this interview? Was it before or after Chrysler pulled all of its lease support in Canada? A lot of Chrysler’s recent success has been due to, as Mr. Held puts it “aggressive incentives”.
Mr. Held also runs a dealership near Edmonton, Alberta. Edmonton is an amazingly strong car market and domestic dealers, especially Chrysler and Ford have been very strong retailers in a market that services the oil patch.
That being said, I would agree that Chrysler has a hit in the Patriot (less so in the Caliber and I don’t know how he sees Compass as anything other than the red-headed stepchild of the three). The minivans continue to move (Canada has always been a proportionally bigger minivan market than the US) and at least in Alberta and Western Canada, that new Ram truck is going to be huge!
Nice to see some optimism on these pages. It was getting more depressing than a Russian novel.
The old term “Whistling past the graveyard” comes to mind.
hehe, “chequered past”.
There are definitely a lot of Chrysler minivans in Southern Ontario. I was there 3 weeks ago and was amazed so see so many on the road. Whereas in the US, it’s Expeditions/Exploders/Trailblazers, in Canada it’s minivans.
I also saw a decent number of Calibers. It’s too bad they didn’t actually offer a diesel option in the Caliber though, Canadians would be buying those like crazy with the lack of a VW TDI at the moment.
I hope Chrysler survives, but the Canadian market is way too small to sustain their money losing US operations.
Did this guy inherit the dealership and money from his dad or something? Investing $18M in a new dealership for perhaps the weakest brand in the market seems foolish especially when that brand is falling like a rock with a lead weight tied to it. A couple of local dealers, one Ford and one Chevy, opened new lots recently, but that was A) three years ago and B) probably didn’t cost $18M combined. Heck those new dealerships may not have cost anything as they were moving from property right in town to property on the outskirts of town, which I’m sure was cheaper than the property they sold.
“Yeah, it was a take-over. I mean, all the Chrysler execs were fired and replaced with Benz guys. But under Benz, I saw some of the product development; it gave us access to some high-technology Mercedes components we would never have had access to,” he states matter-of-factly. “It was better for Chrysler than it was for Benz. Benz bought the company for $40b and sold it for $7b,” he reminds me.
No. Just no.
Other than the drivetrain in the LX cars and some other powertrain components, Mercedes contributed very little (and took much), and the marketing and product planning damage they did more than outweighed any engineering benefit.
Most of the Chrysler products in the pipe prior to the merger (and this includes the conceptual LX cars, Viper and PT) were actually quite good. Anything that transpired during Mercedes reign (Compatriot, Sebring, Commander, Aspen) was awful.
The reason Mercedes got docked 33 billion is because Jurgen Schrempp (and Dieter Zetsche, to a lesser degree) can’t manage their way out of a wet paper bag. Put it this way: their operational performance makes Rick Wagoner look good.
Given the market in the early/mid 2000s, Chrysler should have been able to make money hand over fist. They didn’t. Even GM and Ford were able to crank out something.
wow, $18 million. That’s a hell of a lot of money to bet on Chrysler. I wonder if the person with the largest holding in Cerberus even has that much invested in Chrysler.
Chrysler actually does reasonably well in Canada, at least compared to the US. The ComPatriot and Caliber sell pretty well, as does the Caravan. Even the LX cars and Sebring move in greater numbers. Personally, I think it’s because they’re cheap and Canadians have less disposable income.
That said, Chrysler’s Canadian dealers got stabbed in the chest–twice–when it was announced two of the best selling products (SWB Caravan, Neon) were going away, as will the still-strong-selling Neon.
In central Oklahoma we have a Chevy dealer that thinks like Held. He’s building an enormous new store that’s like a cross between dealership, city park and entertainment venue. Darned if I can see how he can sell enough Chevies to support such a huge investment, but he’s brimming with optimism. And in other towns he has Ford and Chrysler stores! He’d better be on his knees every night praying that the 2.8 survive.
It’s easy to be an economic optimist in oil rich Alberta.
I wonder if his glass half full perspective is shared in the socialist provinces (yeah, that’s right, I said it…) – that’s everything east of the Ottawa river.
He is also fortunate to be in the one of the economic hot spots in North America right now. The nearby Canadian oil sands are driving the Canadian and Alberta economy.
MikeInCanada:
I’d like to know how the Atlantic provinces are socialist?
NB and PEI have liberal governments in power and NS and NL have progressive conservative governments.
Also didn’t you hear that Ontario is no longer a “have” province while Newfoundland is.
All of Canada is socialist, for a given value of socialist. Yes, even Red Neck Wild Rose country.
As a socialist myself, I don’t see this as a bad thing.
psarhjinian:
“The reason Mercedes got docked 33 billion is because Jurgen Schrempp (and Dieter Zetsche, to a lesser degree) can’t manage their way out of a wet paper bag. Put it this way: their operational performance makes Rick Wagoner look good.”
