Chrysler

Will the 200 sedan energize Chrysler?

March 24, 2014: 1:54 PM ET

The midsize sedan faces some market challenges, but it's the company's best effort yet to compete with the Accords, Camrys, and Fusions of the world.

By Doron Levin

Chrysler 200 sedan

The Chrysler 200 sedan

FORTUNE -- Chrysler has provided too few thrills and too many disappointments to investors over the years, as well as to car owners.  The new Chrysler 200 sedan could be a step toward the creation -- finally -- of a stable passenger car business for the newly reorganized company.

The new model, which will begin arriving at showrooms this quarter, is the automaker's best effort yet to compete with the likes of the Honda Accord (HMC), Toyota Camry (TM), and Ford Fusion (F). It is put together from a Fiat-derived architecture the automaker calls "Compact US Wide," which is also the basis for the Dodge Dart and the Jeep Cherokee.

"I think we know that the new 200 is a significant improvement over the car it replaces," said Alec Gutierrez, senior analyst for Kbb.com and Kelley Blue Book. "We should temper expectations, since it's entering a tough segment with significant pricing pressure."

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The midsize family sedan segment is the biggest in the U.S. automotive market, accounting for about 17% of all car sales.  The competitors in the segment lately have been discounting to the tune of $2,000 to $3,000 per vehicle, so as not to give up share -- making the 200's entry difficult.

This year Fiat Chrysler Automobiles NV finally completes its long and tortuous road to global consolidation, following Chrysler's 2009 bankrutpcy. The merged company, cobbled together from two weak automakers, still doesn't sell enough vehicles worldwide to achieve the minimum scale needed to stay in business, according to experts including Sergio Marchionne, the company's chief executive officer.

To reach minimum scale, the automaker must field competitive models in key mainstream segments such as family sedans. Dart, introduced more than a year ago, was a compact sedan released with great hope and expectation, only to suffer mediocre sales.

One of the reasons Chrysler and Dodge cars haven't fared better in the marketplace is so-so ratings from third-party reviewers such as the influential publication Consumer Reports. The previous generation of Chrysler 200, based on an older platform, was a staple of daily-rental fleets and had to be sold at discounts to compact sedans like Toyota Camry and Ford Fusion.

MORE: Broadband on wheels: Connectivity is the new MPG

Gutierrez said the 200 will have trouble grabbing sales from Camry, Fusion, Nissan Altima, and other top players in the segment. It may, however, be able to filch a few from Chevrolet Malibu (GM), which has struggled.

Reviewer reception to the new 200 has been generally positive, with many praising the design of the interior and the exterior.  The least expensive version of the car with a four-cylinder engine will start at about $22,700, including destination charge, and run to more than $30,000 with a V-6 engine and most options.

Unless sales continue to improve across Fiat Chrysler's product line, the company won't generate sufficient investment capital to engineer the various derivatives of basic architectures.  A case in point is the lack of convertible version for the new 200, such as existed for the previous generation.

Likewise, the automaker is dropping the Dodge Avenger version of the 200. The move will save marketing costs and will concentrate sales of the new sedan on behalf of the Chrysler brand.

Marchionne has provided magical leadership, pushing two struggling car companies toward sustainability with sheer energy and a knack for stretching scarce resources. The 200 reflects the efforts of a vast team of workers. Many fingers are crossed, his and theirs.

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