October 3, 2009
Chrysler hopes to lower incentives
But they remain at $4,908 per vehicle
Chrysler Group LLC CEO Sergio Marchionne says the auto industry must reduce or end generous discounts of its products, but Chrysler's average incentives were $4,908 per vehicle in September -- the highest of any mainstream manufacturer, according to Autodata Corp.
"We need to go back to making products that people want at a price that is defensible in a competitive framework," said Marchionne, whose company increased incentives 18% in September compared with the same period a year ago.
That's according to an estimate from Autodata. Automakers do not publicly release their incentive spending.
After Daimler-Benz AG joined with Chrysler in 1998, German executives sent to run the American automaker made similar remarks about trying to wean Chrysler off the incentives that are so popular in the United States. Then- Chrysler Group Chief Executive Dieter Zetsche publicly called incentives a drug, and lamented how the automaker was forced to react to rival incentives in the marketplace.
Ultimately, however, Daimler's effort to wean Chrysler off incentives failed.
In comments Thursday, Marchionne suggested Chrysler's leaner inventories could help the automaker achieve sales with lower incentives, which could raise profits.
Chrysler shut down all of its factories while it was in bankruptcy for 41 days, ending June 10. It also had an extended summer plant shutdown from May 1 to June 29. That left the automaker with little inventory headed into the federal government's popular cash-for-clunkers incentive program, which gave consumers rebates for new cars if they traded in certain models deemed clunkers.
While the program began July 24, it was under consideration in Congress for several months before that. Most automakers prepared for the event by creating links on their Web sites clarifying the terms of the program and explaining which of its vehicles would qualify for the discounts of $3,500 and $4,500.
However, Chrysler, which was just resuming production as the program began, ran out of the small crossover utility models and midsize sedans that sold well when the program was in effect. Dealers have said Chrysler's sales suffered for lack of inventory.
Marchionne has since called the program "a disturbance that, at least from Chrysler's standpoint was unexpected."
Chrysler's U.S. market share slipped to 9.2% for the first nine months of this year, down from 11% a year earlier.
"It's painful. It looks ugly. People sit back and say 'What are you going to do to try and incentivize the demand?' " Marchionne said.
Instead, Marchionne said
Chrysler's leaner inventories should make it easier to sell 2010 models at closer to their sticker prices -- even if that means the company's market share declines.
While Chrysler's incentives don't appear smaller yet, they might be reduced on newer 2010 models.
Article Link:
Chrysler hopes to lower incentives | Detroit Free Press | Freep.com
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