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Chrysler Considers Sale of Gas-Guzzling Viper

By Jennifer Yousfi, Money Morning • August 28, 2008

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By Jennifer Yousfi
Managing Editor

With the U.S. auto market increasingly focused on practicality and fuel-efficiency, Chrysler LLC announced yesterday (Wednesday) it was entertaining offers for its Dodge Viper sports car.

"We have been approached by third parties who are interested in exploring future possibilities for Viper," Chief Executive Bob Nardelli said in a memo to employees, Reuters reported.

"As [Chrysler] evaluates strategic options to maximize core operations and leverage its assets, we have agreed to listen to these parties," he added.

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The Dodge Viper, one of Chrysler's flashiest models, is a 600-horse power sports car with a starting price of around $90,000. Its V10 engine gets a dismal 13 miles per gallon in the city at a time when cost-conscious consumers are trying to avoid high prices at the pumps.

"My bet will be they will definitely be able to unload it," for a price of "maybe $100 million," James Gillette, an automotive consultant at CSM Worldwide Inc. in Grand Rapids, Michigan, told Bloomberg News. Gillette does asset valuations for customers.

Interested parties could include custom-vehicle builders such as Panoz Auto Development Co. or Shelby Automobiles Inc., both of whom would be logical buyers, Gillette said.

Chrysler is the third-largest U.S. automaker behind rivals General Motors Corp. (GM) and Ford Motor Co. (F). All three have been struggling to adapt to changing consumer preferences, as soaring oil prices shift the focus away from larger models of pick-ups and sport-utility vehicles.

Chrysler has released limited information since its purchase from Daimler AG (DAI) by private equity firm Cerberus Capital Management LP. But with 90% of its sales coming from the hard-hit U.S. market, its safe to assume Chrysler has suffered worse than its more internationally focused competitors.

U.S. automakers were late to adapt to changing industry dynamics as demand for smaller, more fuel-efficient cars has grown. Foreign rivals Toyota Motor Corp. (ADR: TM) and Honda Motor Co. Ltd. (ADR: HMC) have been quicker to market with gas-sipping hybrid models such as Toyota's Prius that have proven popular with U.S. consumers sick of frequent stops at high-priced gas stations.

Being at the leading edge of hybrid technology helped boost Toyota into the top spot as the world's leading auto manufacturer, supplanting longtime leader General Motors.

News and Related Story Links:

  • MarketWatch:
    Chrysler evaluates sale of Dodge Viper
  • Bloomberg News:
    Chrysler May Sell Viper Car Business, Hires Lazard
  • Reuters:
    Chrysler looking at options for Viper business
  • Wikipedia:
    Dodge Viper

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