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Chrysler Hopes New Neon Will Rival the Legendary Beetle

IN a bold step designed to say ``world class,'' the Chrysler Corporation went to Germany recently to publicly unveil its new Neon subcompact at the Frankfurt Auto Show. Chrysler would like the Neon to be the next Beetle, a car that can capture the imagination - and pocketbook - of a generation of buyers.

Chrysler hopes to sell 25,000 Neons annually in Europe. The Neon's ultimate success, though, will depend on whether Chrysler can recreate the image that helped make the Beetle an icon of the Baby Boomers.

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This time the automaker is going after a new generation, the post-Boomers, often referred to as ``Generation X.''

``These are people faced with the knowledge that it's tough to achieve the same lifestyle their parents did,'' says Chrysler President Robert Lutz. With its peculiar - Chrysler prefers ``endearing'' - bug-eyed headlights, the Neon stands out visually at a time when other small cars are looking more and more alike.

The strong response to a Neon concept car at the 1990 Detroit Auto Show helped convince Chrysler to take a chance on building the subcompact. Because potential demand is high, Chrysler already plans a second shift at its Belvidere plant in Illinois. Production starts Nov. 1. Capacity there and in a smaller Mexican plant will be 300,000 cars.

Chrysler has not developed a new small car of its own in 14 years. It has relied on its Japanese affiliate, Mitsubishi Motors, to cover the low-end product line. The company's management team was initially skeptical about the Neon. In past decades, few if any American-made small cars have been profitable.

But at Chrysler's Highland Park, Mich., headquarters, a small team of employees became convinced they could not only build a good small car, but one capable of earning a big profit.

Then-Chairman Lee Iacocca agreed to hear their pitch. The project director, Robert Marcell, began by projecting slides of his hometown, a community devastated by the loss of its mining industry. Abandoning small-car production, he warned, would hurt more Midwest towns. ``It didn't win the argument, but it got Iacocca hooked,'' recalls a Chrysler executive at the meeting.

Production of the Neon has not been business-as-usual, however. Neon designers, engineers, manufacturing, marketing, and finance experts organized into a platform ``team'' to work together. They borrowed ideas from competitors such as Honda and Toyota as well as companies such as General Electric. The team invited suppliers to participate as well.

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The Neon jumped from concept to production in 31 months, faster than many Japanese carmakers. The project required relatively few engineers; tooling and production costs were slashed; and the price tag was $1.3 billion, a fraction of what it typically costs to build a new small car.

To get a feel for the styles and features customers were looking for in a car, Neon team members went to shopping malls, asking young mothers how they use their cars and inviting graduate students to talk with them.

Everyone, it seems, wants more room. So by using a design technique called cab-forward engineering, the subcompact Neon will feature a compact interior. ``We have to meet the demands of a very skeptical buyer,'' says Neon project planner Ron Bolz. A few years ago, that skepticism might have been impossible to overcome, he says. But times are changing. Americans are more interested in domestic products, Mr. Marcell says. With the weak economy, subcompact buyers are more aware of sticker prices.

``The 20-something generation has changed dramatically in the last few years,'' he says. ``They're not waving an American flag, but they're saying they can't afford that Japanese car.'' To make sure their target buyers stay away from the imports, Chrysler is expected to bring the Neon to market in early January for about $8,000. A fully-loaded version will be a little more than $12,000. Chrysler hopes to sell more than 350,000 Neons a year.

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