June 2009

Whoever is making product decisions about Chrysler models in the new Fiat/Chrysler company has a problem they need to fix.

On a recent trip to the Bay Area I drove a rental car, a Chrysler Sebring LX Convertible with a 2.4 liter DOHC four-cylinder engine and a four-speed automatic transmission.  It was underpowered.  It understeered badly on freeway ramps.  The engine and transmission were extremely rough and noisy above 3,000 rpm, which was especially noticeable when accelerating from 40mph to 65mph on the freeway to merge with traffic. 

As I drove around, pondering this, a thought struck me, “Maybe I’m not the driver this car was made for.  Maybe it was made for a driver who doesn’t want acceleration or handling.”   I decided to see what would happen if I drove the car is if I were that kind of driver. 

At the next stop light, I feathered the accelerator pedal, pushing down only about a quarter of an inch.  The car accelerated slowly to 2,500 rpm and then upshifted.  Voila! No noise!  A Mercedes behind me was trying desperately to get past me.   Drivers in the lanes on either side of me passed me, but at least I wasn’t in their way. 

At the second stop light, I accelerated a little harder.  At 3,000 rpm, the noise and roughness began.  3,000 rpm seemed to be a virtual red line.  I held up someone in an American sedan, but the driver considerately waited half a block to go around me. 

At the Semico Summit in March my opening remarks covered the State-of-the-Industry and the unprecedented decline in the fourth quarter 2008. While many other market observers fell into the doom and gloom scenario predicting a 20-30% decline for 2009, Semico utilized it’s IPI, MAP Model and extensive industry experience to refute this conclusion.  Semico’s assertion  was that inventories were not grossly out of balance in Q3 2008 and the subsequent drop in sales was an over reaction resulting in below healthy inventory levels.

Some proclaimed that cell phones were going to experience dramatic drops due to the recession.  Our research and interviews showed just the opposite.  Cell phones are now considered a necessity.  It is the “land line” that is now viewed as an unnecessary extra! As far as the recession goes, consumers that we have interviewed who are looking to reduce their monthly expenditures are researching cell phone providers to pick a plan that reduces their monthly bill. In many cases this results in a change in carriers which requires a new phone! Any reduction in cell phone sales due to the rise in unemployment is overshadowed by consumers changing providers to save on monthly bills.  In December 2008, Semico forecasted cell phones to be down 10% in 2009 and we reaffirm this forecast.

The memory market continues to be plagued by excess capacity, however recently we began seeing improvements and stability even in this market segment.