Daimler's Dieter Zetsche: For Us, Small Cars; For Chrysler, More SUVs

Watch what he does, not what he says. Dieter Zetsche, CEO of Daimler, began last week by offering some unsolicited advice to Chrysler, the company he headed when it had German owners. “I continue to be emotional about this company and am crossing my fingers for the very best future,” he said. And that future should not include the radical downsizing envisioned under Fiat’s Sergio Marchionne. At a media conference in New York, he said. “I would not focus exclusively on small cars going forward. I do believe the successful continuation of SUVs and larger cars is necessary.”

Zetsche’s reasons? SUVs are very profitable for automakers, if not necessarily a good deal for consumers. And despite rising gas prices, Americans are still buying them. Zetsche sees the American auto market climbing about 10 percent to 11 million in 2010.

But what’s good for Chrysler may not be good for Daimler itself in the U.S. market. Zetsche’s own moves indicate he’s thinking small. He told the Wall Street Journal November 13 that the company is considering bringing one of its four European-market compacts, slated for 2011 introduction, into the U.S. (where they’d presumably be competition for the likes of Chrysler’s forthcoming Americanized versions of the Fiat 500 and Alfa-Romeo MiTo small cars).

The definition of “luxury” is changing, Zetshe said. “It will be fewer CO2 emissions and more modesty in appearance.” This prediction is also borne out by market analysis I heard from BMW last week. Today’s luxury buyer wants value, and social responsibility is important, too.

As the Journal noted, “U.S. sales of large sport-utility vehicles such as the Chevrolet Suburban have plunged, while sales of tiny but stylish subcompacts such as the Honda Fit have grown.” Daimler’s poor performance this year is at least partly due to its very expensive luxury lineup, which is itself heavy in SUVs.

If that trend continues, small cars could save Daimler, and presumably Chrysler too. Chrysler experienced a 30 percent month-over-month drop in October, and it wasn’t because of an absence of SUVs and big thirsty cars in its showrooms. The company has a paucity of credible small cars right now.   

Given all this, one wonders whose interests Zetsche was serving when he suggested that Chrysler should stay the course that drove it into bankruptcy.

Photo by Stefan Baudy/Flickr