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Neon priced to compete
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December 30, 1998: 9:58 a.m. ET
With redesign, DaimlerChrysler aims to hold its own in U.S. small-car market
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NEW YORK (CNNfn) - DaimlerChrysler Corp., the world's fifth-largest automaker, has made it clear it has every intention of staying competitive in the U.S. small-car market, which recently has been crippled by low gas prices and the surging popularity in light trucks and sports utility vehicles.
On Tuesday, the newly merged company set its U.S. introductory prices for its all-new 2000 Dodge and Plymouth Neon at a competitive, all-inclusive $12,890 for the four-door model, compared to a median price of $13,895 this year.
1999 model
The leader of the subcompact car segment, Honda Motor Co. Ltd.'s Civic, sells for about $15,800.
Introduced at the Los Angeles Auto Show this week, the 2000 Neons will go on sale in the first quarter of 1999. The car is roomier than before, includes increased trunk space and was designed to appeal to a more mature demographic, whereas in the past the car has been targeted to young, first-time buyers.
DaimlerChrysler, which has about a 10 percent market share in small cars, hopes the redesigned Neon will help keep the company competitive in that segment.
"It's important for us to maintain our presence in the market," the company's U.S. president, Thomas Stallkamp, told CNNfn, pointing out that small cars account for roughly 30 percent of all cars sold.
But maintaining that presence will be tough. Sales in the U.S. small-car segment declined 7.3 percent through November to more than 1.8 million, according to Autodata Corp., an industry research firm.
"We've never been in a market like this, where gasoline prices are cheap," said Maryann Keller, an analyst with ING Baring Furman. "It's a world that's very hostile to small cars."
With strong competition coming from vehicles such as Ford's all-new Focus, VW's remodeled Jetta and Golf models, and established models from General Motors and Toyota, DaimlerChrysler will be hard pressed to achieve even its modest goal of hanging on to its 10 percent share, Keller said.
The quest for increased fuel efficiency is another factor pressing on automakers, particularly in the small-car market. Just last week, Honda introduced one of the industry's first hybrid cars to be sold in the United States. Most other car makers, including DaimlerChrysler, are developing alternative fuel technologies but have yet to introduce them into the general market.
"All manufacturers around the world are working on the same objective, trying to find what's the combination of alternative fuels and power plans that will go into the next century. We still believe the predominant engine will be the internal combustion, gasoline-powered vehicle as we start the new millennium, but we have to be prepared for changes coming along the way," Stallkamp said.
And while some say companies using combustible engines into the next decade may not survive, a look at DaimlerChrysler's performance in 1998 combined with consumers' notorious resistance to radical change may temper that prediction somewhat.
DaimlerChrysler (DCX), which was formed in November from the merger of Chrysler Corp. and Daimler-Benz, said earlier this week that initial estimates showed 1998 sales rose 13 percent to about 260 billion marks (US$155 billion) in 1998 compared with the combined 1997 total of 229.3 billion marks for Daimler-Benz AG and Chrysler Corp. It also said it expects 1998 earnings to be significantly higher than the combined figures for 1997.
Those reported expectations sent shares in the automaker up 4, and on Tuesday, the stock closed up 5/16 at 98-9/16. 
-- from staff and wire reports
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DaimlerChrysler
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