Thank you. I have been saying this for a long time. Not only Jurgen and Dieter, but who was that idiot VP of sales (Joe something) that re-created the sales bank sometime in ’05 or ’06 and was stuffing vehicles into every available space around Michigan? Another Dumbler exec. They sent him away and gave him a Mercedes dealership.
CSJohnston Says:
July 8th, 2008 at 9:55 am
Samir,
When did you do this interview?
Yesterday (July 7).
Neat I used to work just down the street from that dealer at Sherwood Nissan who became the #1 volume Nissan dealer in Canada. We have the biggest Dodge dealer in the country in Derrick Dodge as well.
Let me tell you all, auto sales are roaring in Edmonton. The oil patch fueled growth in this city is off the charts.
I interviewed once for a position at a dealer that Scott Held was running…. he was quite high on the opportunity that was forthcoming at Sherwood Chrysler.
You live in Edmonton Samir?
For the sake of full disclosure, don’t you think you should mention your own checkered history with Chrysler products, Mr. Syed?
Don’t get me wrong, it was a very even-handed approach and I am very happy to seethe perspective (delusions?) of the dealer. He strikes me to be the same as some .com people I’ve worked with.
You live in Edmonton Samir?
No, but I’ve been there.
TokyoEnthusiast Says:
July 8th, 2008 at 1:05 pm
For the sake of full disclosure, don’t you think you should mention your own checkered history with Chrysler products, Mr. Syed?
Fine. My 2nd car was a 1995 Dodge Neon and I hated it. But I’ve owned 3 more cars since then and it’s all water under the bridge now.
Or analogy as when stock market is hot, u can tape a stock maket section on the wall throw darts at any stock then buy you will do no wrong but make money.
Or few years back, when His Majesty Ralph Klein was the Generalissimo to the Principality of Alberta he can do no wrong, or replace him with a Koko the Chmpanzee. Alberta’s economy would be still boomng flushed with cash.
Saldy Canada per se ain’t going to buoyed up the SS Titanic Chryslerbus.
Canada is only 10% of US of A didnt we forget, looks like another Pyrrhic victory.
Is like a when a big ship is going down u better be few hundred yards away or else u get sucked in by the Vortex.
Lets pray Chryslerbus desnt go down, failng that Mr. Held can just stick a new Blu Oval sign onto the front. That shold stay longer than the fasteners can uphold.
Given the strong cash position of Oel sand there,
Mr. Hold can sell anything that can make it back to Fort McLeod.
Good post!
Pattison in BC has just completed a huge Chrysler dealership, the first Chrysler store for the Pattison Group.
Chrysler in Canada for the past several months is comparable to the arrival of a Chinese manufacturer. Its as if Reid Bigland asked a simple question “If the Chinese were to sell vehicles in Canada what would they do?”
After all the talk, the folks in Canada that want a “serious deal” go to a Chrysler store.
Imagine if Jim Press would ask the same question in the US?
However Chrysler does in Canada has no effect on when they will go out of business. Why? Because Canada represents 10% of their vehicles compared to the US. California is likely a greater number.
Also, the price and model mix is less because Canadians have less income and are notoriously cheap . How profitable are vehicles Canadians buy in the first place? Not very.
Ask any OEM in the sales department and they will tell you they consider Canada just another sales region called the “northern territory”
Imagine if the Chrysler “southern territory” generated results comparable to the “northern territory”.
Yes Canadians(northern territory)buy/lease smaller (less lucrative) vehicles gas is $5.00 a US gallon not $ 4.00 like the US (southern territory).
As others have stated, Alberta is boom land due to its glut of Oil revenue, so most dealerships should do well, most Cars in Western Canada are a lot more costly than they are here in Central Canada, a lot of people still come here to buy Vehicles and drive them back to the West.
That dealer in Calgary has not been in business that long to know what the future holds for Chrysler imho! Does he not know that the Warranty offered in the USA is far different from what is offered in Canada? another glaring example is the deal on Gasoline that US People get,things are not equal by any means. I also agree that our Market is very small as compared to USA markets, anyone buying a Chrysler product is taking a huge risk again in my opinion.
This isn’t the only Chrysler dealer investing big in the Edmonton market right now. Crosstown Chrysler is currently building an huge new facility on the west side of Edmonton.
Pattison in BC has just completed a huge Chrysler dealership, the first Chrysler store for the Pattison Group.
Is interesting Jimmy as we refer to Mr. Pattison here. Is bulding a big chry store.
He had changed a Chebby dealer to Suzuki, used to be called a Courtesy ChebbyOlds.
When they closed the Chebby I knew a guy bought a rag top Vette for really below costs, as he had tried earlier the year to pick up one in Lala land. The deal was almost completed, the dealer found out the General kyboshed it. As they dont want Can dealers to get short changed.
