Why FCA Took the "Chrysler" Out of Chrysler

By Markets Fool.com

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This car is a Chrysler, a 2015 300C sedan. That brand name won't change. But the business unit that manufactures it will no longer be known as "Chrysler," the company said on Tuesday. Source: Fiat Chrysler.

Say goodbye to the automaker formerly known as Chrysler: Fiat Chrysler Automobiles announced on Tuesday that its U.S. unit, long known as "Chrysler Group LLC," has been renamed "FCA US LLC," or "FCA US" for short.

It's not a surprising move, but it's a significant one. Much of FCA US is made up of the surviving parts of what used to be the Chrysler Corporation, America's No. 3 automaker.

So why wouldn't FCA keep "Chrysler" in its U.S. unit's name?

"Chrysler" the brand versus Chrysler the company
Chrysler had been run as a subsidiary of Italian automaker Fiat S.p.A. since its emergence from bankruptcy in 2009 until Fiat and Chrysler formally completed their long-anticipated merger this past October.

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Through that period, it made sense to refer to Chrysler as "Chrysler," as Fiat and Chrysler were, legally speaking, separate-but-connected entities. But now, the two have been merged into a new company -- and there are a couple of good reasons for FCA to stop referring to its U.S. unit as "Chrysler."

The first is a marketing issue. FCA is in the midst of a major realignment of several of its brands, including the Chrysler brand -- and eliminating the Chrysler name from the business unit should reduce confusion and make it easier for FCA's marketers to promote Chrysler the brand. (And to be clear, this isn't just about Chrysler: Italy's Fiat Group is also being renamed to "FCA Italy S.p.A.," and the same concerns about Fiat the company and Fiat the brand apply to it as well.)

That's a good thing, because Chrysler the brand has a lot of work to do over the next few years.

A move to focus attention on the Chrysler brand
Chrysler the brand was once a small-volume luxury brand that competed with Ford'sLincoln and General Motors'Cadillac, but in recent years it had become a muddled mess of premium-ish versions of some of the mainstream vehicles offered by sister brand Dodge. Meanwhile, Dodge was the Chrysler company's mainstream brand, offering family-friendly minivans, sedans, and SUVs.

That alignment was tossed out the window when FCA revealed its latest five-year-plan back in May. Dodge is being recast as a brawny "performance" brand in an effort to attract younger buyers, while the Chrysler brand is taking over as FCA's mainstream U.S. brand, with an expanded range of products expected over the next five years.

FCA showed its plans for the Chrysler brand back in May. The brand is expected to get a new small sedan, two new crossovers, and replacements for the Town & Country minivan and full-size 300 sedan over the next few years. The expanded product line will cover 65% of the U.S. mainstream market, FCA says. Source: Fiat Chrysler.

The new Chrysler 200 sedan gives us a hint of where the brand is going: a bit upscale-feeling in terms of features, but priced to compete with the likes of Ford, Chevrolet, Honda, and other mass-market auto brands. FCA is hoping that formula (and its new products) will take Chrysler's sales to 800,000 a year by 2018, up from 350,000 last year.

FCA's five-year plan calls for the Chrysler brand's sales to more than double by 2018. Source: Fiat Chrysler.

But as with any "realignment" of a historic brand, it'll take time and effort to ensure that consumers catch on. It's likely that FCA executives thought that eliminating confusion between the brand and the holding company that runs it would be helpful.

Integrating the former Chrysler further into the global FCA
FCA's leadership had another reason in mind when they decided to make these changes. CEO Sergio Marchionne has long talked about running FCA as "one company in two houses." Today's moves give both of those "houses" new names that reinforce the "one company" aspect. As the company said in a statement on Tuesday, "The name change, which represents the latest phase in adoption of the FCA corporate identity, is intended to emphasize the fact that all Group companies worldwide are part of a single organization. It also further underscores the success of the integration and the new, truly global organization that everyone at FCA has contributed to creating."

That makes sense. And while fans of Chrysler the company (and Fiat the company) may mourn the changes, the reality is that most consumers are unlikely to notice.

The article Why FCA Took the "Chrysler" Out of Chrysler originally appeared on Fool.com.

John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.