DOnt think the Oel Sand will crash & burn real soon, unless oel hit 50 bucks a barrel. Hell freezes over much sooner than that.
June 2008 sales for Chrysler:
USA 117,500
Canada 22,000.
Means the US sales are only just over 5 times Canadian sales, not 10 times.
So Canada is a real bright spot for the Hellish Dog. Maybe that’s why the Windsor minivan plant is still rolling, because I see lots of them, and its styling is growing on me. Don’t mind it at all. YMMV.
wmba Says:
July 8th, 2008 at 5:12 pm
June 2008 sales for Chrysler:
USA 117,500
Canada 22,000.
Means the US sales are only just over 5 times Canadian sales, not 10 times.
Or, to put it another way, if Chrysler’s US sales drop by 20% (probably a low figure), Canadian sales would have to increase by over 100% to make up for it.
Or, to put it another way, if Chrysler’s US sales drop by 20% (probably a low figure), Canadian sales would have to increase by over 100% to make up for it.
Thats not going to happen.
Could they split up nto 2 entities the Canadian & US company incase of a Chpt 7 or 11 , the north of 49th parallel company still exists.
20 yrs ago the Texaco got into a real F ing mess by kyboshing the take over of Getty oil & Pennz oil.
Texaco ended up the big loser. Tex had to sell her Canadian subsidiary to Esso. Soon after there were no more Texaco exists north of the 49th parallel.
Chryslerbus could exists as a small operation in the republc of Canuckstan, our gov no doubt will keep giving more mulla until Chryslerbus pukes.
Chrysler needs to succeed in the US to survive. Canada (which, admittedly, they seem to be doing well in) won’t save them, and neither will their extremely minor non-North American sales. They have to concentrate on the good ol’ U S of A first. GM and Ford have less of a problem here, in that they have significant sales everywhere on the planet. So, if domestic sales drop, they can balance that out a bit with increased sales in China or wherever. Chrysler doesn’t have that luxury, Canada notwithstanding.
This is why Chrysler is almost certainly the first of the Detroit 3 to go bankrupt or out of business. In fact, GM and Ford might survive for decades or longer. Chrysler is royally screwed, however.
not the least of which is the 22 straight months of sales increases for Chrysler’s Canadian retail operations.
Yup, Chrysler is in second spot in Canada. One thing is for sure, if Chrysler croaks altogether, someone is going to get an enormous boost. Interesting to see who rushes in to fill the void.
Have to admire Mr Held’s pluck.
msowers1 Says:
‘Also, the price and model mix is less because Canadians have less income and are notoriously cheap’
I am not cheap, just notoriously easy
The entire population of Canada is less than the population of the city of Tokyo itself. I’m pretty sure that there is no other city with a population larger than Canada’s, but doesn’t that say something right there about the outlook for Chrysler and this new dealership? How long can these sales be sustained?
Mekira
Should Oil sand dries up or oil price went back to 50/barrel U think Canada can still exist?
18 million loonies for a new car dealership building? Uh huh…yeah right…1.8 million I could believe, 18 million is a bit far fetched. Here in LA LA Land dealers don’t spend anywhere near 18 million, and there have been dozens of new buildings erected in just the past year, including a new ChryCo dealership in Puente Hills.
There are dealerships in LA LA Land that have cost upwards of 60 million.
Jim Pattison Chrysler in Surrey BC cost 12 million…Click
Dealer groups are in the real estate business through automotive dealerships…the dealership pays for the real estate investment…does the dealer group care which manufacturer or franchise will pay for the real estate investment…does the manufacturer care which dealer group will give them new and compelling brick and mortar.
One seeks a real estate investment the other a glass palace…its a good fit.
The price of Oil will not go back to $50.00 per barrel no matter that most people would like it, the Oil sands are not going to dry up any time soon, there is almost as much Oil there as in the total Middle East, the problem is the cost of extracting it from the shale! and yes Canada will still be there for Diamonds, three of the largest Diamond Mines in the World are here, also lots of Gold and other minerals and tons of Potash in Western Canada.
GE:
We also have a whole hell of a lot of uranium and fresh water.
psarhjinian Says:
As a socialist myself, I don’t see this as a bad thing.
You’re fortunate. Most hardcore socialists have only been provided the expertise to post on TTAOC : The Truth About Ox Carts.
But lest I forget the Trabant… ;-)
nice to hear from other edmontonians!
i think we in alberta are stupid in that our economy is so good we’re super-willing to pay uber-high prices for cars compared to americans. these dealers have no incentive to lower prices. if we all held back for a couple of months we’d probably see some serious movement in pricing.
and seeing so many kids driving $50k sti’s, people in all sorts of bmw’s, and king ranches is evidence that we’re not cheap!
anyway, that’s probably why we’re seeing dealers able to spend multi-millions of dollars on new facilities.